sctovi
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE TO
(Rule 13e-4)
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
PDF SOLUTIONS, INC.
(Name Of Subject Company (Issuer) and Filing Person (Offeror))
Options to Purchase Common Stock, Par Value $0.00015 Per Share
(Title of Class of Securities)
69328210
(CUSIP Number of Class of Securities (Underlying Common Stock))
JOHN K. KIBARIAN
President and Chief Executive Officer
PDF Solutions, Inc.
333 West San Carlos Street, Suite 700
San Jose, California 95110
(408) 280-7900
(Name, Address, and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Filing Persons)
With copies to:
Peter Cohn, Esq.
Christine A. McCarthy, Esq.
Orrick, Herrington & Sutcliffe LLP
1020 Marsh Road
Menlo Park, California 94025
(650) 614-7400
CALCULATION OF FILING FEE
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Transaction Valuation*
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Amount of Filing fee** |
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$34,451,677 |
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$1,354 |
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* |
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Calculated solely for purposes of determining the filing fee. This
amount assumes that options to purchase 4,551,771 shares of common
stock of PDF Solutions, Inc. that have an aggregate value of
$34,451,677 as of June 5, 2008 will be exchanged pursuant to this
offer. The aggregate value of such options was calculated based on the
Black-Scholes option pricing model. |
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The amount of the filing fee, calculated in accordance with Rule
0-11(b) of the Securities Exchange Act of 1934, as amended by Fee Rate
Advisory No. 5 equals $39.30 per million dollars of the value of the
transaction. |
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Check the box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee
was previously paid. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing. |
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Amount Previously Paid: Not applicable.
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Filing Party: Not applicable. |
Form or Registration No.: Not applicable.
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Date Filed: Not applicable. |
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Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. |
Check the appropriate boxes below to designate any transactions to which the statement
relates:
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third-party tender offer subject to Rule 14d-1. |
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issuer tender offer subject to Rule 13e-4. |
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going-private transaction subject to Rule 13e-3. |
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amendment to Schedule 13D under Rule 13d-2. |
Check the following box if the filing is a final amendment reporting the results of the tender
offer: o
TABLE OF CONTENTS
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ITEM 1. |
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SUMMARY TERM SHEET. |
The information set forth under Summary Term Sheet in the Offer to Exchange, dated June 10,
2008 (the Offer to Exchange), attached hereto as Exhibit (a)(1)(A), is incorporated herein by
reference.
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ITEM 2. |
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SUBJECT COMPANY INFORMATION. |
(a) Name and Address. The name of the issuer is PDF Solutions, Inc., a Delaware corporation
(PDF or the Company). PDFs principal executive office is located at 333 West San Carlos
Street, Suite 700, San Jose, CA 95110 and its telephone number is (408) 280-7900. The information
in the Offer to Exchange in Part III, Section 10 (Information Concerning PDF Solutions, Inc.) is
incorporated herein by reference.
(b) Securities. This Tender Offer Statement on Schedule TO relates to an offer (the Offer)
by PDF to eligible option holders to exchange certain outstanding eligible options to purchase
shares of PDF common stock, par value $0.00015 per share (Common Stock), for restricted stock
rights that will be granted under the PDF Solutions, Inc. 2001 Stock Plan (the 2001 Plan) upon
the terms and subject to the conditions set forth in the Offer to Exchange. As of June 5, 2008,
options to purchase approximately 4,551,711 shares of PDF common stock were eligible for exchange
in the Offer. The information set forth in the Offer to Exchange in Part I (Summary Term Sheet)
and in Part III, Section 1 (Eligibility), Section 2 (Number of Restricted Stock Rights;
Expiration Date), Section 6 (Acceptance of Options for Exchange and Issuance of Restricted Stock
Rights) and Section 9 (Source and Amount of Consideration; Terms of Restricted Stock Rights) is
incorporated herein by reference.
(c) Trading Market and Price. The information set forth in the Offer to Exchange under
Part III, Section 8 (Price Range of Our Common Stock) is incorporated herein by reference.
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ITEM 3. |
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IDENTITY AND BACKGROUND OF FILING PERSON. |
(a) Name and Address. The filing person is the subject company, PDF Solutions, Inc. The
information set forth under Item 2(a) above is incorporated herein by reference. The information
set forth in Appendix A to the Offer to Exchange (Information About the Directors and Executive
Officers of PDF Solutions, Inc.) is incorporated herein by reference.
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ITEM 4. |
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TERMS OF THE TRANSACTION. |
(a) Material Terms. The information set forth in the Offer to Exchange in Part I (Summary
Term Sheet) and in Part III, Section 1 (Eligibility), Section 2 (Number of Restricted Stock
Rights; Expiration Date), Section 4 (Procedures for Tendering Options), Section 5 (Withdrawal
Rights and Change of Election), Section 6 (Acceptance of Options for Exchange and Issuance of
Restricted Stock Rights), Section 7 (Conditions of the Offer), Section 9 (Source and Amount of
Consideration; Terms of Restricted Stock Rights), Section 12 (Status of Options Accepted by Us in
the Offer; Accounting Consequences of the Offer), Section 13 (Legal Matters; Regulatory
Approvals), Section 14 (Material U.S. Federal Income Tax Consequences), Section 15
(Considerations Specific to Eligible Individuals Outside the United States) and Section 16
(Extension of Offer; Termination; Amendment), is incorporated herein by reference.
(b) Purchases. The information in the Offer to Exchange under Part III, Section 11 (Interests
of Directors and Officers; Transactions and Arrangements Concerning the Options) is incorporated
herein by reference.
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ITEM 5. |
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PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS. |
(e) Agreements Involving the Subject Companys Securities. The information set forth in the Offer
to Exchange under Part III, Section 11 (Interests of Directors and Officers; Transactions and
Arrangements Concerning the Options) is incorporated herein by reference. The eligible stock plans
and related agreements are incorporated herein by reference hereto as Exhibits (d)(1) through
(d)(8) and contain information regarding the subject securities.
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ITEM 6. |
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PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS. |
(a) Purposes. The Offer is being conducted to reduce the overhang as described in the Offer
to Exchange and to incentivize and retain employees, consultants and directors providing services
to the Company and its subsidiaries. The information set forth in the Offer to Exchange under
Part III, Section 3 (Purpose of the Offer) is incorporated herein by reference.
(b) Use of Securities Acquired. The information set forth in the Offer to Exchange under
Part III, Section 6 (Acceptance of Options for Exchange and Issuance of Restricted Stock Rights)
and Section 12 (Status of Options Accepted By Us in the Offer; Accounting Consequences of the
Offer) is incorporated herein by reference.
(c) Plans. The information set forth in the Offer to Exchange under Part III, Section 10
(Information Concerning PDF Solutions, Inc.) is incorporated herein by reference.
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ITEM 7. |
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SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. |
(a) Source of Funds. The information set forth in the Offer to Exchange under Part III,
Section 9 (Source and Amount of Consideration; Terms of Restricted Stock Rights) and Section 17
(Fees and Expenses) is incorporated herein by reference.
(b) Conditions. The information set forth in the Offer to Exchange under Part III, Section 7
(Conditions of the Offer) is incorporated herein by reference.
(d) Borrowed Funds. Not applicable.
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ITEM 8. |
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INTEREST IN SECURITIES OF THE SUBJECT COMPANY. |
(a) Securities Ownership. The information set forth in the Offer to Exchange under Part III,
Section 11 (Interests of Directors and Officers; Transactions and Arrangements Concerning the
Options) and Appendix A (Information About the Directors and Executive Officers of PDF Solutions,
Inc.) is incorporated herein by reference.
(b) Securities Transactions. The information set forth in the Offer to Exchange under
Part III, Section 11 (Interests of Directors and Officers; Transactions and Arrangements
Concerning the Options) is incorporated herein by reference.
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ITEM 9. |
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PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED. |
(a) Solicitations or Recommendations. Not applicable.
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ITEM 10. |
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FINANCIAL STATEMENTS. |
(a) Financial Information. The information set forth in the Offer to Exchange under Part III,
Section 10 (Information Concerning PDF Solutions, Inc.) and Section 18 (Additional
Information), in Item 8 of PDFs Annual Report on Form 10-K for its fiscal year ended December 31,
2007, filed with the Securities and Exchange Commission on March 17, 2008, and in Item 1 of the
Companys Quarterly Report on Form 10-Q for its fiscal quarter ended March 31, 2008, filed with the
Securities and Exchange Commission on May 12, 2008, is incorporated herein by reference. A copy of
the Annual Report on Form 10-K and Quarterly Report on Form 10-Q can be accessed electronically on
the Securities and Exchange Commissions website at www.sec.gov .
(b) Pro Forma Information. Not applicable.
(c) Summary Information. The information set forth in the Offer to Exchange under Part III,
Section 10 (Information Concerning PDF Solutions, Inc.) is incorporated herein by reference.
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ITEM 11. |
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ADDITIONAL INFORMATION. |
(a) Agreements, Regulatory Requirements and Legal Proceedings. The information set forth in
the Offer to Exchange under Part III, Section 11 (Interests of Directors and Officers;
Transactions and Arrangements Concerning the Options) and Section 13 (Legal Matters; Regulatory
Approvals) is incorporated herein by reference.
(b) Other Material Information. Not applicable.
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EXHIBIT |
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DESCRIPTION OF EXHIBIT |
(a)(l)(A)
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Offer to Exchange, dated June 10, 2008. |
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(a)(1)(B)
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Form of Election Form |
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(a)(1)(C)
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Form of Notice of Withdrawal |
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(a)(1)(D)
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Form of Restricted Stock Agreement under PDF Solutions, Inc. 2001 Stock Plan |
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(a)(1)(E)
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Form of Communication from P. Steven Melman to All Eligible Option Holders |
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(a)(1)(F)
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Email Communication to Certain Officers of PDF Solutions, Inc. dated June 10, 2008 |
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(a)(1)(G)
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Form of Question and Answer Meeting Announcement |
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(a)(1)(H)
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Copy of PowerPoint Presentation for Eligible Option Holder Question and Answer Meeting |
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(a)(1)(I)
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Form of Confirmation of Receipt of Election Form |
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(a)(1)(J)
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Form of Confirmation of Receipt of Notice of Withdrawal |
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(a)(1)(K)
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Form of Reminder of Expiration of Option Exchange Offer |
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(a)(1)(L)
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Form of Confirmation of Participation in the Option Exchange Offer |
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(a)(1)(M)
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PDF Solutions, Inc. Annual Report on Form 10-K for its fiscal year ended December 31, 2007, SEC File No. 000-31311, filed with the Securities
and Exchange Commission on March 17, 2008 and incorporated herein by reference |
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(a)(1)(N)
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PDF Solutions, Inc. Quarterly Report on Form 10-Q for its fiscal quarter ended March 31, 2008, SEC File No. 000-31311, filed with the Securities
and Exchange Commission on May 12, 2008 and incorporated herein by reference |
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(b)
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Not applicable |
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(d)(1)
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1996 Stock Option Plan and related agreements (incorporated by reference to Exhibit 10.8 to PDFs Registration Statement on Form S-1, as
amended, SEC File No. 333-43192, filed with the Securities and Exchange Commission on August 7, 2000) |
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(d)(2)
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1997 Stock Plan and related agreements (incorporated by reference to Exhibit 10.9 to PDFs Registration Statement on Form S-1, as amended, SEC
File No. 333-43192, filed with the Securities and Exchange Commission on August 7, 2000) |
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(d)(3)
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2001 Stock Plan (incorporated by reference to Exhibit 10.1 to PDFs Form 10-Q, SEC File No. 000-31311, filed with the Securities and Exchange
Commission on May 10, 2007) |
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(d)(4)
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Sub-Plan to the PDF Solutions, Inc. 2001 Stock Plan (France) |
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(d)(5)
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Form of Stock Option Agreement under the Sub-Plan to the PDF Solutions, Inc. 2001 Stock Plan (France) |
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(d)(6)
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2001 Stock Option/Stock Issuance Plan (incorporated by reference to Exhibit 4.1 to PDFs Registration Statement on Form S-8, SEC File No.
333-109809, filed with the Securities and Exchange Commission on October 17, 2003) |
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(d)(7)
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Form of Stock Option Agreement, including Addendum to Stock Option Agreement, under the 2001 Stock Option/Stock Issuance Plan (incorporated by
reference to Exhibit 4.2 to PDFs Registration Statement on Form S-8, SEC File No. 333-109809, filed with the Securities and Exchange Commission
on October 17, 2003) |
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(d)(8)
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2001 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.11 to PDFs Registration Statement on Form S-1, as amended, SEC File
No. 333-43192, filed with the Securities and Exchange Commission on August 7, 2000) |
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(h)
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Not applicable |
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ITEM 13. |
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INFORMATION REQUIRED BY SCHEDULE 13E-3. |
(a) Not applicable.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the information
set forth in this statement is true, complete and correct.
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PDF SOLUTIONS, INC.
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By: |
/s/ John K. Kibarian |
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John K. Kibarian |
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President and Chief Executive Officer |
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Dated: June 10, 2008
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EXHIBIT INDEX
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EXHIBIT |
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DESCRIPTION OF EXHIBIT |
(a)(l)(A)
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Offer to Exchange, dated June 10, 2008. |
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(a)(1)(B)
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Form of Election Form |
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(a)(1)(C)
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Form of Notice of Withdrawal |
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(a)(1)(D)
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Form of Restricted Stock Agreement under PDF Solutions, Inc. 2001 Stock Plan |
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(a)(1)(E)
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Form of Communication from P. Steven Melman to All Eligible Option Holders |
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(a)(1)(F)
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Email Communication to Certain Officers of PDF Solutions, Inc. dated June 10, 2008 |
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(a)(1)(G)
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Form of Question and Answer Meeting Announcement |
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(a)(1)(H)
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Copy of PowerPoint Presentation for Eligible Option Holder Question and Answer Meeting |
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(a)(1)(I)
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Form of Confirmation of Receipt of Election Form |
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(a)(1)(J)
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Form of Confirmation of Receipt of Notice of Withdrawal |
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(a)(1)(K)
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Form of Reminder of Expiration of Option Exchange Offer |
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(a)(1)(L)
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Form of Confirmation of Participation in the Option Exchange Offer |
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(a)(1)(M)
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PDF Solutions, Inc. Annual Report on Form 10-K for its fiscal year ended December 31, 2007, SEC File No. 000-31311, filed with the Securities
and Exchange Commission on March 17, 2008 and incorporated herein by reference |
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(a)(1)(N)
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PDF Solutions, Inc. Quarterly Report on Form 10-Q for its fiscal quarter ended March 31, 2008, SEC File No. 000-31311, filed with the Securities
and Exchange Commission on May 12, 2008 and incorporated herein by reference |
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(b)
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Not applicable |
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(d)(1)
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1996 Stock Option Plan and related
agreements (incorporated by reference to Exhibit 10.8 to
PDFs Registration Statement on Form S-1, as
amended, SEC File No. 333-43192, filed with the Securities and Exchange Commission on August 7, 2000) |
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(d)(2)
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1997 Stock Plan and related
agreements (incorporated by reference to Exhibit 10.9 to
PDFs Registration Statement on Form S-1, as amended, SEC
File No. 333-43192, filed with the Securities and Exchange Commission on August 7, 2000) |
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(d)(3)
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2001 Stock Plan (incorporated by reference to Exhibit 10.1 to PDFs Form 10-Q, SEC File No. 000-31311, filed with the Securities and Exchange
Commission on May 10, 2007) |
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(d)(4)
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Sub-Plan to the PDF Solutions, Inc. 2001 Stock Plan (France) |
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(d)(5)
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Form of Stock Option Agreement under the Sub-Plan to the PDF Solutions, Inc. 2001 Stock Plan (France) |
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(d)(6)
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2001 Stock Option/Stock Issuance Plan (incorporated by reference to Exhibit 4.1 to PDFs Registration Statement on Form S-8, SEC File No.
333-109809, filed with the Securities and Exchange Commission on October 17, 2003) |
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(d)(7)
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Form of Stock Option Agreement, including Addendum to Stock Option Agreement, under the 2001 Stock Option/Stock Issuance Plan (incorporated by
reference to Exhibit 4.2 to PDFs Registration Statement on Form S-8, SEC File No. 333-109809, filed with the Securities and Exchange Commission
on October 17, 2003) |
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(d)(8)
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2001 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.11 to PDFs Registration Statement on Form S-1, as amended, SEC File
No. 333-43192, filed with the Securities and Exchange Commission on August 7, 2000) |
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(h)
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Not applicable |
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Exhibit (a)(1)(A)
PDF SOLUTIONS, INC.
OFFER TO EXCHANGE
RESTRICTED STOCK RIGHTS
FOR
CERTAIN OUTSTANDING STOCK OPTIONS
THIS OFFER AND YOUR WITHDRAWAL RIGHTS EXPIRE
AT 9 P.M., U.S. PACIFIC TIME, ON JULY 9, 2008, UNLESS WE EXTEND THE OFFER.
This document constitutes part of the Section 10(a) Prospectus
Relating to the PDF Solutions, Inc. 2001 Stock Plan
The Date of this Offer is June 10, 2008
PDF Solutions, Inc. (PDF, the Company, we, us or our) is offering eligible individuals
the opportunity to exchange their outstanding eligible options for restricted stock rights that we
will grant under our PDF Solutions, Inc. 2001 Stock Plan, including any sub-plan applicable to
participants in a particular country (the 2001 Plan).
You are eligible to participate in the offer if you provide services to PDF or one of our
subsidiaries as an employee, consultant or Member of our Board of Directors on the date of this
offer and have neither ceased to be an eligible employee, consultant or director, nor have
submitted or received a notice of termination of service, prior to the cancellation of option
grants tendered pursuant to this offer. Unless extended, this offer will expire at 9 p.m., U.S.
Pacific Time, on July 9, 2008.
Options eligible for exchange in this offer are outstanding options to purchase PDF common stock
that have an exercise price per share that is equal to or greater than U.S. $10.00. However, if the
average closing price of our common stock, as reported on the NASDAQ Global Market, for the five
business days prior to the date of expiration of this offer is U.S. $10.00 or higher, we will
terminate this offer.
In this document, we use the term option to mean a particular option grant to purchase a
specified number of shares of our common stock at a specified exercise price per share. You may
tender for exchange all of your eligible options or none at all. However, if you choose to tender
an eligible option, you must tender the entire outstanding, unexercised portion of that option and
all other eligible options that you hold. We will not accept partial tenders of options.
The number of restricted stock rights to be granted in exchange for each eligible option grant
surrendered in this offer will be determined based upon a 4.2 option shares -to-1.0 restricted
share right exchange ratio. If you are eligible to participate in this offer, you will receive an
Election Form which lists each option that you currently hold which has an exercise price equal to
or greater than U.S. $10.00, the number of restricted stock rights you will receive if each option
is exchanged, and the vesting schedule that will apply to such restricted stock rights. Any
fractional right will be rounded up to the nearest whole number.
Each restricted stock right granted pursuant to this offer represents the right to receive one
share of our common stock when the restricted stock right vests through your continued service for
a specified period. Until restricted stock rights have vested, they remain subject to restrictions
on transfer and to forfeiture if your service terminates. If and when the restricted stock rights
vest, the underlying shares of common stock will be issued to you free of forfeiture conditions and
restrictions on transfer, other than required tax withholding and compliance with applicable
securities laws, PDF securities trading policies and any other laws, rules or regulations. You
will not be required to pay anything to receive restricted stock rights or shares pursuant to
restricted stock rights in connection with this offer.
All restricted stock rights will be subject to the terms of the 2001 Plan and a restricted stock
agreement between you and PDF.
Participation in this offer is voluntary, and there are no penalties for electing not to
participate. If you choose not to
participate in the offer, you will not receive restricted stock rights pursuant to the offer and
your outstanding options will remain outstanding according to their existing terms and conditions.
If you want to exchange your eligible options, you must notify PDF of your election before our
offer expires. You may notify PDF of your election by completing, signing and returning the
Election Form and delivering it to P. Steven Melman, Vice President, Investor Relations & Strategic
Initiatives, according to the instructions contained in the Election Form so that we receive it
before the expiration date deadline.
At any time you may also request a copy of any option exchange program document by contacting
the Offering Administrator at tenderoffer@pdf.com.
To inform yourself about our offer, you should:
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Read this whole document and all related attachments, including, the
Election Form, the 2001 Plan and the form of restricted stock
agreement; |
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Review the list of your eligible options in your Election Form; |
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Consider the questions and answers in the attached Summary Term Sheet; and |
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Call P. Steven Melman, Vice President, Investor Relations & Strategic
Initiatives, at +1 (408) 938-6445 or send an email to
tenderoffer@pdf.com, if you have questions about our offer. |
We are making this offer upon the terms and conditions described in this offer to exchange, the
Election Form and Notice of Withdrawal. The offer is not conditioned on any minimum number of
options being exchanged. Our offer is, however, subject to conditions that we describe in Section 7
of Part III of this document.
Shares of our common stock are quoted on the NASDAQ Global Market under the symbol PDFS. On June
5, 2008, the closing price of one share of common stock on the NASDAQ Global Market was $6.05. We
recommend that you get current market prices for our common shares before deciding whether to
exchange your eligible options.
IMPORTANT NOTICE
Although our Board of Directors has approved this offer, neither we nor our Board of Directors
makes any recommendation to you as to whether or not you should tender your eligible options for
exchange. Also, PDF has not authorized any person to make any recommendation on its behalf as to
whether or not you should accept this offer.
You must make your own decision as to whether or not to exchange your eligible options. In doing
so, you should rely only on the information contained in the offering materials, the materials
referenced in Section 18 of Part III of this document, any official question and answer session
organized by PDF, or any other authorized communications from PDF made generally available to
eligible individuals, as no other representations or information have been authorized by PDF. We
recommend that you consult with your own advisors, including your tax advisor, before making any
decisions regarding the offer.
The restricted stock rights we are offering may end up being worth less than your existing options.
In evaluating this offer, you should keep in mind that the future performance of PDF and its stock
will depend upon, among other factors, the future overall economic environment, the performance of
the overall stock market and companies in our sector, the performance of our own business and the
other risks and uncertainties set forth in our filings with the U.S. Securities and Exchange
Commission. In particular, we recommend that you read our Annual Report on Form 10-K for the fiscal
year ended December 31, 2007 and our Quarterly Report on Form 10-Q for the period ended March 31,
2008, each of which has been filed with the U.S. Securities and Exchange Commission and is
available free of charge on the Internet at www.sec.gov.
The statements in this document concerning the eligible options, the 2001 Plan and the restricted
stock rights are
summaries of the material terms but are not complete descriptions of the eligible options, the 2001
Plan, or the restricted stock rights. The stock plans under which the eligible options were
granted, the restricted stock rights and the forms of award agreements have been filed as exhibits
to our Tender Offer Statement on Schedule TO filed with the U.S. Securities and Exchange Commission
(to which this document is also an exhibit). See Section 18 of Part III of this document for
additional information regarding the Schedule TO.
Our offer is not being made to, and we will not accept any election to exchange options from or on
behalf of, option holders in any jurisdiction in which our making the offer or accepting any
tendered options is illegal. However, we may in our sole discretion take the actions we deem
necessary for us to make this offer to option holders in such jurisdiction.
TABLE OF CONTENTS
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I. SUMMARY TERM SHEET |
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How the option exchange program works |
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Background and purpose of the offer |
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Duration of the offer |
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How to elect to participate |
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U.S. federal and international income tax considerations |
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3 |
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Change of control |
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How to get more information |
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II. CERTAIN RISKS OF PARTICIPATING IN THE OFFER |
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15 |
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Economic risks |
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15 |
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Tax-related risks for U.S. tax residents |
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16 |
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Tax-related risks for non-U.S. tax residents |
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16 |
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Business-related risks |
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III. THE OFFER |
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1. Eligibility |
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18 |
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2. Number of Restricted Stock Rights; Expiration Date |
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18 |
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3. Purpose of the Offer |
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4. Procedures for Tendering Options |
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5. Withdrawal Rights and Change of Election |
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6. Acceptance of Options for Exchange and Issuance of Restricted Stock Rights |
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7. Conditions of the Offer |
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8. Price Range of Our Common Stock |
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26 |
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9. Source and Amount of Consideration; Terms of Restricted Stock Rights |
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27 |
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10. Information Concerning PDF Solutions, Inc. |
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29 |
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11. Interests of Directors and Officers; Transactions and Arrangements Concerning the Options |
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31 |
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12. Status of Options Accepted by Us in the Offer; Accounting Consequences of the Offer |
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32 |
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13. Legal Matters; Regulatory Approvals |
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32 |
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14. Material U.S. Federal Income Tax Consequences |
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32 |
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15. Considerations Specific to Eligible Individuals Outside of the United States |
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34 |
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16. Extension of Offer; Termination; Amendment |
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35 |
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17. Fees and Expenses |
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35 |
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18. Additional Information |
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36 |
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19. Miscellaneous |
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36 |
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20. Forward-Looking Statements |
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37 |
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APPENDIX A: Information About the Directors and Executive Officers of PDF Solutions, Inc. |
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A-1 |
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APPENDIX B: Guide to International Issues |
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B-1 |
|
I. SUMMARY TERM SHEET
The following are answers to some questions about our offer. The answers are summaries and do not
describe all of the details of the offer. You should read all of this document, the Election Form,
the Notice of Withdrawal, our PDF Solutions, Inc. 2001 Stock Plan (the 2001 Plan) and the form of
restricted stock agreement, because they contain the full details of our offer and the terms of the
restricted stock rights, and these details could be important to you. For many of the questions, we
have included a reference to the section or sections contained in Part III of this document where
you can find a more complete discussion.
This summary is presented in question-and-answer format, organized as follows:
HOW THE OPTION EXCHANGE PROGRAM WORKS
|
1. |
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What is the Offer? |
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|
2. |
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Am I eligible to participate? |
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3. |
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Are individuals outside the United States eligible to participate? |
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4. |
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What happens if my service terminates before tendered options are canceled? |
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5. |
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Which options may I exchange? |
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6. |
|
If I participate, what will happen to my current options? |
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7. |
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I have more than one eligible option grant. Do I have to exchange all of them in order to participate? |
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8. |
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May I tender unvested options? |
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9. |
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May I tender an option that I have already exercised in full? |
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10. |
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What is a stock option? |
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11. |
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What are restricted stock rights? |
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12. |
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What is the principal difference between stock options and restricted stock rights? |
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13. |
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Do I have to pay any money to receive a restricted stock right or shares pursuant to a restricted stock right? |
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14. |
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If I participate, how many restricted stock rights will I receive? |
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15. |
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When will my restricted stock rights vest? |
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16. |
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What will I receive when my restricted stock rights vest? |
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17. |
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What is the source of the common stock that will be issued under my restricted stock rights? |
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18. |
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What happens if my service terminates before all of my restricted stock rights vest? |
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19. |
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If I participate, when will I receive my restricted stock agreement? |
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20. |
|
Where will I be able to view my restricted stock rights? |
1
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21. |
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Will my restricted stock rights ever expire? |
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22. |
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Are there risks that I should consider in deciding whether to exchange my options? |
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23. |
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What happens if PDFs stock price increases during the offer? |
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24. |
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Why should I consider participating in the offer? |
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25. |
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Are there conditions to the offer? |
BACKGROUND AND PURPOSE OF THE OFFER
|
26. |
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Why is PDF making this offer? |
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27. |
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Why did PDF choose to offer this exchange for restricted stock rights
rather than repricing eligible options or granting new options? |
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28. |
|
If I have already held my options through the required vesting
periods, why are there additional vesting requirements on the
restricted stock rights? |
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29. |
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Will there be additional equity grants in the future? |
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30. |
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Is it likely that an offer similar to this one will be made in the future? |
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31. |
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Does our Board of Directors have a recommendation about this offer? |
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32. |
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Is there any information regarding PDF that I should be aware of? |
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33. |
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What are the accounting consequences to PDF of making this exchange offer? |
DURATION OF THE OFFER
|
34. |
|
How long will this offer remain open? Can the offer be extended, and
if so, how will I know if it is extended? |
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35. |
|
If the offer is extended, how will the extension affect the date on
which restricted stock rights will be granted? |
HOW TO ELECT TO PARTICIPATE
|
36. |
|
What do I need to do to participate in the offer? |
|
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37. |
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Do I have to return the Election Form or any other document if I do not want to exchange my options? |
|
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38. |
|
If I elect to exchange my options by submitting an executed Election
Form, can I change my mind? |
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|
39. |
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Will PDF accept all options tendered for exchange? |
|
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40. |
|
What happens to my options if I do not accept this offer or if my options are not accepted for exchange? |
|
|
41. |
|
What if I am out of the office on leave of absence or sabbatical during the offer period? |
2
U.S. FEDERAL AND INTERNATIONAL INCOME TAX CONSIDERATIONS
|
42. |
|
Will I have to pay U.S. federal income taxes at the time of the exchange if I participate in the offer? |
|
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43. |
|
What are the U.S. federal income tax consequences of receiving shares
pursuant to restricted stock rights? |
|
|
44. |
|
How will U.S. income and employment tax withholding be handled? |
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45. |
|
What are the tax consequences if I live outside of the United States? |
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46. |
|
Are there special considerations for people on international
assignment or who have transferred from another PDF location in
another country? |
CHANGE OF CONTROL
|
47. |
|
If PDF is acquired by another company, are there any change of control
provisions associated with this offer? |
HOW TO GET MORE INFORMATION
|
48. |
|
Who can I talk to if I have questions about the offer? |
References in this document to PDF, the Company, we, us and our means PDF Solutions,
Inc., and references to the time the offer expires mean 9 p.m., U.S. Pacific Time, on July 9,
2008, or, if we extend the offer period, any later date that we specify. References to the offer
to exchange mean this document and its appendices. References to the offer or the program mean
the option exchange program described in the offer to exchange. References to dollars ($) are to
United States dollars.
HOW THE OPTION EXCHANGE PROGRAM WORKS
1. What is the Offer?
Beginning on June 10, 2008 and ending at 9 p.m., U.S. Pacific Time, on July 9, 2008, unless we
extend the offer, each eligible individual (described in Question 2 below) may decide to exchange
eligible options (described in Question 5 below) for restricted stock rights, at no cost to the
individual (described in Question 11 below). If you are an eligible individual, your restricted
stock rights will be granted in the form of rights to acquire shares of common stock. The number
of restricted stock rights an eligible individual will receive in exchange for an eligible option
grant will be determined by the exchange ratio (described in Question 14 below). Restricted stock
rights will be subject to a new vesting schedule (described in Question 15 below), even if the
options tendered in the exchange program currently are fully vested.
Participation in this offer is voluntary, and there are no penalties for electing not to
participate. If you choose not to participate in the offer, you will not receive restricted stock
rights pursuant to this offer, and your outstanding options will remain outstanding in accordance
with their current terms and conditions.
2. Am I eligible to participate?
Only eligible individuals may participate in this offer. Generally, you are eligible to
participate in the offer if you provide services to PDF or one of our subsidiaries as an employee
(including an officer of the Company), consultant or Member of our Board of Directors on June 10,
2008 and are still an eligible employee, consultant or director to PDF or one of our subsidiaries
(even if on an approved leave of absence) on the date on which the tendered options are canceled
and restricted stock rights are granted. If you resign or receive a notice of termination at any
time before the date on which the tendered options are canceled, you are not eligible to
participate in the offer. (See Section 1 of Part III.)
3
3. Are individuals outside the United States eligible to participate?
Generally, yes; all employees, consultants and directors worldwide are eligible to participate in
the offer. Please be sure to read Section 15 of Part III and Appendix B, which discuss terms of the
offer specific to eligible individuals outside of the United States.
4. What happens if my service terminates before tendered options are canceled?
If you tender options for exchange under this offer, but before the tendered options are canceled
your service with PDF or one of our subsidiaries terminates for any reason or you receive or submit
a notice of termination, then your tender will automatically be deemed withdrawn and you will not
participate in the option exchange program. You will retain your outstanding options in accordance
with their current terms and conditions, and you may exercise them during a limited period of time
following your termination of service in accordance with their terms to the extent that they are
vested. If you are currently considered an at-will employee, this offer does not change that
status, and your employment may be terminated by us or by you at any time, including before the
offer expires, for any reason, with or without cause.
5. Which options may I exchange?
Only eligible options may be exchanged under this program. Eligible options are generally those
option grants having an exercise price per share that is equal to or greater than $10.00. Any
options that you tender for exchange with a per share exercise price that is not equal to or
greater than $10.00 will not be eligible for exchange and will automatically be excluded from the
offer. To determine which option grants are eligible for exchange, you should review the Election
Form provided to you which lists all of your option grants which have an exercise price equal to or
greater than $10.00 and therefore are eligible for exchange. We will, however, terminate the offer
if the average market closing price of our common stock for the five business days immediately
preceding the date on which the offer expires is $10.00 or more. (See Section 2 of Part III.)
6. If I participate, what will happen to my current options?
Eligible options that you elect to exchange under this program will be canceled promptly following
the expiration of this offer and you will no longer have those options available for exercise. If
you do not tender all of your eligible options for exchange, none of your eligible options will be
canceled and such eligible options will remain outstanding and subject to their existing exercise
prices and their existing terms. (See Section 6 and Section 12 of Part III.)
7. I have more than one eligible option grant. Do I have to exchange all of them in order to
participate?
Yes. You may exchange all of your eligible option grants or none at all. If you choose to tender
your eligible options for exchange, you must tender all of your outstanding, unexercised eligible
option grants. For purposes of this offer, the term option means a particular option grant to
purchase a specified number of shares of our common stock at a specified exercise price per share.
We will not accept partial tenders of options. If you attempt to tender for exchange less than the
entire outstanding, unexercised portion of an eligible option or some, but not all, of your
eligible options, we will reject your tender in its entirety. (See Section 2 of Part III.)
8. May I tender unvested options?
Yes. Your eligible options do not need to be vested in order for you to participate in the offer.
However, if you choose to tender a particular outstanding eligible option grant, you must tender
the entire eligible option grant, both the vested and unvested portions.
4
9. May I tender an option that I have already exercised in full?
No. The offer pertains only to outstanding options. It does not apply in any way to shares you have
already purchased, whether upon the exercise of options or otherwise, or whether or not you have
vested in those shares. If you have exercised an option in its entirety, that option is no longer
outstanding and is therefore not eligible for this offer. If you have exercised an eligible option
grant in part, the remaining unexercised portion of that option is outstanding and may be tendered
for exchange. Options for which you have properly submitted an exercise notice prior to the date
the offer expires will be considered exercised to that extent, whether or not you have received
confirmation of exercise for the shares purchased.
10. What is a stock option?
A stock option is the right to purchase shares of stock at a specified price, regardless of the
actual market price of the stock at the time the option is exercised. Typically, the specified
purchase or exercise price is the market price of a share of our common stock on the date the
option is granted. Due to subsequent fluctuations, at any given time after the option is granted,
the prevailing market price of the stock may be greater than, equal to, or less than, the specified
exercise price of the option. When the market price is greater than the exercise price of the
option (otherwise known as an in-the-money option), the option holder receives value from
exercising the option, because he or she is able to buy the stock underlying the option at less
than its prevailing market price and then sell the purchased stock for the higher prevailing market
price. The holder of an option to purchase stock at an exercise price that is equal to or greater
than the prevailing market price (otherwise known as an out-of-the-money or an underwater
option) generally would not exercise the stock option. The options eligible for exchange under this
program currently are out-of-the-money.
11. What are restricted stock rights?
Restricted stock rights are rights to acquire PDF common stock. If you elect to participate in
this offer and receive restricted stock rights, they will be granted to you at no cost.
Restricted stock rights granted pursuant to this offer are not actual shares of PDF common stock.
Rather, they represent the right to receive shares of our common stock on a future date (at no cost
to the participant, although you may have to pay applicable withholding taxes). Each restricted
stock right will be settled by the issuance of one share of PDF common stock on the date the
restricted stock right vests. Restricted stock rights are subject to forfeiture upon termination of
service, and to restrictions on transfer prior to vesting and the related issuance of shares of
common stock. Shares you receive if and when your restricted stock rights vest will no longer be
restricted, and you will be free to hold, transfer or sell them, subject to required tax
withholding and compliance with applicable securities laws, PDF securities trading policies and any
other laws, rules and regulations.
Generally, participants in the exchange offer will forfeit restricted stock rights, to the extent
unvested, if they cease to provide services to PDF or one of our subsidiaries, and participants may
not transfer, pledge, or otherwise dispose of unvested restricted stock rights. The vesting and
forfeiture provisions, transfer restrictions and other terms of the restricted stock rights are set
forth in the 2001 Plan and the forms of restricted stock agreement included as exhibits to our
Tender Offer Statement on Schedule TO filed with the U.S. Securities and Exchange Commission (to
which this offer to exchange is also an exhibit).
Participants granted restricted stock rights will not be PDF stockholders as a result of holding
restricted stock rights, and restricted stock rights do not entitle their holders to vote at
meetings of PDF stockholders. You will not be paid any dividends paid on PDF shares while you hold
restricted stock rights, although we do not currently pay dividends on our stock and have no
current plan to do so. Once the restricted stock rights have vested and the underlying shares of
common stock are issued to you, you will become and have all of the rights of a PDF stockholder
(such as voting and dividend rights) with respect to those shares, and you may transfer or sell the
shares, subject to required tax withholding and compliance with applicable securities laws and any
other laws, rules and regulations.
5
12. What is the principal difference between stock options and restricted stock rights?
When the market price of the underlying shares declines below the applicable option exercise price,
as it has in the case of the options eligible under this offer, the option has no realizable value.
In contrast, restricted stock rights continue to have value even if the market price of our stock
has declined below its value at the time of grant.
The eligible options you now hold may have greater potential value in the event our common stock
price increases significantly (because there are more shares underlying such options than there
will be subject to the restricted stock rights that you would receive in the exchange), but the
restricted stock rights you would receive if you choose to participate in the offer will likely
have greater value if our common stock price does not increase significantly (because you will not
have to pay anything to receive shares pursuant to such restricted stock rights), provided you hold
the restricted stock rights for the applicable vesting period.
13. Do I have to pay any money to receive a restricted stock right or shares pursuant to a
restricted stock right?
No. You do not have to pay any money to receive either restricted stock rights granted pursuant to
this offer or shares issued pursuant to such restricted stock rights. However, you will be
responsible for paying all applicable taxes in connection with the shares received pursuant to
restricted stock rights and any subsequent sale of such shares. (See Questions 42 through 46 below
and Sections 14 and 15 of Part III.)
14. If I participate, how many restricted stock rights will I receive?
The number of restricted stock rights that we are offering in exchange for each eligible option
grant is determined by an exchange ratio. For every 4.2 shares subject to an eligible stock option
grant that you surrender in the exchange, you will receive one restricted stock right. As an
example, if you have a stock option grant for 42 shares with an exercise price of $10.00, you would
receive 10 restricted stock rights, subject to PDFs right to withhold or arrange for the sale of
shares subject to the restricted stock right sufficient in number to satisfy any applicable
withholding.
We will not issue any fractional restricted stock rights. Any exchange that would result in a
fractional restricted stock right under the exchange ratio will be rounded up to the next whole
share. We will terminate the offer if the average market closing price of our common stock for the
five business days immediately preceding the date on which the offer expires is $10.00 or greater.
(See Questions 23 and 25, and Section 2 of Part III.)
15. When will my restricted stock rights vest?
Restricted stock rights received in exchange for eligible options will be subject to new vesting
schedules which will generally provide that the shares subject to the restricted stock right will
be unvested on the date of the exchange and will require a minimum period of at least approximately
sixteen months of service after the date of the exchange to fully vest, even if the exchanged
options were fully vested. The length of the vesting schedule for each restricted stock right will
depend on when your stock options you exchange were granted to you. If your service with us
terminates before all of your restricted stock rights have vested, you will generally forfeit any
restricted stock rights that remain unvested at that time.
Vesting Applicable to Restricted Stock Rights:
|
|
|
Year During Which Exchanged Options |
|
|
Were Granted |
|
Vesting Schedule of Restricted Stock Right |
2000 - 2003 |
|
50% on 5/15/2009 and 50% 6-months thereafter |
2004 |
|
25% on 5/15/2009 and 25% every 6-months thereafter |
2005 |
|
16.7% on 5/15/2009 and 16.66% every 6-months thereafter |
2006 and later years |
|
12.5% on 5/15/2009 and 12.5% every 6-months thereafter |
Only a whole number of restricted stock rights will vest in any period. Any fractional restricted
stock right that would otherwise vest will be carried over to the next vesting period. (See
Section 9 of Part III.)
6
If you are a participant in the offer to exchange, and we are acquired by another company after we
accept and cancel your tendered options and grant you restricted stock rights, any unvested
restricted stock rights will immediately vest and any shares received pursuant to vested restricted
stock rights would be treated in the same manner as all other shares of PDF common stock
outstanding at the time of the merger or acquisition transaction.
16. What will I receive when my restricted stock rights vest?
Restricted stock rights will be settled on a one-to-one basis in shares of PDF common stock on the
applicable vesting dates. We intend to satisfy any applicable withholding obligations that arise in
connection with restricted stock rights through a sell-to-cover procedure further described in
Question 44 below.
17. What is the source of the common stock that will be issued under my restricted stock rights?
The shares of PDF common stock issued under restricted stock rights will be issued under our 2001
Plan. Consistent with the terms of the 2001 Plan, the stock issuable under the 2001 Plan will be
authorized but unissued shares or treasury shares. Shares subject to stock options or restricted
stock rights that were granted under the 2001 Plan and later forfeited or terminated before being
exercised will again become available for issuance pursuant to the 2001 Plan (including forfeitures
that occur as a result of this offer).
18. What happens if my service terminates before all of my restricted stock rights vest?
You will generally forfeit any restricted stock rights that are not vested on the day you stop
providing services to PDF or one of its subsidiaries for any reason. Any shares of common
stock that you receive upon vesting of your restricted stock rights while you are an employee,
consultant or director of PDF or one of its subsidiaries are yours to keep even after you leave
PDF. If you elect to keep all of your eligible options (i.e., you do not tender any options in the
exchange), your stock option agreements generally provide that you have a limited period of time
after your final day of service with us to exercise your stock options to the extent that they are
vested. If you do not exercise them within that limited time period, you will forfeit all
unexercised options, whether vested or unvested, and will not receive any compensation for such
forfeited options.
If you believe you may resign before the restricted stock rights vest, you should carefully
consider whether or not to participate in the offer. Your options currently may be fully or
partially vested. If you do not exchange them, you may be able to exercise your vested options for
a period of time after your service ends (as specified in your stock option agreement). If you
participate in the offer, the options you elect to exchange will be canceled and you will generally
forfeit any restricted stock rights that have not vested at the time your service ends. (See
Section 9 of Part III.)
19. If I participate, when will I receive my restricted stock agreement?
Restricted stock rights will be granted promptly following expiration of the offer in exchange for
all properly tendered options that we accept for cancellation and exchange. We expect to deliver
restricted stock agreements to restricted stock right recipients via the Citigroup Global Markets
Inc. website at www.benefitaccess.com as soon as practicable following the grant date; provided
that you must accept the agreement by December 31, 2008, otherwise you will forfeit the agreement
and all of the restricted stock rights.
20. Where will I be able to view my restricted stock rights?
You will be able to view your awards and monitor your vesting dates through Citigroup Global
Markets Inc., much as you can do now with stock options that we have previously granted to you. If
you have accepted the restricted stock agreement, on each semi-annual vesting date, your Citigroup
Global Markets Inc. account will automatically reflect the shares of common stock subject to your
restricted stock rights which have been issued to you on that date, in accordance with this offer,
reduced by the number of shares we withhold or sell to satisfy any applicable withholding
requirements. (See Questions 44 and 45.) You will be able to immediately sell all or a portion of
your remaining vested shares of common stock from your Citigroup Global Markets Inc. account,
subject to compliance with all applicable laws, rules and
regulations, PDF securities trading policies and any other legal requirements.
7
21. Will my restricted stock rights ever expire?
No. If you still provide services to PDF or one of our subsidiaries on each of your semi-annual
vesting dates and you received a restricted stock right pursuant to this offer, a portion of your
shares will become vested shares on each semi-annual vesting date. If your service terminates, you
will automatically forfeit any restricted stock rights that you hold at that time that are
unvested. See also the answers to Questions 15, 16 and 17.
22. Are there risks that I should consider in deciding whether to exchange my options?
Yes. Exchanging your eligible options does have some risks. You should carefully review the
discussion of certain of these risks in Part II of this document (Certain Risks of Participating
in the Offer).
23. What happens if PDFs stock price increases during the offer?
If our stock price increases during the offer, you may want to exercise some of your options or
even decide that you do not want to participate in the offer. If you want to exercise any of your
options that may be eligible for exchange and still participate in the offer, you can do so by
exercising them before you make an election to participate. Once you have submitted an election to
participate, you cannot exercise eligible options you have elected to exchange unless you first
withdraw your previous election. If you withdraw and then exercise some of your eligible options
and want to exchange the rest, you can do so by again following the procedures in Section 4 of Part
III. We will terminate the offer if the average market closing price of our common stock for the
five business days immediately preceding the date on which the offer expires is $10.00 or more. The
five-business day average closing price of our common stock prior to June 5, 2008, as reported on
the NASDAQ Global Market, was $5.616.
24. Why should I consider participating in the offer?
If you participate in the offer, you will surrender for exchange eligible options for more shares
than the number of restricted stock rights you will receive, based on an exchange ratio of 4.2
option shares to 1 share subject to a restricted stock right, as described in the answer to
Question 14 and Section 2 of Part III. The exchange ratio was determined by our Board of Directors
on the basis of a number of factors. However, the eligible options that you hold might never be
in-the-money (see Question 10) and, therefore, may never have any actual value to you, whereas
restricted stock rights have a greater likelihood of having value when (and if) you sell the
underlying stock.
Some examples (based on vesting schedules applicable to restricted stock rights to be granted) may
assist you:
|
|
|
If you have an eligible option grant for 42 shares at an exercise
price of $12.00 per share, at the exchange ratio of 4.2 option shares
for 1.0 restricted stock right, you could elect to surrender this
option and receive 10 restricted stock rights. If this option was
granted from 2000 through 2003, your restricted stock rights would
vest 50% on May 15, 2009. At that time, if the market price per share
of our common stock is, for example, $10.00, you could sell the vested
portion of your award for $50.00 (i.e., 5 shares x $10.00). If the
market price remains the same throughout the vesting period, you could
sell the remaining 50% of your award for an additional $50.00 (i.e., 5
shares x $10.00) on the following semi-annual vesting date. |
|
|
|
|
If you chose to retain your option rather than exchanging it for
restricted stock rights, you would not have been able to exercise the
option for any value because, at an exercise price of $12.00, it would
be out-of-the-money when the market price is $10.00 per share. It is
possible that the price of our common stock will never rise above
$12.00 during the life of the option. If that happens, you will not be
able to exercise and sell the underlying shares at a profit. However,
if the market price per share of our common stock climbs to $15.00,
rather than $10.00, your unexercised option would be worth $126.00
(i.e., 42 shares x ($15.00 $12.00)), whereas the restricted stock
rights that you would receive based on the 4.2-to-1.0 exchange ratio
would be worth $150.00 (i.e., 10 shares x $15.00). |
The foregoing examples assume that you remain an eligible employee, consultant or director of the
Company or one of its subsidiaries through the applicable vesting dates. In addition, none of the
foregoing takes into account the tax effects of any of the transactions which are described in
Questions 42 46.
8
Again, you should keep in mind that, if you choose to participate in this offer and receive
restricted stock rights, you will be exchanging stock options that may already be vested either in
full or in part for restricted stock rights that will be unvested at grant and will have a minimum
period of at least approximately sixteen months before the restricted stock rights will vest in
full. (See Question 15.)
To illustrate the significance of vesting on restricted stock rights, consider the first example
above in which the price of our common stock remains at $10.00 per share throughout the sixteen
month-vesting period of the restricted stock rights. As explained above, the restricted stock
rights would yield more than the stock options, since the options, with an exercise price of $12.00
per share, would remain out-of-the-money for the entire period, while the shares underlying the
restricted stock rights could be sold for a total of $100.00 (i.e., 10 shares x $10.00). However,
now assume that the stock price rises to $20.00 per share prior to the first semi-annual restricted
stock rights vesting date following the exchange, and then declines to $10.00 per share for the
remainder of the sixteen month vesting period. Under those assumptions, you would have lost the
opportunity to realize $336.00 (i.e., 42 shares x ($20.00 $12.00)) for your stock options
(assuming you exercised them and sold the stock at $20.00 per share), in exchange for restricted
stock rights worth $150.00 on the day they vest (i.e.,5 shares x $20.00 plus 5 shares x $10.00).
Moreover, if your service with the Company and its subsidiaries terminates prior to the time your
restricted stock rights vest in full, you will not realize any value from the unvested portion of
the award, which you will generally forfeit.
In evaluating this offer, you should keep in mind that the future performance of our common stock
will depend upon, among other factors, the future overall economic environment, the performance of
the overall stock market and companies in our sector, the performance of our own business and the
risks and uncertainties set forth in our filings with the U.S. Securities and Exchange Commission.
We recommend that you read our Annual Report on Form 10-K for the fiscal year ended December 31,
2007 and our Quarterly Report on Form 10-Q for the period ended March 31, 2008, which have been
filed with the U.S. Securities and Exchange Commission and are available at www.sec.gov,
as well as all other documents incorporated by reference in our Tender Offer Statement on
Schedule TO (to which this document is also an exhibit).
25. Are there conditions to the offer?
Yes. The offer is subject to a requirement that the average market closing price of our common
stock for the five business days immediately preceding the date on which the offer expires be less
than $10.00. In addition, the offer is subject to a number of other conditions that are described
in Section 7 of Part III. The offer is not conditioned on a minimum number of options being
tendered for exchange or upon a minimum number of option holders accepting the offer. Participation
in the offer is completely voluntary.
BACKGROUND AND PURPOSE OF THE OFFER
26. Why is PDF making this offer?
Since many of the eligible options have been out-of-the-money for some time, they have not been
exercised by their holders and have added to an increase in the overhang of options outstanding
in relation to the aggregate number of shares of our common stock outstanding. In addition, as a
result of the significant volatility in our stock price over the last several years, a considerable
number of option holders of PDF or one of its subsidiaries are holding options that have exercise
prices higher than the current and recent trading prices of our common stock. We believe that these
out-of-the-money options are not achieving the purposes for which they were intended, primarily
service provider incentives and retention. The overall purpose of this offer is to promote the
interests of our stockholders by reducing our stock option overhang and by strengthening our
ability to motivate and retain valued employees, consultants and directors. (See Section 3 of Part
III.)
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27. Why did PDF choose to offer this exchange for restricted stock rights rather than repricing
eligible options or granting new options?
Our Board of Directors considered a variety of alternatives to address the issues of the stock
option overhang and the significant number of out-of-the-money options. Ultimately, the Board
determined that by exchanging stock options according to the terms of this offer, we will reduce
the number of shares of stock subject to equity awards, thereby reducing potential dilution to our
stockholders. Additionally, some option holders could benefit from the opportunity to choose
between what we believe is the more certain benefit associated with restricted stock rights and the
potentially more valuable, though less certain, benefit those holders may realize by retaining
their stock options. By providing for the grant of replacement awards consisting of restricted
stock rights rather than new at-the-money stock options, our Board of Directors also sought to
strengthen PDFs equity-based retention incentives while further aligning our existing equity
compensation programs with our overall compensation philosophy. (See Section 3 of Part III.)
28. If I have already held my options through the required vesting periods, why are there
additional vesting requirements on the restricted stock rights?
Two of the principal purposes of our equity programs are to align the interests of our employees,
consultants and directors with those of our stockholders and to retain the services of these
employees, consultants and directors. We believe that anything shorter than the vesting schedules
described in Question 15 would not adequately allow us to further these objectives. You should
carefully consider the risks of exchanging vested options for unvested restricted stock rights.
(See Questions 15 and 24.)
29. Will there be additional equity grants in the future?
Our Board of Directors and its Compensation Committee periodically evaluate our compensation
programs. At this time, the Board and Compensation Committee believe that equity compensation forms
an important component of our compensation programs and they fully intend to periodically evaluate
future equity awards for eligible individuals.
30. Is it likely that an offer similar to this one will be made in the future?
While our Board and Compensation Committee evaluate PDFs compensation programs periodically, it
has no current intention to make any similar offer in the future. You should make your decision on
the assumption that, if you do not surrender your eligible options in accordance with the terms of
this offer (including deadlines stated in this offer to exchange), you will not have another
similar opportunity.
31. Does our Board of Directors have a recommendation about this offer?
Our Board of Directors is not making a recommendation about this offer. Although the Compensation
Committee of the Board and our Board of Directors have approved this exchange offer, they recognize
that the decision to accept or reject this offer is an individual one that should be based on a
variety of factors, including your own personal circumstances and preferences. You should consult
with your personal advisors if you have questions about your financial or tax situation. Neither
we, the Compensation Committee, nor our Board of Directors are making a recommendation as to
whether or not to accept this exchange offer.
32. Is there any information regarding PDF that I should be aware of?
Yes. Your decision of whether to accept or reject this offer should take into account the factors
described in this offer to exchange, as well as the various risks and uncertainties inherent in our
business. These risks include, but are not limited to, those risks set forth in our Annual Report
on Form 10-K for the fiscal year ended December 31, 2007 and our Quarterly Report on Form 10-Q for
the period ended March 31, 2008. In addition, before making your decision to tender your eligible
options, you should carefully review the information about PDF discussed in Part II (Certain Risks
of Participating in the Offer) and in Section 10 of Part III of this document. This information
includes an update on recent events affecting our business and explains where you can find
additional information about us.
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33. What are the accounting consequences to PDF of making this exchange offer?
Under the current accounting rules, both stock options and restricted stock rights result in an
expense for financial accounting purposes and the amount of that expense is based on their
estimated fair value at the grant date. For accounting purposes, to the extent the fair value of
each award of restricted stock rights granted to participants exceeds the fair value of the stock
options surrendered, determined on the exchange date, such excess is considered additional
compensation. (See Section 12 of Part III.)
DURATION OF THE OFFER
34. How long will this offer remain open? Can the offer be extended, and if so, how will I know if
it is extended?
This offer begins on June 10, 2008 and is scheduled to expire at 9 p.m., U.S. Pacific Time on July
9, 2008. No exceptions will be made to this deadline, unless we extend it. Although we do not
currently intend to do so, we may, in our sole discretion, extend the expiration date of this offer
at any time. If we extend this offer, we will publicly announce the extension no later than 6 a.m.,
U.S. Pacific Time, on the next business day after the last previously scheduled or announced
expiration date. (See Section 16 of Part III.)
35. If the offer is extended, how will the extension affect the date on which restricted stock
rights will be granted?
If we extend the offer and you elect to participate in it, you must properly tender your eligible
option grants you wish to exchange before the expiration of the extended offer period. Your
properly tendered eligible options will be accepted and canceled, and your award of restricted
stock rights will be granted, promptly following the extended expiration.
HOW TO ELECT TO PARTICIPATE
36. What do I need to do to participate in the offer?
To properly elect to exchange your eligible options, you must notify PDF of your election before 9
p.m., U.S. Pacific Time, on the expiration date, which is currently July 9, 2008. Complete, sign,
date and return the Election Form and deliver it to P. Steven Melman, Vice President, Investor
Relations & Strategic Initiatives, according to the instructions contained in the Election Form so
that we receive them before the expiration date deadline.
At any time you may also request a copy of any option exchange program document by contacting
the Offering Administrator at tenderoffer@pdf.com.
37. Do I have to return the Election Form or any other document if I do not want to exchange my
options?
No. You do not have to return any documents to us if you do not wish to exchange your eligible
options in this offer. If you do not return the executed Election Form, you will not participate in
the option exchange program. This offer is completely voluntary, and there are no penalties for
electing not to participate in the offer.
38. If I elect to exchange my options by submitting an executed Election Form, can I change my
mind?
Yes. If you decide to participate in the offer and then decide to withdraw the election you
submitted, you may do so at any time before the offer expires. You may withdraw your election by
submitting a Notice of Withdrawal. (See Section 5 of Part III.)
If you then decide to make a new election, you must submit a new executed Election Form. Your
election to withdraw must be received by P. Steven Melman, Vice President, Investor Relations &
Strategic Initiatives, before the offer expires.
39. Will PDF accept all options tendered for exchange?
We intend to accept all options that are properly tendered for exchange unless the offer is
terminated. If we terminate the
offer without accepting options for exchange, we will communicate this to you by 9 p.m., U.S.
Pacific Time on the first business day after the offer expires ( i.e., if the expiration date is
July 9, 2008, this communication will be no later than 9 p.m., U.S. Pacific Time on July 10, 2008).
The communication may be made orally, by written or electronic notice or by public announcement.
(See Sections 6 and 16 of Part III.)
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40. What happens to my options if I do not accept this offer or if my options are not accepted for
exchange?
Nothing. If you do not elect to participate in the offer, or if we do not accept options that are
tendered for exchange, you will keep all your current options, and you will not receive any
restricted stock rights. The offer will not result in any changes to the terms of your current
options. (See Section 4 of Part III.)
41. What if I am out of the office on leave of absence or sabbatical during the offer period?
If you will be on a leave of absence, extended paid-time-off or sabbatical during any portion of
the offer period, you may request that copies of the Election Form be mailed to your home address.
Please contact the Offering Administrator at tenderoffer@pdf.com. It is your responsibility to
contact PDF to obtain the election materials if you will be out of the office for an extended time
during the offer period. If you do not submit an executed Election Form, you will not participate
in the option exchange program.
U.S. FEDERAL AND INTERNATIONAL INCOME TAX CONSIDERATIONS
42. Will I have to pay U.S. federal income taxes at the time of the exchange if I participate in
the offer?
We believe that individuals who are subject to U.S. income taxation will incur no immediate U.S.
federal income tax consequences as a result of either electing to retain their eligible options or
electing to exchange their eligible options for restricted stock rights. However, see the response
to Question 43 for the U.S. federal income tax consequences of shares received pursuant to your
restricted stock rights.
43. What are the U.S. federal income tax consequences of receiving shares pursuant to restricted
stock rights?
Individuals subject to U.S. income taxation will recognize no taxable income upon the receipt of
restricted stock rights. You will, however, recognize ordinary income (like salary) at the time the
restricted stock rights vest and shares are issued pursuant to the restricted stock rights. The
amount of ordinary income recognized will be equal to the fair market value of the shares on the
vesting date. We will determine the fair market value of the shares based on the closing price of
our common stock as reported on the NASDAQ Global Market on the applicable vesting date. The
ordinary income resulting from the vesting of restricted stock rights and issuance of shares will
be reflected in your Form W-2 reported to the Internal Revenue Service for the year of vesting. At
the time that you recognize ordinary income, you will have an income and employment withholding tax
obligation with respect to that income, much like the obligation that arises when we pay you your
salary. (See Question 44 and Section 14 of Part III.)
Upon a U.S. participants sale of shares acquired under a restricted stock right, any gain or loss,
based on the difference between the sale price and the fair market value of the shares on their
vesting date, will be taxed as a capital gain or loss. Such gain or loss will be long-term if the
participant held the shares more than one year following their vesting date.
44. How will U.S. income and employment tax withholding be handled?
For our participants who are subject to U.S. income taxation, as your restricted stock rights vest
over time and you are issued shares pursuant to your restricted stock rights, you will be required
to recognize taxable income. This means that we will have an obligation to withhold income and
employment taxes, much like the obligation that arises when we pay you your salary. Until you have
satisfied these tax withholding requirements, we will have no obligation to release shares to you.
Generally, non-employee directors and consultants will not be subject to such withholding, but may
be required to pay quarterly estimated taxes.
As your restricted stock rights vest over time and you are issued shares pursuant to your
restricted stock rights, you will
automatically participate in one or more block trades, through Citigroup Global Markets Inc., of a
portion of your shares to obtain sufficient proceeds to satisfy the withholding tax liability. Out
of the proceeds of the sale of withheld shares, Citigroup Global Markets Inc. will remit to us the
proceeds (note that the full amount of the proceeds will be applied to satisfy any applicable tax,
withholding or other liability, even if it may exceed the minimum amount required to satisfy such
tax, withholding or other liability). Any sale of your shares must be made in compliance with
securities laws restrictions and our insider trading policies including our pre-clearance
requirements.
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Promptly after each vesting date, Citigroup Global Markets Inc. will group a portion of your shares
as part of one or more block trades and sell enough shares to cover the amount of withholding taxes
on your shares. Citigroup Global Markets Inc. will charge a trade commission for this sale, which
Citigroup Global Markets Inc. will deduct from the proceeds of the sale of the shares. Your sale
price per share for your shares will be the weighted average sale price for all of the shares of
all holders that Citigroup Global Markets Inc. sells in all of the block trades. The amount of
withholding taxes you owe will depend on the last sale price of our common stock as reported on the
NASDAQ Global Market on the vesting date. However, the block trades will not occur until one or
more trading days after your vesting date, and it may take several trading days to sell sufficient
shares to cover all withholding taxes on the shares. The trading price of our common stock may
decline during that period. You may therefore have to sell shares at lower prices to cover taxes
set on the basis of a higher market price. This would increase the number of shares that you would
need to sell in order to cover the withholding taxes on your shares. You will bear the full risk of
changes in the trading price of our stock. This risk may affect your ability to cover your tax
obligations on the shares. We and Citigroup Global Markets Inc. will attempt to estimate the
correct number of shares to sell to cover withholding taxes based on the price of our common stock.
But it is possible that the proceeds from the sale will be either too much or too little to pay the
withholding taxes. If there are insufficient proceeds to cover the withholding taxes on your
shares, then we reserve the right to deduct the necessary amount from your next paycheck unless you
deliver to us a check for the balance of the taxes due. If there are excess proceeds, they will be
applied to any applicable tax, withholding or other liability that you have with respect to the
shares. If there is not a market in our common stock, we will have the right to make other
arrangements to satisfy the withholding tax obligations.
If you are subject to U.S. income tax and participate in the block trades to cover the withholding
taxes on your shares, or if you otherwise plan to sell any of your shares, you should be aware of
the wash sale provisions of Section 1091 of the Internal Revenue Code. Under those provisions, a
loss from the sale of stock is not deductible for income tax purposes if the taxpayer acquires
other shares of the same stock within 30 days before or after the sale. If this loss of tax
deductibility occurs, the tax rules provide for an adjustment in the tax basis of your other
acquired stock to reflect the amount of the non-deductible loss. An acquisition of shares of our
common stock under our 2001 Employee Stock Purchase Plan is an acquisition of other shares of the
same stock for purposes of the wash sale provisions.
If your service with us is terminated for any reason after you have received shares of common stock
but before you have satisfied your income and employment withholding tax obligation, you will
authorize us to instruct Citigroup Global Markets Inc. to sell on your behalf a number of shares
sufficient to satisfy your income and employment tax obligation, and we will deduct the entire
amount of any remaining tax obligation from your final paycheck.
45. What are the tax consequences if I live outside of the United States?
Eligible individuals who are residents of countries other than the United States who receive
restricted stock rights in the exchange offer will be subject to the income and social insurance
tax laws of those countries. See Section 15 of Part III (Considerations Specific to Eligible
Individuals Outside of the United States) and Appendix B (Guide to International Issues) for
additional information regarding the income and social insurance tax consequences of this exchange
offer to non-U.S. participants. If you are subject to income tax in more than one country, you
should be aware that there may be income and social insurance tax consequences in addition to those
described in the exchange offer which may apply to you. Please consult your personal tax advisor to
discuss these consequences.
46. Are there special considerations for people on international assignment or who have transferred
from another PDF location in another country?
For participants on international assignment or who have recently transferred within PDF
internationally, please refer to
the Guide to International Issues attached as Appendix B. If your questions are not answered by the
attached international guide, please consult your personal tax advisor.
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CHANGE OF CONTROL
47. If PDF is acquired by another company, are there any change of control provisions associated
with this offer?
Yes. If you are a participant in the offer to exchange, and we are acquired by another company
after we accept and cancel your tendered options and grant you restricted stock rights, any
unvested restricted stock rights will immediately vest and any shares received pursuant to vested
restricted stock rights would be treated in the same manner as all other shares of PDF common stock
outstanding at the time of the merger or acquisition transaction.
If we are acquired by another company before the offer expires, you may withdraw your tendered
options and have all of the rights under your options. Further, if we are acquired prior to the
offer expiration date, we reserve the right to withdraw the offer, in which case your options will
remain outstanding subject to their terms.
HOW TO GET MORE INFORMATION
48. Who can I talk to if I have questions about the offer?
For additional information or assistance, you should call P. Steven Melman, Vice President,
Investor Relations & Strategic Initiatives, at +1 (408) 938-6445 or send an email to
tenderoffer@pdf.com.
In addition to these resources, we also plan to arrange for question and answer sessions about this
exchange program. These sessions will not be a solicitation or make any recommendations whatsoever
with respect to the offer. For example, we will not be able to answer questions about your personal
situation or otherwise provide an assessment of the merits of this offer. You should consult your
personal advisors if you have questions about your financial or tax situation. We will be providing
you information about the timing and location of the question and answer session in the coming
days.
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II. CERTAIN RISKS OF PARTICIPATING IN THE OFFER
Participation in the offer involves a number of potential risks, including those described below.
The risks identified in this section and the risks described under the heading entitled Risk
Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed with
the U.S. Securities and Exchange Commission on March 17, 2008 and in our Quarterly Report on Form
10-Q for the period ended March 31, 2008, filed with the U.S. Securities and Exchange Commission on
May 12, 2008, highlight the material risks of participating in this offer. Eligible individuals
should carefully consider these risks and are encouraged to speak with an investment and tax
advisor as necessary before deciding to participate in the offer. We strongly recommend that you
read the rest of this offer to exchange. In addition, individuals who live and work outside of the
United States are encouraged to read Section 15 of Part III (Considerations Specific to Eligible
Individuals Outside of the United States) and Appendix B (Guide to International Issues) of this
offer to exchange discussing income and social insurance tax consequences in various countries, as
well as the other documents listed above, and consult with an investment and tax advisor as
necessary before deciding to participate in this offer.
ECONOMIC RISKS
If our stock price increases after the date your tendered options are canceled, including if we are
acquired by or merge with another company, your canceled options might have been worth more than
the restricted stock rights that you receive in exchange for them.
We cannot predict the market price of our stock. It is possible over time that options you tender
for exchange would have had a greater value or lesser value than the restricted stock rights you
receive under this offer.
We may engage in transactions in the future with business partners or other companies which could
significantly change our structure, ownership, organization or management or the make-up of our
Board of Directors, and which could significantly affect the price of our shares.
If you are a participant in the offer to exchange, and we are acquired by another company after we
accept and cancel your tendered options and grant you restricted stock rights, any unvested
restricted stock rights will immediately vest and any shares received pursuant to vested restricted
stock rights would be treated in the same manner as all other shares of PDF common stock
outstanding at the time of the merger or acquisition transaction. Option holders who do not tender
their options in the offer will have their outstanding options treated in accordance with the terms
of the plan under which they were granted, and if their options are assumed by a successor to PDF,
those options would be priced in accordance with the terms of that transaction. Since the options
represent rights to purchase a greater number of shares than the restricted stock rights that would
replace them under this offer, this could potentially result in a greater financial benefit for
those option holders who decided not to participate in this offer and who instead retain their
original options.
If you do not have a service relationship with PDF or one of its subsidiaries for any reason on the
date your restricted stock rights would otherwise vest, including as the result of a
reduction-in-force, you will generally forfeit any then unvested restricted stock rights.
This means that if you quit for any reason, die, or we terminate your service, with or without
cause or notice, and you are not an eligible employee, consultant or director on the date your
restricted stock rights would vest, you will generally forfeit the unvested restricted stock rights
and will not receive anything for the options you tendered and we canceled. This offer is not a
guarantee of employment or service for any period. Your employment or service relationship with PDF
(or one of our subsidiaries or a successor entity, as applicable) may be terminated at any time by
either you or us, or our subsidiary or successor entity, with or without cause or notice, subject
to any employment or service agreement you may have with PDF (or one of our subsidiaries or a
successor entity, as applicable).
If you are a participant in the offer to exchange, and we are acquired by another company after we
accept and cancel your tendered options and grant you restricted stock rights, any unvested
restricted stock rights will immediately vest and any shares received pursuant to vested restricted
stock rights would be treated in the same
manner as all other shares of PDF common stock outstanding at the time of the merger or acquisition
transaction.
15
We will not grant restricted stock rights to you if we are prohibited by applicable laws, rules,
regulations or policies.
Even if we accept your tendered options, we will not grant restricted stock rights to you if we are
prohibited by applicable laws, rules, regulations or policies from doing so. Such a prohibition
could result from, among other things, changes in U.S. laws, U.S. Securities and Exchange
Commission rules, regulations or policies or NASDAQ Global Market listing requirements or if you
move to a jurisdiction in which we are prohibited or prevented from granting restricted stock
rights.
TAX-RELATED RISKS FOR U.S. TAX RESIDENTS
General
When your restricted stock right vests and shares of PDF common stock are issued to you, you will
generally recognize ordinary income equal to the fair market value of the shares. Any excess of the
proceeds on a subsequent sale of the shares over their fair market value on the vesting date will
be a capital gain, although you will be eligible for favorable long-term capital gain treatment
only if you have held the shares for more than 12 months from the date of vesting.
Tax Withholding
If you are an employee, in most cases, at the time the restricted stock right vests and shares are
issued, you will be responsible for FICA taxes. This means that you are potentially subject to the
old age and survivor component of FICA. However, this is true only to the extent your salary does
not exceed the Social Security taxable wage base for that year ($102,000 for 2008). This also
generally means that 1.45% of the fair market value of the shares issued pursuant to the restricted
stock right at the time of vesting would have to be withheld in payment of Medicare tax. In
addition, you will have an income tax withholding obligation with respect to ordinary income you
must recognize on the vesting date, much like the obligation that arises when we pay you your
salary. PDF will be authorized under the 2001 Plan and your restricted stock agreement to withhold
proceeds received upon sale of the underlying common stock through a sell-to-cover arrangement.
Alternatively, PDF may satisfy these tax withholding obligations by one of the methods described in
the response to Question 44 and in Section 14 of Part III. Generally, non-employee directors and
consultants will not be subject to such withholding, but may be required to pay quarterly estimated
taxes.
The income tax withholding may be insufficient to cover your final income tax liability with
respect to the vesting of your restricted stock rights. You should consult with your own tax
advisor to determine whether you should make estimated tax payments for each year in which your
restricted stock rights vest and shares are issued.
You should review Section 14 of Part III carefully for a more detailed discussion of the potential
consequences of participating in this offer. We recommend that you consult with your personal tax
advisor before deciding whether or not to participate in the offer with respect to the tax
consequences relating to your specific circumstances.
TAX-RELATED RISKS FOR NON-U.S. TAX RESIDENTS
If you are an eligible individual who is not a resident of the U.S. for tax purposes, you should
refer to Appendix B (Guide to International Issues) to this offer to exchange for a discussion of
the tax, social insurance and other legal consequences of accepting or rejecting the offer under
various foreign laws.
If you are a tax resident or citizen of a foreign jurisdiction or are otherwise subject to a tax
liability in a foreign jurisdiction and you participate in this offer, you may be liable for income
and social insurance tax in connection with the grant of restricted stock rights to you. Subject to
any modification required to comply with local law, we expect to satisfy any applicable tax,
withholding or other obligations with respect to our international participants by using the
procedures described in the response to Question 44 and in Section 14 of Part III. In addition, you
may have exchange control reporting obligations.
The Guide to International Issues found in Appendix B is general in nature and is not complete and
may not apply to your specific circumstances. In addition, tax consequences change frequently and
occasionally on a retroactive basis. We therefore recommend you consult with your personal tax
advisor in your own country about the effect on your personal tax situation if you choose to
participate in the offer.
16
If you are eligible for the offer and you live or work in one country but are also subject to the
tax laws in another country, you should be aware that there may be other income and social
insurance tax consequences which may apply to you. We recommend you consult your own tax advisor to
discuss these consequences.
BUSINESS-RELATED RISKS
For a description of risks related to PDFs business, please see the discussion of risks associated
with our business under the heading Risk Factors in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2007 and the Quarterly Report on Form 10-Q for the period ended March 31,
2008.
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III. THE OFFER
Section 1. Eligibility.
Individuals are eligible individuals if they are employees (including officers) or consultants of
PDF or one of our subsidiaries or members of our Board of Directors on the date the offer commences
and on the date on which the tendered options are canceled and restricted stock rights are granted.
Individuals who are on medical, maternity, paternity, workers compensation, military or another
statutorily protected leave of absence or an approved personal leave of absence are eligible to
participate in the offer. However, any individual who resigns or is dismissed or receives a notice
of termination (as defined below) at any time before the tendered options are canceled is not
eligible to participate in the offer.
For purposes of this offer, an individual will have received a notice of termination if the
individual has received a written notice that PDF or one of its subsidiaries intends to take the
steps necessary to end the individuals service relationship or, in accordance with local laws, the
individual has received an offer, filed or has agreed in writing to file a petition in a labor
court or has entered into an agreement, in each case, to end the individuals service relationship
with PDF or one of its subsidiaries. If you are currently considered an at-will employee, this
exchange offer does not change that status, and your employment may be terminated by us or by you
at any time, including before the exchange offer expires, for any reason, with or without cause.
Section 2. Number of Restricted Stock Rights; Expiration Date.
We are offering eligible employees, consultants and directors the opportunity to exchange their
outstanding stock options to purchase our common stock, par value $0.00015 per share, that have a
per share exercise price equal to or greater than $10.00 for restricted stock rights. We refer in
this offer to option grants with a per share exercise price that is equal to or greater than $10.00
as eligible options. Our offer is subject to the terms and conditions described in this offer to
exchange, the Election Form and the Notice of Withdrawal.
Each restricted stock right granted pursuant to this offer represents the right to receive one
share of our common stock when the restricted stock right vests through the participants continued
service for a specified period. Until restricted stock rights have vested, they remain subject to
restrictions on transfer and to forfeiture if the participants service terminates. If and when the
restricted stock rights vest, the underlying shares of common stock will be issued to the
participant free of forfeiture conditions and restrictions on transfer, other than required tax
withholding and compliance with applicable securities laws, PDF securities trading policies and any
other laws, rules or regulations. The participant will not be required to pay anything to receive
restricted stock rights or shares pursuant to restricted stock rights in connection with this
offer. The restricted stock rights will be granted under, and will be subject to the terms and
conditions of, our 2001 Plan and a restricted stock agreement between PDF and the eligible
individual.
As of
June 5, 2008, options to purchase approximately 7,795,617 shares of our common stock were
outstanding under our equity compensation plans. Of these, options held by eligible individuals to
purchase approximately 4,551,711 shares of our common stock have per share exercise prices equal to or
greater than $10.00 per share, and are thus potentially eligible to participate in this offer.
Assuming all such options are properly tendered for exchange, we will
issue approximately 1,084,069
restricted stock rights. However, in the event that the average closing price of our common stock,
as reported on the NASDAQ Global Market, for the five business days prior to the date of expiration
of this offer is $10.00 or higher, we will terminate this offer exchange program.
You may tender for exchange all of your eligible options or none at all. However, if you choose to
tender eligible option grants, you must tender for exchange the entire outstanding, unexercised
portion of all of your option grants. For the purposes of this offer, the term option means a
particular option grant to purchase a specified number of shares of our common stock at a specified
exercise price per share. In other words, you will not be permitted to exchange part, but not all,
of any particular option grant, and you will not be permitted to exchange some, but not all, of
your eligible options grants. For example, if an eligible individual has received two individual
option grants, both of which remain outstanding in their entirety, consisting of (a) an option to
purchase 1,000 shares of common stock with an exercise price of $13.00 and (b) an option to
purchase 1,000 shares of common stock with an exercise price of $15.00, that individual may choose
to exchange both or neither of the options. In this example, the individual may not choose to
exchange less than the entire option for 1,000 shares under either grant and may not choose to exchange only one option grant. We
will not accept partial tenders of options. If you attempt to tender for exchange less than the
entire outstanding, unexercised portion of an eligible option or for some but not all of your
eligible options, we will reject your tender in its entirety.
18
The number of restricted stock rights to be granted in exchange for each eligible option grant
surrendered in this offer will be determined based upon a 4.2 option shares -to-1.0 restricted
share right exchange ratio. This means that for each 4.2 shares subject to an option that we
cancel, we will grant one restricted stock right. We will not issue any fractional restricted stock
rights. Accordingly, any exchange that would result in a fractional right will be rounded up to the
next whole number of restricted stock rights. For example, if a participant elects to exchange an
eligible option grant to purchase 50 shares of our common stock, that participant will receive a
total of 12 restricted stock rights (i.e., 50 divided by the exchange ratio of 4.2 is 11.9, and
rounded up to the next whole number is 12).
You will receive an Election Form which identifies each of the options you currently hold which has
an exercise price equal to or greater than $10.00 and therefore may be eligible for exchange, the
number of restricted stock rights you will receive if each option is exchanged, and the vesting
schedule that will apply to such restricted stock rights. If you have misplaced your Election Form,
you may request assistance or another copy of your statement by contacting the Offering
Administrator at tenderoffer@pdf.com.
This offer will expire on the expiration date. The term expiration date means 9 p.m., U.S.
Pacific Time, on July 9, 2008 unless we, in our discretion, extend the period of time during which
the offer will remain open. If we extend the period of time during which the offer remains open,
the term expiration date will mean the latest time and date at which the offer expires. See
Section 16 of Part III for a description of our rights to extend, delay, terminate and amend the
offer.
Section 3. Purpose of the Offer.
We are making this exchange offer to reduce the overhang of outstanding stock options and to
incentivize and retain individuals providing services to PDF and its subsidiaries.
Under this offer, participants will receive fewer restricted stock rights than the number of shares
subject to options that are canceled in the exchange. Therefore, the number of shares of our common
stock subject to all outstanding stock options will be reduced, thereby reducing our option
overhang.
We have granted options under our equity compensation plans to provide our employees, consultants
and directors with an opportunity to acquire or increase a proprietary interest in PDF, thereby
creating a stronger incentive to contribute to our growth and success and encouraging our
employees, directors and consultants to continue their service with PDF. However, in light of the
significant volatility in the market price of our common stock over the last several years, a
number of our option holders are holding options that have exercise prices higher than the current
and recent trading prices of our common stock. We believe that these out-of-the-money options are
not achieving the purposes for which they were intended. By making this offer we expect to be able
to provide better performance incentives to our continuing employees, directors and consultants and
more closely align their interests with those of our stockholders in maximizing stockholder value.
Our Board of Directors considered a variety of alternatives to address the issues of the stock
option overhang and the significant number of out-of-the-money options. Ultimately, the Board
determined that by exchanging stock options according to the terms of this offer, we will reduce
the number of shares of stock subject to equity awards, thereby reducing potential dilution to our
stockholders. Additionally, the Board determined that some option holders could benefit from the
opportunity to choose between what we believe is the more certain benefit associated with
restricted stock rights and the potentially more valuable, though less certain, benefit those
holders may realize by retaining their stock options. By providing for the grant of replacement
awards consisting of restricted stock rights rather than new at-the-money stock options, the Board
of Directors also sought to strengthen PDFs equity-based retention incentives while further
aligning our existing equity compensation programs with our overall compensation philosophy.
Although the Compensation Committee of our Board of Directors and the Board of Directors have
approved this offer, they recognize that the decision to accept or reject the offer is an
individual one that should be based on a variety of factors. Accordingly, you should consult with
your personal advisors if you have questions about your financial or tax situation. We and our
Board of Directors are not making any recommendation to you as to whether you should elect to
exchange your options. The restricted stock rights we are offering may end up being worth less than
your existing options. You must make your own decision whether to exchange your options.
19
Section 4. Procedures for Tendering Options.
Proper Tender of Options.
To properly elect to exchange your eligible options, you must notify PDF of your election before 9
p.m., U.S. Pacific Time, on the expiration date, which is currently July 9, 2008. Complete, sign,
date and return the Election Form and deliver it to P. Steven Melman, Vice President, Investor
Relations & Strategic Initiatives, according to the instructions contained in the Election Form so
that we receive them before the expiration date deadline.
At any time you may also request a copy of any option exchange program document by contacting the
Offering Administrator at tenderoffer@pdf.com.
To submit an executed Election Form, you must send the entire Election Form via electronic
delivery, facsimile, regular mail, overnight courier or hand delivery using the following contact
information:
Via Electronic Delivery:
Scan the completed and signed Election Form and email it to tenderoffer@pdf.com.
Via Facsimile:
PDF Solutions, Inc., Attn: P. Steven Melman, Vice President, Investor Relations & Strategic
Initiatives, at +1 (408) 938-6478.
Via Regular Mail, Overnight Courier or Hand Delivery:
PDF Solutions, Inc., 333 West San Carlos Street, Suite 700, San Jose, California 95110, Attn: P.
Steven Melman, Vice President, Investor Relations & Strategic Initiatives.
Your acceptance of our offer will be effective as of the date PDF receives your executed Election
Form by any of the methods described above. While not a condition to your election, if you
submitted your executed Election Form by way of electronic delivery or facsimile, we also ask that
you make a copy for your own files and then please submit the original executed Election Form to P.
Steven Melman by any of the methods described above. It is your responsibility to ensure that your
election is received by PDF by the deadline.
You do not need to return your stock option agreements in order to effectively elect to accept our
exchange offer.
If you send to PDF an executed Election Form, you may confirm that your documents have been
received by sending an email to the Offering Administrator at tenderoffer@pdf.com. We intend to
confirm receipt of your executed Election Form within three business days of its arrival. If you do
not receive confirmation of our receipt, it is your responsibility to ensure that PDF has properly
received your completed forms.
You are not required to return an executed Election Form. However, if PDF does not receive the
executed Election Form before 9 p.m., U.S. Pacific Time, on the expiration date, which is currently
July 9, 2008, we will interpret this as your election not to participate in the offer, and you will
retain all of your outstanding options with their current terms.
Your proper and timely submission of an election to participate or an election to withdraw from
participation will constitute a submitted election. To be timely, your election must be RECEIVED
by PDF before the offer expires by delivery of an executed Election Form as described above.
The method of delivery of your executed Election Form is at your election and risk. Your executed
Election Form will be effective upon receipt. In all cases, you should allow sufficient time to
ensure PDF receives them in time. If you do not receive confirmation of our receipt, it is your
responsibility to ensure that PDF has received your forms.
20
Determination of Validity; Rejection of Options; Waiver of Defects; No Obligation to Give Notice of
Defects.
We will determine, in our discretion, all questions as to the number of shares subject to eligible
options, and the validity, form, eligibility (including time of receipt) of submitted elections
(including any changes of elections) and acceptance of any tender of options. Our determination of
these matters will be final and binding on all parties. We may reject any submitted elections or
any options tendered for exchange to the extent that we determine they are not properly completed
or to the extent that we determine it is unlawful to accept the options for exchange. We may waive
any defect or irregularity in a submitted election. No eligible options will be properly tendered
for exchange until all defects or irregularities have been cured by the option holder or waived by
us. Neither we nor any other person is obligated to give notice of any defects or irregularities in
any submitted election, and no one will be liable for failing to give notice of any defects or
irregularities.
Your Choosing to Participate and Our Accepting Your Options Constitute an Agreement.
If you elect to exchange your options by submitting an executed Election Form in accordance with
the procedures described above, you will have accepted the terms and conditions of our offer. If we
accept the eligible options that you properly tender for exchange, there will be a binding
agreement between us and you on the terms and subject to the conditions of this offer to exchange
and the Election Form. Subject to our rights to extend, terminate and amend the offer, we currently
expect that we will accept promptly after the expiration of the offer all properly tendered
eligible options that have not been validly withdrawn.
Effect of Exchange on Options.
If you elect to exchange your eligible options and we accept such options for exchange, effective
on our acceptance, the eligible options you tendered for exchange will be canceled and the stock
option agreement(s) evidencing them will be deemed null and void. You will be required to accept a
restricted stock agreement governing the terms of your restricted stock rights by December 31,
2008, otherwise you will forfeit the agreement and all of the restricted stock rights. If you do
not elect to exchange your eligible options or you properly withdraw a previously submitted
election, you will not participate in the offer with respect to such options and you will retain
your options at their current exercise price(s) and subject to their current terms.
Questions About the Offer.
You can ask questions about this offer or request assistance by contacting P. Steven Melman, Vice
President, Investor Relations & Strategic Initiatives, at +1 (408) 938-6445 or sending an email to
tenderoffer@pdf.com. You can request additional copies of the exchange offer documents and copies
of the Election Form by sending an email to the Offering Administrator at tenderoffer@pdf.com.
Section 5. Withdrawal Rights and Change of Election.
You may only withdraw your tendered options or change your election in accordance with the
provisions of this Section 5.
You may withdraw your tendered options from the option exchange offer at any time before 9 p.m.,
U.S. Pacific Time, on July 9, 2008. If we extend the offer beyond that time, you may withdraw your
tendered options at any time until the extended expiration date. We expect to accept and cancel all
properly tendered eligible options promptly following the expiration of the offer.
If your service with PDF or one of its subsidiaries terminates prior to the cancellation of options
tendered pursuant to this offer, your tendered options will automatically be withdrawn. If
automatically withdrawn, you may exercise those options to the extent they are vested at the time
of your termination of service, but only during the limited period for which those options remain
exercisable pursuant to your stock option agreement following your termination.
Please note that, just as you may not tender only a part of an eligible option or tender only some
of your option grants, you may also not withdraw your election with respect to only part of an eligible option or only some of
your options grants. Accordingly, if you elect to withdraw a previously tendered option represented
by a particular grant, you must reject this exchange offer with respect to the entire option
represented by that particular grant and with respect to all options.
21
If you previously elected to exchange eligible options for restricted stock rights by submitting an
executed Election Form and you would like to withdraw your election to exchange your eligible
option grants, you must notify PDF of your withdrawal. Complete, sign, date and return the Notice
of Withdrawal and deliver it to P. Steven Melman, Vice President, Investor Relations & Strategic
Initiatives, according to the instructions contained in the form so that we receive it before the
expiration date deadline.
At any time you may also request a copy of any option exchange program document by contacting the
Offering Administrator at tenderoffer@pdf.com.
To submit a printed Notice of Withdrawal, you must send the entire form via electronic delivery,
facsimile, regular mail, overnight courier or hand delivery using the following contact
information:
Via Electronic Delivery:
Scan the completed and signed Notice of Withdrawal and email it to P. Steven Melman, Vice
President, Investor Relations & Strategic Initiatives, at tenderoffer@pdf.com.
Via Facsimile:
PDF Solutions, Inc., Attn: P. Steven Melman, Vice President, Investor Relations & Strategic
Initiatives, at +1 (408) 938-6478.
Via Regular Mail, Overnight Courier or Hand Delivery:
PDF Solutions, Inc., 333 West San Carlos Street, Suite 700, San Jose, California 95110, Attn: P.
Steven Melman, Vice President, Investor Relations & Strategic Initiatives.
Your withdrawal from our offer will be effective as of the date PDF receives your Notice of
Withdrawal by any of the methods described above. While not a condition to your election, if you
submitted your printed Notice of Withdrawal by way of electronic delivery or facsimile, we also ask
that you make a copy for your own files and then please submit the original Notice of Withdrawal to
P. Steven Melman by any of the methods described above. It is your responsibility to ensure that
your withdrawal is received by PDF before the expiration of this offer.
PDF must receive your election to withdraw before 9 p.m., U.S. Pacific Time, on July 9, 2008,
unless the offer is extended, in which case your Notice of Withdrawal must be received before the
extended expiration of the offer.
If you send us a printed Notice of Withdrawal, you may confirm that your document has been received
by sending an email to the Offering Administrator at tenderoffer@pdf.com. We intend to confirm
receipt of your paper Notice of Withdrawal within three business days of its arrival. If you do not
receive confirmation of our receipt, it is your responsibility to ensure that PDF has properly
received your Notice of Withdrawal.
If you later decide to make a new election to tender eligible options in this offer, you must
submit a new executed Election Form by following the instructions in Section 4. Please see
Section 4 for location and contact information you should use to request additional copies of the
Election Form or the Notice of Withdrawal. The final change to your elections that you submit to
PDF prior to the expiration of the offer will be binding, and you will not be permitted to make any
further withdrawals or elections after the offer expires.
You may not rescind any withdrawal, and options you withdraw will thereafter be deemed not properly
tendered for purposes of the offer, unless you properly re-tender those options by submitting a new
properly completed and executed Election Form before the offer expires.
Neither we nor any other person is obligated to give notice of any defects or irregularities in any
Notice of Withdrawal or new Election Form, and no one will be liable for failing to give notice of any defects or
irregularities. We will determine, in our discretion, all questions as to the form and validity,
including time of receipt, of Notices of Withdrawal and new Election Forms. Our determinations of
these matters will be final and binding.
22
To be timely, your election to withdraw previously tendered options from this offer must be
RECEIVED by PDF before the offer expires by delivery of a Notice of Withdrawal as described above.
The method of delivery of your Notice of Withdrawal is at your election and risk. Your Notice of
Withdrawal will be effective upon receipt by PDF. In all cases, you should allow sufficient time
to ensure PDF receives it in time. We intend to confirm our receipt of your submitted election
within three business days of receipt. If you do not receive confirmation of our receipt, it is
your responsibility to ensure that we have received your election.
Section 6. Acceptance of Options for Exchange and Issuance of Restricted Stock Rights.
Upon the terms and subject to the conditions of this offer and promptly following the expiration
date, we expect to accept for exchange all eligible options properly tendered and not validly
withdrawn before the expiration of the offer. All options accepted by us pursuant to this offer
will be canceled as of the date of acceptance, and you will no longer have any rights under those
options. Restricted stock rights will be granted as of the date of our acceptance. If we accept and
cancel options properly tendered for exchange after July 9, 2008, or if we extend the date by which
we must accept and cancel options properly tendered for exchange, the time in which the restricted
stock rights will be granted will be similarly delayed.
We will not accept partial tender of an eligible option grant or a tender of some but not all of an
option holders option grants. However, you may tender the remaining portions of eligible option
grants that you have partially exercised.
All restricted stock rights will be granted under our 2001 Plan and will be subject to the terms
and conditions of a restricted stock agreement between you and PDF. As promptly as practicable
after the grant date, we will deliver to you a restricted stock agreement (in the appropriate form
filed as an exhibit to our Tender Offer Statement on Schedule TO but with all the blanks filled in)
via the Citigroup Global Markets Inc. website at www.benefitaccess.com. This agreement will be
effective from and as of the grant date, provided that you must accept the agreement by December
31, 2008, otherwise you will forfeit the agreement and all of the restricted stock rights.
If you are not an eligible individual at PDF or one of our subsidiaries on the expiration date,
your election to exchange your options will automatically be deemed to have been withdrawn as of
the date of your termination of service and our offer will not affect the terms of your existing
options.
It is possible that, prior to the cancellation of options tendered for exchange and the grant of
restricted stock rights, we might effect or enter into an agreement for a merger or other similar
transaction in which PDF is acquired by another company. If there is a sale of all or substantially
all of our assets or stock, or we merge with another company, before the expiration of the offer,
you may withdraw your tendered options and have all the rights afforded you to acquire our common
stock under the existing agreements evidencing those options. Further, if we are acquired prior to
the expiration date, we reserve the right to withdraw the offer, in which case your options and
your rights under them will remain intact subject to all of their terms and conditions.
If you are a participant in the offer to exchange, and we are acquired by another company after we
accept and cancel your tendered options and grant you restricted stock rights, any unvested
restricted stock rights will immediately vest and any shares received pursuant to vested restricted
stock rights would be treated in the same manner as all other shares of PDF common stock
outstanding at the time of the merger or acquisition transaction.
Section 7. Conditions of the Offer.
Subject to the rules of the U.S. Securities and Exchange Commission and notwithstanding any other
provision of the offer, we will not be required to accept for exchange any options and may
terminate or amend the offer or postpone the acceptance of any options, if at any time on or after
commencement of the offer and before the expiration date of the offer any of the following events
shall have occurred (or shall have been determined by us to have occurred) that in our
judgment makes it inadvisable to proceed with the offer or with acceptance for exchange:
23
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there has been instituted or is pending any action or proceeding by
any government or governmental, regulatory or administrative agency,
authority or tribunal or any other person, domestic or foreign, before
any court, authority, agency or tribunal that challenges the making of
the offer, the acquisition of some or all of the tendered options
pursuant to the offer, or the issuance of restricted stock rights in
exchange for options; or that, in our reasonable judgment, would
materially and adversely affect the business, condition (financial or
other), income, operations or prospects of us and our subsidiaries, or
otherwise materially impair in any way the contemplated future conduct
of our business or the business of any of our subsidiaries or
materially impair (such as by increasing the accounting or other costs
of the offer to us) the contemplated benefits of the offer to us
described in Section 3 above; |
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there has been any action pending or taken, or approval withheld, or
any statute, rule, regulation, judgment, order or injunction proposed,
sought, promulgated, enacted, entered, amended, enforced or deemed to
be applicable to the offer or us or any of our subsidiaries, by any
court or any authority, agency or tribunal that, in our reasonable
judgment, would: |
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make the acceptance for exchange of, or the issuance of restricted
stock rights for, some or all of the options illegal or otherwise
restrict or prohibit consummation of the offer; |
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delay or restrict our ability, or render us unable, to accept for
exchange, or issue restricted stock rights for, some or all of the
tendered options; |
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materially impair (such as by increasing the accounting or other costs
of the offer to us) the contemplated benefits of the offer to us
described in Section 3 above; or |
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materially and adversely affect the business, condition (financial or
other), income, operations or prospects of us and our subsidiaries,
taken as whole, or otherwise materially impair in any way the
contemplated future conduct of our business or the business of any of
our subsidiaries; |
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any general suspension of trading in, or limitation on prices for,
securities on any national securities exchange or in the
over-the-counter market; |
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the declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States (whether or not mandatory); |
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the commencement of a war, armed hostilities or other international or
national crisis directly or indirectly involving the United States,
which could reasonably be expected to affect materially or adversely,
or to delay materially, the completion of this offer; |
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any limitation (whether or not mandatory) by any governmental,
regulatory or administrative agency or authority on, or any event
that, in our reasonable judgment, would affect the extension of credit
by banks or other lending institutions in the United States; |
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any significant and adverse change in the market price of our shares
of common stock or any change in the general political, market,
economic or financial conditions in the United States or abroad that
would, in our reasonable judgment, have a material and adverse effect
on our business, condition (financial or other), operations or
prospects or on the trading in our common stock; |
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any change in the general political, market, economic or financial
conditions in the United States or abroad that would have, in our
reasonable judgment, a material and adverse effect on our business,
condition (financial or other), operations or prospects or that of our
subsidiaries or that, in our reasonable judgment, makes it inadvisable
to proceed with this offer; |
24
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in the case of any of the foregoing existing at the time of the
commencement of the offer, a material acceleration or worsening
thereof; |
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any decline in either the Dow Jones Industrial Average or the
Standard & Poors Index of 500 Companies by an amount in excess of 10%
measured from the close of business on June 10, 2008; or |
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any change in generally accepted accounting principles or
interpretations of generally accepted accounting principles which
would, in our reasonable judgment, materially and adversely affect the
manner in which we are required for financial accounting purposes to
account for the offer; |
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a tender or offer with respect to some or all of our common stock, or
a merger or acquisition proposal for us, has been proposed, announced
or made by another person or entity or has been publicly disclosed, or
we have learned that: |
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any person, entity or group (within the meaning of Section 13(d)(3)
of the Securities Exchange Act) shall have acquired or proposed to
acquire beneficial ownership of more than 5% of the outstanding shares
of our common stock, or any new group has been formed that
beneficially owns more than 5% of the outstanding shares of our common
stock (other than any such person, entity or group who has filed a
Schedule 13D or Schedule 13G with the U.S. Securities and Exchange
Commission on or before the expiration date of the offer); |
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any person, entity or group who has filed a Schedule 13D or Schedule
13G with the U.S. Securities and Exchange Commission on or before the
expiration date of the offer has acquired or proposed to acquire
beneficial ownership of an additional 2% or more of the outstanding shares of our common stock; or |
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any person, entity or group has filed a Notification and Report Form
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or made
a public announcement reflecting an intent to acquire us or any of our
subsidiaries or any of their respective assets or securities; |
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any change or changes shall have occurred in our business, condition
(financial or other), assets, income, operations, prospects or stock
ownership or that of our subsidiaries that, in our reasonable
judgment, has or would have a material adverse effect on us and our
subsidiaries, taken as a whole; |
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the average closing price of our common stock, as reported on the
NASDAQ Global Market, for the five business days prior to the date of
expiration of this offer is $10.00 or more. |
The conditions to the offer are for our benefit. We may assert them at our discretion prior to the
expiration date. We may waive them, in whole or in part, at any time and from time to time prior to
the expiration date, in our discretion, whether or not we waive any other conditions to the offer.
Our failure at any time to exercise any of these rights will not be deemed a waiver of such rights,
but will be deemed a waiver of our ability to assert the condition that was triggered with respect
to the particular circumstances under which we failed to exercise our rights. The waiver of any of
these rights with respect to particular facts and circumstances will not be deemed to be a waiver
with respect to any other facts and circumstances. Any determination or judgment we make concerning
the events described in this section will be final and binding upon all persons.
25
Section 8. Price Range of Our Common Stock.
Our common stock is quoted on the NASDAQ Global Market under the trading symbol PDFS. The
following table sets forth, for the periods indicated, the high and low closing sales prices per
share of our common stock as reported by the NASDAQ Global Market.
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High |
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Low |
Fiscal Year Ended December 31, 2005 |
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First Quarter |
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$ |
16.15 |
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$ |
13.25 |
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Second Quarter |
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$ |
13.90 |
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$ |
11.41 |
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Third Quarter |
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$ |
17.76 |
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$ |
13.15 |
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Fourth Quarter |
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$ |
17.33 |
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$ |
14.48 |
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Fiscal Year Ended December 31, 2006 |
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First Quarter |
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$ |
19.85 |
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$ |
16.50 |
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Second Quarter |
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$ |
19.36 |
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$ |
11.00 |
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Third Quarter |
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$ |
13.35 |
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$ |
9.50 |
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Fourth Quarter |
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$ |
15.70 |
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$ |
10.79 |
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Fiscal Year Ended December 31, 2007 |
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First Quarter |
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$ |
14.82 |
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$ |
10.00 |
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Second Quarter |
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$ |
12.16 |
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$ |
9.87 |
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Third Quarter |
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$ |
12.49 |
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$ |
9.36 |
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Fourth Quarter |
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$ |
10.22 |
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$ |
7.21 |
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Fiscal Year Ended December 31, 2008 |
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First Quarter |
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$ |
9.40 |
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$ |
4.56 |
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Second Quarter (through June 5, 2008) |
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$ |
6.09 |
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$ |
3.86 |
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On June 5, 2008, the closing price per common share as reported by the NASDAQ Global Market was
$6.05.
Our stock price has been, and in the future may be, highly volatile. The trading price of our
common stock has fluctuated widely in the past and is expected to continue to do so in the future,
as a result of a number of factors, some of which are outside our control. In addition, the stock
market has experienced extreme price and volume fluctuations that have affected the market prices
of many companies, and that have often been unrelated or disproportionate to the operating
performance of these companies.
We recommend that you obtain the current market price of our common shares before deciding whether
to elect to exchange your options.
26
Section 9. Source and Amount of Consideration; Terms of Restricted Stock Rights.
Consideration.
The number of whole restricted stock rights to be granted in exchange for each eligible option
grant will be determined based upon an exchange ratio of 4.2 option shares to 1 restricted stock
right. Each eligible individual will receive in an Election Form identifying the options held by
the individual which have exercise prices equal to or greater than $10.00 and therefore are
eligible for exchange.
We will not issue any fractional restricted stock rights. Accordingly, any exchange that would
result in a fractional right under the exchange ratio will be rounded up to the next whole number
of restricted stock rights.
As of
June 5, 2008, options to purchase approximately 7,795,617 shares of our common stock were
outstanding under our equity compensation plans. Of these, options held by eligible individuals to
purchase approximately 4,551,711 shares of our common stock have exercise prices equal to or greater
than $10.00 per share, and are thus potentially eligible to participate in this offer. The number
of shares subject to options having exercise prices equal to or greater than $10.00 per share equal
approximately 17% of the total number of shares of our common stock issued and outstanding as of
June 5, 2008. If we receive and accept for exchange all such outstanding options having exercise
prices equal to or greater than $10.00 per share, we will issue
approximately 1,084,069 restricted
stock rights, representing a number of shares equal to less than 4% of total number of shares
of our common stock issued and outstanding as of June 5, 2008.
Since certain options eligible for the exchange were granted under the Companys 1997 Stock Plan
and 2001 Stock Option/Stock Issuance Plan, every share subject to an award canceled in the option
exchange program will not be returned back to the 2001 Plan. Instead, only shares subject to the
options originally granted under the 2001 Plan that are canceled pursuant to the option exchange
program will be returned to the 2001 Plan to be available for issuance pursuant to future awards.
Terms of the Restricted Stock Rights.
The restricted stock rights issued pursuant to this offer will be issued under the 2001 Plan. For
each restricted stock right granted in the offer, we and the participant will enter into a
restricted stock agreement, which we will deliver to each recipient via the Citigroup Global
Markets Inc. website at www.benefitaccess.com as promptly as practicable after the grant date. The
terms and conditions of the restricted stock rights will vary from the terms and conditions of the
options tendered for exchange. You must accept the restricted stock agreement by December 31, 2008
to be entitled to your restricted stock rights. If you do not accept the restricted stock
agreement by December 31, 2008, you will forfeit the agreement and all of the restricted stock
rights. This agreement will be effective from and as of the grant date. The following description
of the restricted stock rights to be granted under the 2001 Plan is a summary of the material terms
of these awards.
Important Note: The description below of the 2001 Plan and the restricted stock rights to be
granted in this offer is merely a summary and does not purport to be complete. Any statements are
subject to, and are qualified in their entirety by reference to, all provisions of the 2001 Plan
and the applicable form of restricted stock agreement evidencing the restricted stock rights. These
documents have been included as exhibits to our Tender Offer Statement on Schedule TO filed with
the U.S. Securities and Exchange Commission (to which this document is also an exhibit).
In addition, please note that your restricted stock agreement will contain additional provisions
regarding data privacy, responsibility for taxes, and an acknowledgment and waiver with respect to
the nature of the offer.
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General. The 2001 Plan was adopted by our Board of Directors on June
12, 2001 and approved by our stockholders on July 6, 2001. As of June
5, 2008, there were approximately 2,020,392 shares of our common stock
available for grant under the 2001 Plan. This number will be increased
by up to approximately 4,279,494 shares subject to eligible options canceled in this
offer, less the number of shares subject to restricted stock rights
granted in the exchange program. The 2001 Plan permits an appointed
committee (the Committee) of our Board of Directors to grant awards
of stock options and restricted stock rights. |
27
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Purpose. The purpose of the 2001 Plan is to advance the interests of
PDF and its stockholders by providing an incentive to attract, retain
and motivate persons whose present and potential contributions are
important to the success of PDF. |
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Administration. The 2001 Plan is generally administered by the
Compensation Committee of our Board of Directors. Subject to the
provisions of the 2001 Plan, the Compensation Committee selects the
individuals eligible to be granted awards under the 2001 Plan, the
types of awards granted, the time(s) at which awards may be granted,
the number of shares subject to each award and all of the terms and
conditions of each award. The Compensation Committee has the authority
to interpret the 2001 Plan and to make all other determinations
relating to the 2001 Plan. |
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Nature of Restricted Stock Rights. Each restricted stock right is a
right to receive a share of our common stock at a time specified in
the applicable award agreement. You should be aware that restricted
stock rights are merely bookkeeping entries, so that no actual shares
of our common stock are issued when the restricted stock rights are
granted. Under the terms of the restricted stock rights to be issued
in this offer, shares of our common stock will be issued when the
corresponding restricted stock rights vest, if at all. Between the
date on which restricted stock rights are granted and the date on
which restricted stock rights vest, the value of the award will
fluctuate based on the market price of our common stock. However, you
will have no rights as a PDF stockholder by virtue of having been
granted a restricted stock right until actual shares of our common
stock are issued to you upon vesting of the restricted stock right. No
monetary payment (other than applicable tax withholding, if any) will
be required as a condition of being granted a restricted stock right
or being issued shares of our common stock upon vesting of the
restricted stock rights. |
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Vesting. Restricted stock rights received in exchange for eligible
options will be subject to a new vesting schedule which will generally
provide that the restricted stock rights will be unvested on the date
of the exchange and will require a minimum period of at least
approximately sixteen months of service after the date of the exchange
to fully vest, even if the exchanged options were fully vested on the
date of the exchange. The length of the vesting schedule for each
restricted stock right will depend on when your stock options you
exchange were granted to you. If your service with us terminates
before all of your restricted stock rights have vested, you will
generally forfeit any restricted stock rights that remain unvested at
that time. |
The vesting schedules for restricted stock rights granted to participants in all countries will be
the same.
Vesting Applicable to Restricted Stock Rights
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|
|
Year During Which Exchanged Options |
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|
Were Granted |
|
Vesting Schedule of Restricted Stock Right |
2000 - 2003 |
|
50% on 5/15/2009 and 50% 6-months thereafter |
2004 |
|
25% on 5/15/2009 and 25% every 6-months thereafter |
2005 |
|
16.7% on 5/15/2009 and 16.66% every 6-months thereafter |
2006 and after |
|
12.5% on 5/15/2009 and 12.5% every 6-months thereafter |
Only a whole number of restricted stock rights will vest in any period. Any fractional restricted
stock right that would otherwise vest will be carried over to the next vesting period.
If you are a participant in the offer to exchange, and we are acquired by another company after we
accept and cancel your tendered options and grant you restricted stock rights, any unvested
restricted stock rights will immediately vest and any shares received pursuant to vested restricted
stock rights would be treated in the same manner as all other shares of PDF common stock
outstanding at the time of the merger or acquisition transaction.
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|
Delivery of Common Shares. Upon vesting, restricted stock rights will
be settled, on a one-to-one basis, by issuance of shares of our common
stock to the participant, subject to our right to withhold from or
arrange for the sale of shares that would otherwise be released to you
a number of whole shares necessary to satisfy any required
withholding. |
28
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|
Termination of Service. In the event a participant in the offer ceases
to be a service provider to PDF or any of our subsidiaries at any time
prior to the vesting of the participants restricted stock rights, all
of such participants restricted stock rights which are unvested at
the time of termination of service generally will be forfeited to PDF
and canceled. |
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Transfer Restrictions. Until they have vested and have been settled in shares of our common stock, your restricted stock rights may not be
sold, assigned, transferred, pledged or otherwise disposed of or
encumbered, other than by will or the laws of descent and
distribution. |
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Voting and Dividend Rights. You will have no voting rights and no
rights to receive any dividends paid with respect to shares of our
common stock prior to the date on which the shares underlying your
restricted stock rights are issued to you in settlement of your award. |
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Adjustments Upon Certain Events. Subject to any required action by our
stockholders, in the event of a subdivision of the outstanding shares,
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 price of shares, a combination or consolidation
of the outstanding shares (by reclassification or otherwise) into a
lesser number of shares, a recapitalization, reorganization, merger,
liquidation, spin-off or a similar occurrence, proportionate
adjustments will be made in the number of shares subject to restricted
stock rights, as determined by the 2001 Plan administrator. |
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|
Effect of a Change in Control of PDF. In the event of a change in
control of PDF, your unvested restricted stock rights will immediately
vest and any shares of common stock that were issued to you as a
result of vesting of your restricted stock rights would be treated in
the same manner as all other shares of PDF common stock outstanding at
the time of the merger or acquisition transaction. |
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|
Amendment or Termination of the 2001 Plan. The Board of Directors has
the authority to amend or terminate the 2001 Plan at any time. |
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|
Registration of Shares. The shares of PDF common stock that may be
issued pursuant to any restricted stock rights granted in connection
with the exchange have been registered under the Securities Act of
1933 on a registration statement on Form S-8 filed with the U.S.
Securities and Exchange Commission. Unless you are considered an
affiliate of PDF, you will generally be able to sell the vested shares you receive pursuant to your restricted stock rights free of
any transfer restrictions under applicable United States securities
laws. |
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|
Tax Consequences. If you are a U.S. tax resident, you should refer to
Section 14 for a discussion of the material U.S. federal income tax
consequences of the acquisition of restricted stock rights under this
offer and the issuance of shares upon vesting of such restricted stock
rights. If you are resident outside the United States, you should
refer to Section 15 and Appendix B to this offer to exchange for a
discussion of income and social insurance tax consequences for
individuals in certain countries of the acquisition, holding and
vesting of restricted stock rights, as well as the consequences of
accepting such awards under this offer. We recommend that you consult
with your own tax advisor to determine the income and social insurance
tax consequences of this transaction under the laws of the country in
which you live and work. |
Section 10. Information Concerning PDF Solutions, Inc.
General. PDF Solutions, Inc. is incorporated in the State of Delaware. Our principal executive
offices are located at 333 West San Carlos Street, Suite 700, San Jose, CA 95110, USA, and our
telephone number at that address is +1 (408) 280-7900.
PDF incorporated in 1992 and is a leading provider of infrastructure technologies and services to
improve yield and optimize performance of integrated circuits. Our technologies and services enable
semiconductor companies to improve profitability across the entire process lifecycle, which is
the term we have coined for the time from the design of an
integrated circuit (IC) through volume manufacturing of that IC. Our solutions enable this by
improving our customers time-to-market, increasing yield, and reducing total design and
manufacturing costs. Our solutions combine proprietary
29
software, physical intellectual property in
the form of cell libraries for IC designs, test chips, an electrical wafer test system, proven
methodologies, and professional services. We analyze yield loss mechanisms to identify, quantify,
and correct the issues that cause yield loss. Our analysis drives IC design and manufacturing
improvements to enable our customers to optimize the technology development process, to increase
the initial yield when an IC design first enters a manufacturing line, to increase the rate at
which yield improves, and to minimize excursions and process variability that cause yield loss
throughout mass production. The result of successfully implementing our solutions is the creation
of value that can be measured based on improvements to our customers actual yield. Through our
gainshare performance incentives component, we have aligned our financial interests with the yield
and performance improvements realized by our customers, and we receive revenue based on this value.
Our technologies and services have been sold to leading integrated device manufacturers, fabless
semiconductor companies, and foundries.
In the ordinary course of business, we regularly engage in, evaluate, and expect to continue to
engage in and evaluate, a wide array of potential strategic transactions, including
(i) acquisitions of companies, businesses, intellectual properties, and other assets, and
(ii) investments in new businesses. Subject to the foregoing, and except as otherwise disclosed in
this offer to exchange or in our filings with the U.S. Securities and Exchange Commission, we
presently have no plans or proposals and are not engaged in negotiations that relate to or are
currently likely to result in:
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a material extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving us or any of our
subsidiaries; |
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|
any purchase, sale or transfer of a material amount of our assets or
the assets of any of our subsidiaries; |
|
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|
any material change in our present dividend rate or policy, our
indebtedness or capitalization; |
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|
any change in our present Board of Directors or management, including
a change in the number or term of directors or to fill any existing
board vacancies or to change any executive officers material terms of
employment; |
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any other material change in our corporate structure or business; |
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our common shares being delisted from the NASDAQ Global Market; |
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|
our common shares becoming eligible for termination of registration
pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; |
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the suspension of our obligation to file reports pursuant to
Section 15(d) of the Securities Exchange Act of 1934; |
|
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|
the acquisition by any person of any of our securities or the
disposition of any of our securities; or |
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|
any change in our certificate of incorporation or bylaws, or any
actions which may impede the acquisition of control of us by any
person. |
We cannot assure you that we will not plan, propose or engage in negotiations with respect to the
above noted matters during or after the expiration of our offer.
Certain Financial Information. Set forth below is a summary of our financial information. This
information is derived from and qualified by reference to our publicly available consolidated
financial statements and should be read in conjunction with the financial statements, related notes
and other financial information included in Item 15(a)(1) on pages F-1 through F-30 of PDFs Annual
Report on Form 10-K, for its fiscal year ended December 31, 2007, and Item 1 on pages 3 through 6
of PDFs Quarterly Report on Form 10-Q for its fiscal quarter ended March 31, 2008, which are
incorporated herein by reference. See Section 18.
30
CONDENSED CONSOLIDATED FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Year Ended December 31, |
|
|
|
|
BALANCE SHEET DATA |
|
2007(a) |
|
|
2006(a) |
|
|
March 31, 2008 |
|
Current assets |
|
$ |
88,820 |
|
|
$ |
85,805 |
|
|
$ |
87,192 |
|
Non-current assets |
|
|
90,531 |
|
|
|
83,052 |
|
|
|
92,858 |
|
Total assets |
|
|
179,351 |
|
|
|
168,857 |
|
|
|
180,050 |
|
Current liabilities |
|
|
16,364 |
|
|
|
19,219 |
|
|
|
16,345 |
|
Non-current liabilities |
|
|
6,517 |
|
|
|
1,419 |
|
|
|
6,944 |
|
Total liabilities |
|
|
22,881 |
|
|
|
20,638 |
|
|
|
23,289 |
|
Total stockholders equity |
|
|
156,470 |
|
|
|
148,219 |
|
|
|
156,761 |
|
|
|
|
(a) |
|
Derived from audited financial statements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months |
|
|
Year Ended |
|
ended |
(In thousands, except per share data) |
|
December 31, |
|
March 31, |
STATEMENTS OF OPERATIONS DATA |
|
2007(a) |
|
2006(a) |
|
2008 |
|
2007 |
Net revenue |
|
$ |
94,463 |
|
|
$ |
76,184 |
|
|
$ |
20,347 |
|
|
|
22,142 |
|
Gross Profit |
|
|
56,845 |
|
|
|
43,287 |
|
|
|
11,950 |
|
|
|
12,800 |
|
Operating loss |
|
|
(7,542 |
) |
|
|
(6,399 |
) |
|
|
(3,619 |
) |
|
|
(2,427 |
) |
Loss before benefit from income taxes |
|
|
(5,651 |
) |
|
|
(3,572 |
) |
|
|
(3,130 |
) |
|
|
(1,931 |
) |
Net loss |
|
$ |
(2,927 |
) |
|
$ |
(439 |
) |
|
$ |
(2,513 |
) |
|
|
(2,355 |
) |
Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.10 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.09 |
) |
|
|
(0.08 |
) |
Number of shares used in computation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
|
28,066 |
|
|
|
26,885 |
|
|
|
27,840 |
|
|
|
27,980 |
|
|
|
|
(a) |
|
Derived from audited financial statements. |
PDFs
book value per share as of March 31, 2008 was $5.65. Book value per share is the value of our
total stockholders equity divided by the number of our issued and outstanding common shares, which
as of March 31, 2008 amounted to 27,743,000 shares. Since PDF had no earnings, the ratio of
earnings to fixed charges was not applicable for the years ended December 31, 2007 and December 31,
2006 or the three months ended March 31, 2008 and March 31, 2007.
For information regarding the accounting consequences of our offer, see Section 12.
Section 11. Interests of Directors and Officers; Transactions and Arrangements Concerning the
Options.
Members of our Board of Directors (including non-employee and employee members of our Board of
Directors) and all other employees (including officers of the Company) and consultants are eligible
to participate in the offer if they hold eligible options.
A list of our directors and executive officers are attached to this offer to exchange as
Appendix A, which is incorporated by reference herein. For information with respect to the
beneficial ownership of our common stock by those directors and executive officers who were
beneficial owners of our common stock as of December 31, 2007, please refer to our Annual Report on
Form 10-K for the fiscal year ended December 31, 2007 and our definitive proxy statement on
Schedule 14A filed with the U.S. Securities and Exchange Commission on April 22, 2008, which is
incorporated by reference into our Form 10-K.
Other than as described below and other than transactions in our securities in the ordinary course
under our stock incentive plans with persons who are neither executive officers nor directors of PDF, neither PDF
or its subsidiaries nor, to the best of our knowledge, our executive officers, directors or
affiliates have effected transactions in options to purchase PDF common stock or in shares of PDF
common stock during the 60 days prior to June 10, 2008.
31
Except as described in this offer to exchange and in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2007, and other than outstanding options and other awards granted from time
to time to certain of our employees (including executive officers) and our directors under our
compensation and incentive plans, neither we nor any person controlling us nor, to our knowledge,
any of our directors or executive officers, is a party to any contract, arrangement, understanding
or relationship with any other person relating, directly or indirectly, to the offer with respect
to any of our securities (including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any such securities, joint ventures, loan
or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving
or withholding of proxies, consents or authorizations).
Section 12. Status of Options Accepted by Us in the Offer; Accounting Consequences of the Offer.
Options that we acquire and cancel through the offer that were originally granted under the 2001
Plan will be used for the issuance of the restricted stock rights granted under the option exchange
program, and up to approximately an additional 3,195,425 of the shares subject to those canceled options will be
returned to the pool of shares available for future issuance under the 2001 Plan. Any shares in excess
of the foregoing will not be returned to the 2001 Plan.
The Company accounts for stock-based compensation in accordance with Financial Accounting Standards
Boards Statement of Financial Accounting Standard No. 123 (revised 2004), Share-Based Payment
(SFAS No. 123R), on accounting for share-based payments; which requires recognition of expense
for both stock option grants and restricted stock rights based on their estimated fair value as of
the date of grant. Under SFAS No. 123R, to the extent the fair value of each award of restricted
stock rights granted to participants exceeds the fair value of the stock options surrendered, such
excess is considered additional compensation. This excess, in addition to any remaining
unrecognized expense for the stock options surrendered in exchange for the restricted stock rights,
will be recognized by PDF as an expense for compensation. This expense will be recognized ratably
over the vesting period of the restricted stock rights in accordance with the requirements of
SFAS No. 123R. In the event that any of the restricted stock rights are forfeited prior to their
vesting due to termination of service, the expense for the forfeited restricted stock rights will
be reversed and will not be recognized.
Section 13. Legal Matters; Regulatory Approvals.
We are not aware of any license or regulatory permit that appears to be material to our business
that might be adversely affected by the offer, or of any approval or other action by any government
or regulatory authority or agency that is required for the acquisition or ownership of the options
or restricted stock rights as described in the offer. If any other approval or action should be
required, we presently intend to seek that approval or take that action. This could require us to
delay the acceptance of options returned to us. We cannot assure you that we would be able to
obtain any required approval or take any other required action. Our failure to obtain any required
approval or take any required action might result in harm to our business. Our obligation under the
offer to accept exchanged options and to issue restricted stock rights is subject to the conditions
described in Section 7.
Section 14. Material U.S. Federal Income Tax Consequences.
The following is a description of the material U.S. federal income tax consequences of the offer.
This discussion is based on the Internal Revenue Code of 1986, as amended (which we refer to in
this Section as the Code), its legislative history, Treasury Regulations thereunder and
administrative and judicial interpretations thereof, as of the date hereof. We have not obtained a
tax ruling or other confirmation from the U.S. Internal Revenue Service (which, we refer to as the
IRS) with regard to this information, and it is possible that the IRS may take a different
position. This summary is general in nature and does not discuss all of the tax consequences that
may be relevant to you in light of your particular circumstances, nor is it intended to be
applicable in all respects to all categories of eligible individuals. Please note that tax laws
change frequently and occasionally on a retroactive basis. As a result, the information contained
in this summary may be out of date at the time the restricted stock award is granted or the
restricted stock award vests.
If you are living or working in the United States, but are also subject to the tax laws in another
country, you should be aware that there may be other income and social insurance tax consequences
which may apply to you. We recommend that you consult your own tax advisor to discuss the
consequences to you of participating in the offer.
32
We recommend that you consult your own tax advisor with respect to the consequences of
participating in the offer under state, local and non-U.S. tax laws, as well as tax consequences
arising from your particular personal circumstances.
Option Exchange and Grant of Restricted Stock Rights. We believe that you will not be subject to
current U.S. federal income taxation if you elect to keep your eligible options. We do not believe
that there will be any immediate U.S. federal income tax consequences of receiving restricted stock
rights in exchange for your eligible options if you are subject to U.S. income taxation.
Issuance of Shares Upon Vesting of Restricted Stock Rights. You will recognize ordinary income when
you receive shares upon vesting of restricted stock rights. The amount of such income will be equal
to the fair market value of those shares on the date of vesting. We will determine the fair market
value of the shares based on the closing price of our common stock as reported on the NASDAQ Global
Market on the applicable vesting date, or if not reported on such date, on the last day such
closing price was reported. Generally, we will be entitled to a tax deduction equal to any amount
recognized as ordinary income by you with respect to the shares issued to you upon vesting of
restricted stock rights.
Subsequent Sale of Shares. Your tax basis in the shares issued to you pursuant to restricted stock
rights will be equal to the fair market value on the date of vesting (that is, equal to the amount
of ordinary income you recognize), and the capital gain holding period will commence upon the day
following the vesting date. Your subsequent disposition of the shares will ordinarily result in a
capital gain or loss in an amount equal to the difference between the amount you realize on the
disposition and your tax basis in the shares that are disposed. If you dispose of shares after you
have held the shares for more than one year, such capital gain or loss will be long-term capital
gain or loss. Long-term capital gains recognized by individuals are subject to a more favorable
rate of tax (currently, a maximum rate of 15%) than ordinary income. There are limitations imposed
on the ability of individuals to deduct capital losses against their ordinary income.
Tax Withholding. At the time you recognize ordinary income, if you are employee, we will have an
income and employment tax (e.g., FICA) withholding obligation with respect to that income, much
like the obligation that arises when we pay you your salary or a bonus. This ordinary income
resulting from the vesting of your restricted stock will be reflected on your year-end Form W-2
reported to the Internal Revenue Service. The income tax withholding may be insufficient to cover
your final income tax liability with respect to the shares issued to you. You should consult with
your own tax advisor to determine whether you should make estimated tax payments for the year in
which you recognize ordinary income pursuant to your restricted stock rights. Generally,
non-employee directors and consultants will not be subject to such withholding, but may be required
to pay quarterly estimated taxes.
As your restricted stock rights vest over time and you are issued shares pursuant to your
restricted stock rights, you will automatically participate in one or more block trades, through
Citigroup Global Markets Inc., of a portion of your shares to obtain sufficient proceeds to satisfy
the withholding tax liability. Out of the proceeds of the sale of withheld shares, Citigroup
Global Markets Inc. will remit to us the proceeds (note that the full amount of the proceeds will
be applied to satisfy any applicable tax, withholding or other liability, even if it may exceed the
minimum amount required to satisfy such tax, withholding or other liability). Any sale of your
shares must be made in compliance with securities laws restrictions and our insider trading
policies including our pre-clearance requirements.
Promptly after each vesting date, Citigroup Global Markets Inc. will group a portion of your shares
as part of one or more block trades and sell enough shares to cover the amount of withholding taxes
on your shares. Citigroup Global Markets Inc. will charge a trade commission for this sale, which
Citigroup Global Markets Inc. will deduct from the proceeds of the sale of the shares. Your sale
price per share for your shares will be the weighted average sale price for all of the shares of
all holders that Citigroup Global Markets Inc. sells in all of the block trades. The amount of
withholding taxes you owe will depend on the last sale price of our common stock as reported on the
NASDAQ Global Market on the vesting date. However, the block trades will not occur until one or
more trading days after your vesting date, and it may take several trading days to sell sufficient
shares to cover all withholding taxes on the shares. The trading price of our common stock may
decline during that period. You may therefore have to sell shares at lower prices to cover taxes
set on the basis of a higher market price. This would increase the number of shares that you would need to sell in order
to cover the withholding taxes on your shares. You will bear the full risk of changes in the
trading price of our stock. This risk may affect your ability to cover your tax obligations on the
shares. We and Citigroup Global Markets Inc. will attempt to estimate the correct number of shares
to sell to cover withholding taxes based on the price of our common stock. But it is possible that
the proceeds from the sale will be either too much or too little to pay the withholding taxes. If
there are
33
insufficient proceeds to cover the withholding taxes on your shares, then we reserve the
right to deduct the necessary amount from your next paycheck unless you deliver to us a check for
the balance of the taxes due. If there are excess proceeds, they will be applied to any applicable
tax, withholding or other liability that you have with respect to the shares. If there is not a
market in our common stock, we will have the right to make other arrangements to satisfy the
withholding tax obligations.
If you are subject to U.S. income tax and participate in the block trades to cover the withholding
taxes on your shares, or if you otherwise plan to sell any of your shares, you should be aware of
the wash sale provisions of Section 1091 of the Internal Revenue Code. Under those provisions, a
loss from the sale of stock is not deductible for income tax purposes if the taxpayer acquires
other shares of the same stock within 30 days before or after the sale. If this loss of tax
deductibility occurs, the tax rules provide for an adjustment in the tax basis of your other
acquired stock to reflect the amount of the non-deductible loss. An acquisition of shares of our
common stock under our 2001 Employee Stock Purchase Plan is an acquisition of other shares of the
same stock for purposes of the wash sale provisions.
If your service with us is terminated for any reason after you have received shares of common stock
but before you have satisfied your income and employment withholding tax obligation, you will
authorize us to instruct Citigroup Global Markets Inc. to sell on your behalf a number of shares
sufficient to satisfy your income and employment tax obligation, and we will deduct the entire
amount of any remaining tax obligation from your final paycheck.
Section 15. Considerations Specific to Eligible Individuals Outside of the United States.
If you are eligible to participate in the offer and reside outside of the United States, you are
subject to the terms of the offer as described in this offer to exchange and you should refer to
Appendix B of this offer to exchange (Guide to International Issues) for a discussion of the tax,
social insurance and other legal consequences of accepting or rejecting the offer under various
foreign laws.
If you are a tax resident or citizen of a foreign jurisdiction or are otherwise subject to a tax
liability in a foreign jurisdiction and you participate in this offer, you may be liable for income
and social insurance tax in connection with the grant of restricted stock rights to you. Subject to
any modification required to comply with local law, we expect to satisfy any applicable tax,
withholding or other obligations with respect to our international participants by using the
procedures described under Tax Withholding in Section 14 above. In addition, you may have
exchange control reporting obligations.
The Guide to International Issues found in Appendix B of this offer to exchange is general in
nature and is not complete and may not apply to your specific circumstances. In addition, tax
consequences change frequently and occasionally on a retroactive basis. We therefore recommend you
consult with your personal tax advisor in your own country about the effect on your personal tax
situation if you choose to participate in the offer.
If you are eligible for the offer and you live or work in one country but are also subject to the
tax laws in another country, you should be aware that there may be other income and social
insurance tax consequences which may apply to you. We recommend you consult your own tax advisor to
discuss these consequences.
Before accepting the offer, we recommend that you consult with your own tax advisor to determine
the income and social contribution tax consequences of participating in the offer.
34
Section 16. Extension of Offer; Termination; Amendment.
We expressly reserve the right, in our discretion, at any time and from time to time, and
regardless of whether or not any
event set forth in Section 7 (Conditions of the Offer) of Part III of this document has occurred
or is deemed by us to have occurred, to extend the period of time during which the offer is open
and thereby delay the acceptance for exchange of any options by giving oral, written or electronic
notice of such extension to the option holders or making a public announcement thereof.
We also expressly reserve the right, in our reasonable judgment, prior to the expiration date of
the offer to terminate or amend the offer and postpone our acceptance and cancellation of any
options that you elect to exchange upon the occurrence of any of the conditions specified in
Section 7 of this document by giving oral, written or electronic notice of such termination or
postponement to you or by making a public announcement thereof. Notwithstanding the foregoing, we
will pay the consideration offered or return the options elected for exchange promptly after
termination or withdrawal of the offer to exchange.
Subject to compliance with applicable law, we further reserve the right, in our discretion, and
regardless of whether any event set forth in Section 7 has occurred or is deemed by us to have
occurred, to amend the offer in any respect.
Amendments to the offer may be made at any time and from time to time. In the case of an extension,
the amendment will be issued no later than 6 a.m., U.S. Pacific Time, on the next business day
after the last previously scheduled or announced expiration date. Any amendment of the offer will
be disseminated promptly in a manner reasonably designed to inform option holders of the change.
Without limiting the manner in which we may choose to disseminate any amendment of this offer,
except as required by law, we have no obligation to publish, advertise, or otherwise communicate
any dissemination.
If we materially change the terms of the offer or the information concerning the offer, or if we
waive a material condition of the offer, we will extend the offer. Except for a change in the
amount of consideration or change in percentage of securities sought, the amount of time by which
we will extend the offer following a material change in the terms of the offer or information
concerning the offer will depend on the facts and circumstances, including the relative materiality
of the information. If we decide to take any of the following actions, we will notify you and
extend the expiration date to the tenth business day after the date of the notice (unless the
expiration date as originally scheduled is already on or after the tenth business day):
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we increase or decrease the per share exchange value of the options
(i.e.,increase or decrease what we will give you in exchange for your
options); |
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we change the type of options eligible to be tendered for exchange in the offer; or |
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we increase the number of options eligible to be tendered for exchange
in the offer such that the common shares underlying the increased
options exceed 2% of the common shares issuable upon exercise of the
options that are subject to the offer immediately prior to the
increase. |
A business day means any day other than a Saturday, Sunday or federal holiday and consists of the
time period from 12:01 a.m. through 12:00 midnight, Eastern Time.
Section 17. Fees and Expenses.
We will not pay any fees or commissions to any broker, dealer or other person for asking option
holders to exchange options under this offer.
35
Section 18. Additional Information.
With respect to the offer, we have filed with the U.S. Securities and Exchange Commission (the
Commission) a Tender Offer Statement on Schedule TO, of which this offer to exchange is a part.
This offer to exchange does not contain all of the information contained in the Schedule TO and the
exhibits to the Schedule TO. We recommend that, in addition to this offer to exchange, the Election
Form and the Notice of Withdrawal, you review the Schedule TO, including its exhibits, before
deciding whether or not to exchange your options. We are subject to the informational filing
requirements of the Securities Exchange Act of 1934 and, in accordance with that act, are obligated
to file reports, proxy statements and other information with the U.S. Securities and Exchange Commission relating to our business, financial
condition and other matters. Such reports, proxy statements and other information include the
following, which are incorporated herein by reference:
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our Annual Report on Form 10-K for our fiscal year ended December 31,
2007, filed with the Commission on March 17, 2008; |
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our definitive proxy statement for our 2008 annual meeting of
stockholders, filed with the Commission on April 22, 2008; |
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our Quarterly Report on Form 10-Q for the period ended March 31, 2008,
filed with the Commission on May 12, 2008; and |
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the description of our common stock contained in the PDFs
Registration Statement on Form 8-A, together with any other amendments
or reports filed for the purpose of updating such description; |
and any amendment or report filed for the purpose of updating such descriptions may be examined,
and copies may be obtained, at the U.S. Securities and Exchange Commissions public reference room
in Washington, D.C. You may obtain information on the operation of the public reference room by
calling the U.S. Securities and Exchange Commission at 1-800-732-0330. Our filings are also
available to the public on the U.S. Securities and Exchange Commissions Internet site at
http://www.sec.gov and our website at http://www.pdf.com.
Our common stock is quoted on the NASDAQ Global Market under the symbol PDFS, and our filings
with the Commission can also be read at the offices of the NASDAQ Global Market.
We will also provide without charge to each person to whom a copy of this offer to exchange is
delivered, upon the written or oral request of any such person, a copy of any or all of the
documents to which we have referred you, other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference into such documents). You may request by
writing to PDF Solutions, Inc., Attn: Offering Administrator, 333 West San Carlos Street, Suite 700
San Jose, CA 95110, USA, or emailing at tenderoffer@pdf.com.
As you read the documents listed in this Section 18, you may find some inconsistencies in
information from one document to another. Should you find inconsistencies between the documents, or
between a document and this offer to exchange, you should rely on the statements made in the most
recent document.
The information contained in this offer to exchange about PDF should be read together with the
information contained in the documents to which we have referred you.
Section 19. Miscellaneous.
We are not aware of any jurisdiction where the making of the offer is not in compliance with
applicable law. If we become aware of any jurisdiction where the making of the offer is not in
compliance with any valid applicable law, we will make a good faith effort to comply with such law.
If, after such good faith effort, we cannot comply with such law, the offer will not be made to,
nor will options be accepted from the option holders residing in such jurisdiction.
We have not authorized any person to make any recommendation on our behalf as to whether you should
elect to accept this offer with respect to your options. You should rely only on the information in
this document or documents to which we have referred you. We have not authorized anyone to give you
any information or to make any representations in connection with the offer other than the
information and representations contained in this Offer to Exchange Restricted Stock for
Outstanding Stock Options and in the related offer documents. If anyone makes any recommendation or
representation to you or gives you any information, you must not rely upon that recommendation,
representation or information as having been authorized by PDF.
36
Section 20. Forward-Looking Statements.
Our reports filed with the Commission referred to above contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934, as amended. Any statement concerning future financial performance (including future
revenues, earnings or growth rates), ongoing business strategies or prospects, and possible actions
taken by us or our subsidiaries, which may be provided by us are forward-looking statements. The
words may, will, should, expect, plan, anticipate, believe, estimate, predict,
potential or continue, the negative effect of terms like these or other similar expressions are
also used to identify forward-looking statements. These forward-looking statements are only
predictions. Forward-looking statements are based on current expectations, and projections about
future events and are inherently subject to a variety of risks and uncertainties discussed in PDFs
Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and Quarterly Report on Form
10-Q for its fiscal quarter ended March 31, 2008, many of which are beyond our control, which could
cause actual results to differ materially from those anticipated or projected.
All forward-looking statements attributable to us are expressly qualified in their entirety by this
cautionary statement.
June 10, 2008
PDF Solutions, Inc.
37
APPENDIX A
INFORMATION ABOUT THE DIRECTORS AND EXECUTIVE OFFICERS
OF
PDF SOLUTIONS, INC.
The directors and executive officers of PDF Solutions, Inc., their positions and offices held as of
June 10, 2008 are set forth in the following table:
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Name |
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Positions and Offices Held |
Directors: |
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Susan H. Billat
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Director |
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Thomas Caulfield
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Director |
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R. Stephen Heinrichs
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Director |
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Lucio L. Lanza
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Director |
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Albert Y. C. Yu
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Director |
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John K. Kibarian
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Director |
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Kimon W. Michaels
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Director |
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Executive Officers: |
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John K. Kibarian*
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Chief Executive Officer and President |
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Keith A. Jones*
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Chief Financial Officer and Vice President, Finance |
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P. Steven Melman
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Vice President, Investor Relations and Strategic Initiatives |
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David A. Joseph*
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Chief Strategy Officer |
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Kimon W. Michaels*
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Vice President, Design For Manufacturability |
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Jim Jensen
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Vice President, Business Development |
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Andre Hawit
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Vice President and General Manager, Yield Management
Solutions |
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Cornelius (Cees) Hartgring*
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Vice President, Client Services and Sales |
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* |
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These individuals were identified as a named executive officer in
the Companys proxy statement filed April 22, 2008. |
The address of each director and executive officer is c/o PDF Solutions, Inc., 333 West San Carlos
Street, Suite 700, San Jose, CA 95110, USA. The telephone number for each director and executive
officer is +1 (408) 280-7900.
A-1
APPENDIX B
GUIDE TO INTERNATIONAL ISSUES
B-1
APPENDIX B
OFFER TO EXCHANGE: A GUIDE TO TAX ISSUES IN FRANCE
The following is a general summary of the material tax consequences of the voluntary cancellation
of eligible options in exchange for the grant of restricted stock rights for eligible individuals
subject to tax in France. This summary is based on the law in effect in France as of May 2008. This
summary is general in nature and does not discuss all of the tax consequences that may be relevant
to you in light of your particular circumstances, nor is it intended to be applicable in all
respects to all categories of eligible employees, directors and consultants. Please note that tax
laws change frequently and occasionally on a retroactive basis. As a result, the information
contained in this summary may be out of date at the time the restricted stock rights are granted,
the restricted stock rights vest or you sell shares acquired upon vesting of the restricted stock
rights.
This summary also includes other country-specific requirements that may affect your participation
in the offer.
If you are a citizen or resident of another country for local law purposes, the information
contained in this summary may not be applicable to you. You are strongly advised to seek
appropriate professional advice as to how the tax or other laws in France apply to your specific
situation.
TAX INFORMATION
Option Exchange and Grant of Restricted Stock Rights
As your entitlement to receive shares under the grant of restricted stock rights is conditioned on
your continued employment by a PDF Solutions entity from the date of grant through the date of vesting
of your restricted stock rights, you should not be required under current law to recognize income
for income tax or social security purposes as a result of the exchange of eligible options for the
grant of restricted stock rights.
Vesting of Restricted Stock Rights
You will be subject to income tax and social security contributions when your restricted stock
rights vest. You will be subject to income tax and social security contributions based on the fair
market value of the shares issues to you at vesting.
Sale of Shares
When you subsequently sell the shares, you will not be subject to tax on the capital gain if your
total proceeds from the sale of securities (including your spouses and your childrens) during a
calendar year do not exceed a certain amount which is set annually (25,000 for 2008).
However, if your total proceeds (including your spouses and your childrens) from the sale of
securities during a calendar year exceed the set amount, then you must pay capital gains tax on the
entire gain you realize (i.e., the difference between the net sale price and the fair market value
of the shares issued to you on the vesting date). Capital gains tax applies at the rate of 29%
(i.e., 18% income tax plus 11% additional social taxes). The capital gain is equal to the
difference between the sale price of the shares and the fair market value of the shares on the date
of vesting.
If the sale proceeds are less than the fair market value of the shares at the time of vesting, you
will realize a capital loss. Such capital loss can be offset against capital gains realized from
the sale of securities during the year in which you sold the shares and/or during the ten following
years. However, capital losses cannot be offset against other types of income (such as salary).
Dividends
You may be entitled to receive dividends, if the Board of Directors of PDF, in its discretion,
declares a dividend. Any dividend paid will be subject to United States federal tax withheld at
source and will then be subject to income tax in France.
B-2
Pursuant to the provisions of the tax treaty entered into between France and the United States on August
31, 1994, the dividends
received by a French tax resident who is not a US citizen will generally be subject to a 15%
withholding tax. Under French tax law, the dividends will be either (i) subject to progressive
income tax rates on 40% of the gross dividend received (i.e., before US withholding tax) or (ii)
subject to a 29% withholding tax (i.e., 18% income tax plus 11% additional social contributions) on
the gross dividend received (i.e., before US withholding tax). You may, however, be entitled to a
foreign tax credit against your French income tax for the United States federal tax withheld at
source.
Withholding and Reporting
Your employer will withhold and pay all applicable social insurance contributions at the time of
vesting. By participating in the offer, you will agree to make arrangements satisfactory to PDF
Solutions, Inc. for the satisfaction of any applicable tax, social insurance or other obligations
that arise in connection with the restricted stock rights and any shares issued pursuant thereto.
Specifically, an amount sufficient to satisfy social insurance contributions and/or applicable
taxes may be withheld from the proceeds of the sale of a certain number of your vested shares or
through any program as determined appropriate and in accordance with the local laws and
regulations. However, it is your responsibility to pay any taxes resulting from the vesting of
your restricted stock rights, the sale of your shares, or the receipt of any dividends.
B-3
APPENDIX B
OFFER TO EXCHANGE: A GUIDE TO TAX ISSUES IN GERMANY
The following is a general summary of the material tax consequences of the voluntary cancellation
of eligible options in exchange for the grant of restricted stock rights for eligible individuals
subject to tax in Germany. This summary is based on the law in effect in Germany as of May 2008.
This summary is general in nature and does not discuss all of the tax consequences that may be
relevant to you in light of your particular circumstances, nor is it intended to be applicable in
all respects to all categories of eligible employees, directors and consultants. Please note that
tax laws change frequently and occasionally on a retroactive basis. As a result, the information
contained in this summary may be out of date at the time the restricted stock rights are granted,
the restricted stock rights vest or you sell shares acquired upon vesting of the restricted stock
rights.
This summary also includes other country-specific requirements that may affect your participation
in the offer.
If you are a citizen or resident of another country for local law purposes, the information
contained in this summary may not be applicable to you. You are strongly advised to seek
appropriate professional advice as to how the tax or other laws in Germany apply to your specific
situation.
TAX INFORMATION
Option Exchange
You likely will not be subject to tax as a result of the exchange of eligible options for the grant
of restricted stock rights.
Grant of Restricted Stock Rights
You will not be subject to tax when the restricted stock rights are granted to you.
Vesting of Restricted Stock Rights
You will be subject to income tax at your marginal tax rate and to social insurance contributions
(to the extent you have not already exceeded the applicable contribution ceiling) when the
restricted stock rights vest. You will be taxed on the fair market value of the shares issued to
you on the date of vesting. The fair market value of the shares is determined on the date the
shares are debited from PDFs books for issuance to you.
Pursuant to Section 19a of the German Income Tax Act (Einkommensteuergesetz), you may be able to
deduct from the taxable income you receive at vesting 135 (per calendar year) because the
income results from the acquisition of shares in your employers parent company at no cost. Please
check the availability of this deduction with your tax advisor.
Sale of Shares
When you subsequently sell the shares acquired upon vesting, you will not be subject to tax
provided that: (i) you own the shares for more than one (1) year; (ii) you do not own 1% or more of
PDFs stated capital (and have not owned 1% or more at any time in the last five (5) years); and
(iii) the shares are not held as business assets (this requirement should be met since you acquired
the shares as an employee).
You will be subject to tax only if your total capital gain is 512 or more in the relevant tax
year. If the sum of all of your capital gains upon sale exceeds the amount of 512, one-half of
the whole amount is subject to taxation (less one-half of the sale-related expense). These rules
are applicable until December 31, 2008. Significant changes to the tax treatment of capital gains
become effective as of 2009; a general tax rate of 25% will then apply to your full capital gain.
Dividend Equivalents
If you receive shares upon vesting, you may be entitled to receive a dividend if the Board of
Directors of PDF, in its discretion, declares a dividend. Any dividend paid will be subject to
income tax in Germany and also to United States federal withholding tax. You may be entitled to a
foreign tax credit against your German income tax for the United States federal income tax
withheld.
B-4
Withholding and Reporting
Your employer will report and withhold income tax and social insurance contributions (to the extent
you have not already exceeded the applicable contribution ceiling) when your restricted stock
rights vest and shares are issued to you. By participating in the offer, you will agree to make
arrangements satisfactory to PDF Solutions, Inc. for the satisfaction of any applicable tax, social
insurance or other obligations that arise in connection with the restricted stock rights and any
shares issued pursuant thereto. Specifically, an amount sufficient to satisfy social insurance
contributions and/or applicable taxes may be withheld from the proceeds of the sale of a certain
number of your vested shares or through any program as determined appropriate and in accordance
with the local laws and regulations. Should there be a difference between the actual tax liability
and the amount withheld, the tax office may assess additional taxes or refund excess taxes after
review of your annual tax return. It is your responsibility to report and pay any taxes due as a
result of the sale of shares and the receipt of any dividends.
B-5
APPENDIX B
OFFER TO EXCHANGE: A GUIDE TO TAX ISSUES IN ITALY
The following is a general summary of the material tax consequences of the voluntary cancellation
of eligible options in exchange for the grant of restricted stock rights for eligible individuals
subject to tax in Italy. This summary is based on the law in effect in Italy as of May 2008. This
summary is general in nature and does not discuss all of the tax consequences that may be relevant
to you in light of your particular circumstances, nor is it intended to be applicable in all
respects to all categories of eligible employees, directors and consultants. Please note that tax
laws change frequently and occasionally on a retroactive basis. As a result, the information
contained in this summary may be out of date at the time the restricted stock rights are granted,
the restricted stock rights vest or you sell shares acquired upon vesting of the restricted stock
rights.
This summary also includes other country-specific requirements that may affect your participation
in the offer.
If you are a citizen or resident of another country for local law purposes, the information
contained in this summary may not be applicable to you. You are strongly advised to seek
appropriate professional advice as to how the tax or other laws in Italy apply to your specific
situation.
TAX INFORMATION
Option Exchange
You will not be subject to tax as a result of the exchange of existing options for the grant of
restricted stock rights.
Fair Market Plan Exemption
Please note that as of July 4, 2006, the fair market value plan tax exemption which had been in
effect for options granted before January 1, 1998 or after January 15, 2000 has been repealed by a
recent decree. As a result, companies must start withholding income tax from the spread for option
exercises occurring on or after July 4, 2006, unless another exemption applies. If the option was
granted on or before July 4, 2006, the decree provides that no social insurance contributions are
due on the exercise of the option. You should keep the tax consequences of existing options in mind
in deciding whether to participate in the exchange offer.
Please also note that it is possible that the Italian IRS may characterize the exchange offer as a
disposal of the stock options you were originally granted for a consideration comprising restricted
stock rights. In such a case, your options would not benefit from the exemption regime, and the
stock option value would be represented by the fair market value of the restricted stock rights at
the time of the exchange.
One other exemption may apply to income from the exercise of options, which would be available if
your options were granted between January 1, 1998 and January 15, 2000 and could be settled using
only newly issued shares of PDF common stock upon exercise.
Grant of Restricted Stock Rights
You will not be subject to tax when the restricted stock rights are granted to you.
Vesting of Restricted Stock Rights
You will be subject to income tax and social insurance contributions when the restricted stock
rights vest. You will be taxed on the fair market value (as defined under Italian law) of the
shares issued to you on the date of vesting. Fair market value is defined as the average price
per share on the official stock exchange on which PDFs shares are traded during the period ending
on the day that the restricted stock rights vest and shares are issued and starting on the same day
of the preceding calendar month.
B-6
Sale of Shares
If you acquire shares upon vesting, you will be subject to capital gains tax when you subsequently
sell the shares. The gain on the shares sold is calculated as the difference between the sale price
and the value of the shares issued to you at
vesting which has been previously subject to employment income taxation. The capital gain realized
by you on the sale of the shares will be taxed at a rate of 12.5% since it is highly likely that
the shares sold will be non-qualified shareholdings. A shareholding will be a non-qualified
shareholding and thus subject to capital gains tax at the rate of 12.5%, if the shares sold
represent less than 2% of the voting rights or less than 5% of the outstanding shares of PDF
ordinary shares.
In calculating capital gains tax, you may subtract any expenses incurred to produce the gain,
except interest, and losses from the sale of any other non-qualified shareholding or from the sale
of other capital investments. If losses exceed gains, the difference can be carried forward for the
next four (4) years. Capital gains (or losses) must be reported in your annual tax return and the
applicable capital gains tax must be paid, together with the personal income tax.
If you sell a non-qualified shareholding (as defined above), you may also elect to be taxed under
one of two alternative tax regimes (described below). To be eligible for either of these methods,
you must keep the shares in the custody of a financial broker or a bank authorized under the
Italian Bank Act
Administered Savings Method
Under the administered savings method, you deposit the shares with an authorized broker, but you
retain the right to make investment decisions. Under this method, a 12.5% flat withholding tax is
levied on the capital gain for each transaction. The gain is calculated using the same method as
described above. Losses from the sale of the shares may be subtracted from the related gain and,
where losses exceed gains, the difference can be carried forward for the next four (4) years. Under
this method, your broker pays the tax at the time of the transaction, so that capital gain is not
included on your annual tax return.
Managed Savings Method
Under the managed savings method, you deposit the shares with an authorized broker and leave the
administration and investment decisions to the broker. In this case, the 12.5% flat withholding tax
is levied not on the capital gain actually realized through the sale of the shares but on the net
result of the investment
portfolio at the end of the year and the value of the portfolio at the beginning of the year,
subject to some adjustment. Once again, the broker pays the tax at the end of the year and it is
not included on your individual tax return.
Dividends
If you receive shares upon vesting, you may be entitled to receive dividends if the Board of
Directors of PDF, in its discretion, declares a dividend. Any dividends paid will be subject to a
12.5% flat withholding tax in Italy, since it is highly likely that the shares held will be
non-qualified shareholdings. Such withholding tax will be applied on the dividend received net of
any United States federal withholding tax applied on such dividend by the Italian authorized
financial broker or bank acting as collecting agent of such dividends.
Withholding and Reporting
If your restricted stock rights are settled in shares, your employer will be required to report and
withhold income tax and social insurance contributions on the income you derive from the vesting of
the restricted stock rights at the time the restricted stock rights vest. By participating in the
offer, you will agree to make arrangements satisfactory to PDF Solutions, Inc. for the satisfaction
of any applicable tax, social insurance or other obligations that arise in connection with the
restricted stock rights and any shares issued pursuant thereto. Specifically, an amount sufficient
to satisfy social insurance contributions and/or applicable taxes may be withheld from the proceeds
of the sale of a certain number of your vested shares or through any program as determined
appropriate and in accordance with the local laws and regulations.
It is your responsibility to report the capital gain derived from the sale of shares and any
dividends received in your annual tax return and to pay the relevant tax; however you are not
required to report capital gain and any dividends received if you elected to keep the shares in the
custody of a financial broker or a bank authorized under the Italian Bank Act.
B-7
APPENDIX B
OFFER TO EXCHANGE: A GUIDE TO TAX ISSUES IN JAPAN
The following is a general summary of the material tax consequences of the voluntary cancellation
of eligible options in exchange for the grant of restricted stock rights for eligible individuals
subject to tax in Japan. This summary is based on the law in effect in Japan as of May 2008. This
summary is general in nature and does not discuss all of the tax consequences that may be relevant
to you in light of your particular circumstances, nor is it intended to be applicable in all
respects to all categories of eligible employees, directors and consultants. Please note that tax
laws change frequently and occasionally on a retroactive basis. As a result, the information
contained in this summary may be out of date at the time the restricted stock rights are granted,
the restricted stock rights vest or you sell shares acquired upon vesting of the restricted stock
rights.
This summary also includes other country-specific requirements that may affect your participation
in the offer.
If you are a citizen or resident of another country for local law purposes, the information
contained in this summary may not be applicable to you. You are strongly advised to seek
appropriate professional advice as to how the tax or other laws in Japan apply to your specific
situation.
TAX INFORMATION
Option Exchange
You may not be subject to tax as a result of the exchange of eligible options for the grant of
restricted stock rights. Please note, however, that the Japanese tax treatment of an option
exchange for restricted stock rights is uncertain because there are no specific tax provisions
related to such an exchange. Therefore, we recommend that you check with your personal tax advisor
on the potential tax consequences of the offer.
Grant of Restricted Stock Rights
Although the tax treatment of restricted stock rights is uncertain in Japan, under the current
practice of the tax authorities, you likely will not be subject to tax when the restricted stock
rights are granted to you.
Vesting of Restricted Stock Rights
You will likely be subject to income tax when the restricted stock rights vest and shares are
issued to you. You will be taxed on the fair market value of the shares issued to you on the date
of vesting. Based on a recent decision of the Supreme Court of Japan on the taxation of stock
options, the income realized on the vesting of the restricted stock rights will likely be
characterized as remuneration income and taxed at your marginal tax rate. We recommend that you
consult with your personal tax advisor to obtain more information on the income classification
issue. You likely will not be subject to social insurance contributions upon vesting of your
restricted stock rights.
Sale of Shares
When you subsequently sell the shares acquired upon vesting, you will be subject to tax on any gain
you realize. The taxable gain will be calculated as the difference between the sale proceeds and
your tax basis in the shares. Your tax basis will likely be the amount you recognize as income at
vesting (i.e., the fair market value of the shares at vesting). Generally, you will be subject to
capital gains tax at a flat rate of 20%. You may be eligible for a reduced flat tax rate of 10%, as
opposed to the standard flat rate of 20%. The 10% temporary lower rate is in effect (until 2008)
subject to conditions including: (1) the stock must be traded on a recognized exchange (i.e., the
NASDAQ Global Select Market); and (2) the stock must be sold through a financial instruments firm
registered in Japan. In addition, the 10% extended temporary lower rate will be applicable up to
¥5,000,000 of capital gains (as of January 1, 2009 and through December 31, 2010) subject to
certain conditions. Please consult with your tax advisor to find out if you are eligible for a
reduced rate and/or other favorable stock-related tax treatment.
B-8
Dividends
If you receive shares upon vesting, you may be entitled to receive dividends if the Board of
Directors of PDF, in its discretion, declares a dividend. Any dividends paid on the shares will be
subject to income tax in Japan and also to United
States federal withholding tax.
If the dividends are paid through a Japanese paying agent (i.e., a financial instruments firm in
Japan), the paying agent will withhold Japanese income tax at a rate of 10% (as of April 1, 2003
and through December 31, 2008). The withholding rate after December 31, 2008 will be 10% (up to
¥1,000,000) or 20% (over ¥1,000,000) until December 31, 2010. You may be entitled to a foreign tax
credit against your Japanese income tax for the United States federal tax withheld.
Withholding and Reporting
Your employer is not required to withhold income tax on the exchange of options or the grant or
vesting of your restricted stock rights. It is your responsibility to report any income resulting
from the exchange of options, grant or vesting of your restricted stock rights, from the sale of
shares or the receipt of any dividends and to pay the applicable taxes.
When you sell the shares acquired upon vesting of your restricted stock rights, any capital gains
or losses must be reported in that year. However, if your gross annual salary amount is ¥20,000,000
or less and if your total annual income other than remuneration income paid by your main employer
and retirement income (for example, bank interest, capital gains and divided income) is ¥200,000 or
less for that year, you are not required to report such income.
You are generally not required to report your capital gain in the specific account at a financial
instruments firm if the withholding tax on the income in the account is withheld by the financial
instruments firm according to your choice.
Please consult with your tax advisor to find out if you are eligible for these general exemptions
from filing a tax return.
Please note that Japanese tax authorities are aware that employees of Japanese affiliates of U.S.
companies may earn income as a result of their participation in equity incentive plans, and they
are systematically auditing the tax returns of such employees to confirm that they have correctly
reported the resulting income.
B-9
APPENDIX B
OFFER TO EXCHANGE: A GUIDE TO TAX ISSUES IN THE NETHERLANDS
The following is a general summary of the material tax consequences of the voluntary cancellation
of eligible options in exchange for the grant of restricted stock rights for eligible individuals
subject to tax in the Netherlands. This summary is based on the law in effect in the Netherlands as
of May 2008. This summary is general in nature and does not discuss all of the tax consequences
that may be relevant to you in light of your particular circumstances, nor is it intended to be
applicable in all respects to all categories of eligible employees, directors and consultants.
Please note that tax laws change frequently and occasionally on a retroactive basis. As a result,
the information contained in this summary may be out of date at the time the restricted stock
rights are granted, the restricted stock rights vest or you sell shares acquired upon vesting of
the restricted stock rights.
This summary also includes other country-specific requirements that may affect your participation
in the offer.
If you are a citizen or resident of another country for local law purposes, the information
contained in this summary may not be applicable to you. You are strongly advised to seek
appropriate professional advice as to how the tax or other laws in the Netherlands apply to your
specific situation.
TAX INFORMATION
Option Exchange
No tax is due as a result of the exchange of options for the grant of restricted stock rights.
Grant of Restricted Stock Rights
You will not be subject to tax when the restricted stock rights are granted to you.
Vesting of Restricted Stock Rights
You will be subject to income tax and social insurance contributions (to the extent you have not
already exceeded the applicable contribution ceiling) when the restricted stock rights vest and
shares are issued to you. You will be taxed on the fair market value of the shares issued to you on
the date of vesting.
Sale of Shares
When you subsequently sell the shares acquired, you will not be subject to tax on any gain you
realize, provided you hold less than 5% of (any class of) PDFs outstanding shares.
Annual Investment Tax
Investment yield tax (Box III) applies at a rate of 1.2% on the average value of all assets that
you own at the beginning and end of the year (including shares of PDF), subject to an annual
exemption (20,315.00 for 2008). It is your responsibility to pay any investment tax due.
Dividend Equivalents
You may be entitled to receive dividend equivalents on your shares if the Board of Directors of
PDF, in its discretion, declares a dividend. Any dividend equivalents paid will not be subject to
income tax in the Netherlands. However, the dividend equivalents will be subject to United States
federal withholding tax. You may be entitled to a foreign tax credit against your Dutch income tax
for the United States federal income tax withheld (up to 15%).
Withholding and Reporting
Your employer will withhold and report income tax and any applicable social insurance contributions
due when the restricted stock rights vest. By participating in the offer, you will agree to make
arrangements satisfactory to PDF Solutions, Inc. for the satisfaction of any applicable tax, social
insurance or other obligations that arise in connection with the restricted stock rights and any
shares issued pursuant thereto. Specifically, an amount sufficient to satisfy social insurance
contributions and/or applicable taxes may be withheld from the proceeds of the sale of a certain
number of your vested shares or through any program as determined appropriate and in accordance
with the local laws and regulations. It
is your responsibility to report any investment tax due and pay any tax due as a result of the sale
of shares.
B-10
APPENDIX B
OFFER TO EXCHANGE: A GUIDE TO TAX ISSUES IN SINGAPORE
The following is a general summary of the material tax consequences of the voluntary cancellation
of eligible options in exchange for the grant of restricted stock rights for eligible individuals
subject to tax in Singapore. This summary is based on the law in effect in Singapore as of May
2008. This summary is general in nature and does not discuss all of the tax consequences that may
be relevant to you in light of your particular circumstances, nor is it intended to be applicable
in all respects to all categories of eligible employees, directors and consultants. Please note
that tax laws change frequently and occasionally on a retroactive basis. As a result, the
information contained in this summary may be out of date at the time the restricted stock rights
are granted, the restricted stock rights vest or you sell shares acquired upon vesting of the
restricted stock rights.
This summary also includes other country-specific requirements that may affect your participation
in the offer.
If you are a citizen or resident of another country for local law purposes, the information
contained in this summary may not be applicable to you. You are strongly advised to seek
appropriate professional advice as to how the tax or other laws in Singapore apply to your specific
situation.
TAX INFORMATION
Option Exchange
There is a risk that the IRAS may view the exchange as a taxable release, in which case, you will
be subject to tax on the value of the shares subject to your eligible options at the time of
cancellation. Whether the IRAS will disregard the release of options (and tax only the restricted
stock rights upon vesting as described below) depends on whether the terms of the restricted stock
rights are more favourable compared to the options previously granted to you.
Grant of Restricted Stock Rights
Apart from the potential tax exposure in relation to the release of the option as mentioned above,
generally you will not be subject to tax when restricted stock rights are granted to you with a
vesting period.
Vesting of Restricted Stock Rights
You will be subject to income tax on the fair market value of the shares issued to you when the
restricted stock rights vest (and may be net of any related gain on which you were previously taxed
at the time of cancellation of your stock options), unless you are eligible for an exemption or
deferral, as described below. You will not be subject to Central Provident Fund contributions upon
vesting of your restricted stock rights. Please note that, if you are neither a Singapore citizen
nor a Singapore permanent resident or you are a Singapore permanent resident who intends to leave
Singapore permanently, different rules may apply to you, and you are advised to consult your
personal tax advisor. As mentioned above, your tax treatment may be different if one of the
exemption or deferral schemes applies. Please consult with your personal tax advisor to determine
whether any of such schemes apply and which portion, if any, of your restricted stock rights may
qualify for the favourable tax treatment.
ERIS (All Corporations) Scheme
Please note that the ERIS (All Corporations) Scheme is available only if restricted stock rights
are granted to at least 25% of the employees employed by the Singapore affiliate of PDF Solutions,
Inc. (i.e., your employer) as of December 31st of the year of the offer. In addition,
the ERIS (All Corporations) Scheme is available only with respect to restricted stock rights that
have been held for one-half or one full year, depending on the price payable to acquire the shares.
You may qualify for a tax exemption on the first S $2,000 of the gain at vesting or thereafter,
annually, to the extent the restricted stock rights fall under the ERIS (All Corporations) Scheme.
If you qualify for the ERIS (All Corporations) Scheme, you will have to pay tax only on 75% of the
remaining gain (after the S $2,000 exemption) that falls under the exemption. However, tax
exemptions under this scheme are limited to gains of up to S $1 million over a ten-year period from
the year of first exemption.
B-11
Sale of Shares
When you subsequently sell the shares acquired upon vesting, you will not be subject to tax on any
gain you realize, unless you are engaged in the business of buying and selling securities.
Dividends
If you receive shares upon vesting, you may be entitled to receive dividends if the Board of
Directors of PDF, in its discretion, declares a dividend. Any dividend paid will be
subject to United States federal withholding tax, but it will not be subject to Singapore income
tax, even if it is received in Singapore.
Withholding and Reporting
Your employer is not required to withhold income tax when your restricted stock rights vest.
However, if you are neither a Singapore citizen, nor a Singapore permanent resident or you are a
Singapore permanent resident who intends to leave Singapore permanently, withholding tax rules will
apply to you and you are advised to consult your tax advisor. By participating in the offer, you
will agree to make arrangements satisfactory to PDF Solutions, Inc. for the satisfaction of any
applicable tax, social insurance or other obligations that arise in connection with the restricted
stock rights and any shares issued pursuant thereto. Specifically, an amount sufficient to satisfy
social insurance contributions and/or applicable taxes may be withheld from the proceeds of
the sale of a certain number of your vested shares or through any program as determined appropriate
by PDF Solutions, Inc. and in accordance with the local laws and regulations.
Your employer will complete a Form IR8A, which will declare the taxable benefits you have derived
from the release of the option and upon vesting of the restricted stock rights. The completed Form
IR8A will state the salary or benefits paid to you by your employer during the year, whether in
cash or in kind, including any income you have realized from your release of your options and upon
vesting of the restricted stock rights. It is your responsibility to file your income tax return,
wherein you must report this income or any gains from the subsequent sale of the shares (if you are
engaged in the business of buying and selling securities) and pay the applicable taxes.
B-12
APPENDIX B
OFFER TO EXCHANGE: A GUIDE TO TAX ISSUES IN TAIWAN
The following is a general summary of the material tax consequences of the voluntary cancellation
of eligible options in exchange for the grant of restricted stock rights for eligible individuals
subject to tax in Taiwan. This summary is based on the law in effect in Taiwan as of May 2008. This
summary is general in nature and does not discuss all of the tax consequences that may be relevant
to you in light of your particular circumstances, nor is it intended to be applicable in all
respects to all categories of eligible employees, directors and consultants. Please note that tax
laws change frequently and occasionally on a retroactive basis. As a result, the information
contained in this summary may be out of date at the time the restricted stock rights are granted,
the restricted stock rights vest or you sell shares acquired upon vesting of the restricted stock
rights.
This summary also includes other country-specific requirements that may affect your participation
in the offer.
If you are a citizen or resident of another country for local law purposes, the information
contained in this summary may not be applicable to you. You are strongly advised to seek
appropriate professional advice as to how the tax or other laws in Taiwan apply to your specific
situation.
TAX INFORMATION
Option Exchange
You likely will not be subject to tax as a result of the exchange of eligible options for the grant
of restricted stock rights.
Grant of Restricted Stock Rights
You will not be subject to tax when the restricted stock rights are granted to you.
Vesting of Restricted Stock Rights
You will be subject to personal income tax when the restricted stock rights vest. You will be taxed
on the fair market value of the shares on the date of vesting. You will not be subject to social
insurance contributions upon vesting of your restricted stock rights.
Sale of Shares
When you subsequently sell the shares acquired upon vesting, you may be subject to the 20%
Alternative Minimum Tax on the offshore capital gain, provided the sale takes place after December
31, 2008.
Dividends
If you receive shares upon vesting, you may be entitled to receive dividends if the Board of
Directors of PDF, in its discretion, declares a dividend. You may be subject to the
20% Alterative Minimum Tax on any offshore dividends received after December 31, 2008. You will be
subject to United States federal withholding tax.
Withholding and Reporting
Your employer likely is not required to withhold income tax but is required to report to the tax
authorities the related information when your restricted stock rights vest. It will be your
responsibility to report any income you derive from the vesting of the restricted stock rights on
your personal tax return and pay the applicable taxes.
B-13
exv99wxayx1yxby
Exhibit (a)(1)(B)
OFFER TO EXCHANGE RESTRICTED STOCK RIGHTS
FOR CERTAIN OUTSTANDING STOCK OPTIONS
DATED JUNE 10, 2008
ELECTION FORM
Please read this Election Form carefully. To properly elect to exchange your eligible options, PDF
must receive your Election Form before 9 p.m., U.S. Pacific Time, on July 9, 2008.
You are not required to return this Election Form if you do not wish to participate in the offer.
However, if PDF does not receive an Election Form before 9 p.m., U.S. Pacific Time, on July 9,
2008, we will interpret this as your election not to participate in the offer, and you will retain
all of your outstanding options, subject to all of their current terms and conditions.
You must send a properly executed Election Form via electronic delivery, facsimile, regular mail,
overnight courier, or hand delivery using the following contact information:
Via Electronic Delivery:
Scan the completed and signed Election Form and email it to tenderoffer@pdf.com.
Via Facsimile:
PDF Solutions, Inc., Attn: P. Steven Melman, +1 (408) 938-6478.
Via Regular Mail, Overnight Courier or Hand Delivery:
PDF Solutions, Inc., Attn: P. Steven Melman, 333 West San Carlos Street, Suite 700, San Jose,
California 95110, USA.
Your acceptance of our offer will be effective as of the date and time that PDF receives your
signed Election Form by any of the methods described above. While not a condition to your election,
if you submitted your signed Election Form by way of electronic delivery or facsimile, PDF also
asks that you make a copy for your own files and then submit the original signed Election Form by
any of the methods described above. It is your responsibility to ensure that your election is
received by PDF by the deadline.
You do not need to return your stock option agreement(s) in order to effectively elect to accept
this offer.
You may confirm that your documents have been received by sending an email to the Offering
Administrator at tenderoffer@pdf.com. PDF intends to confirm receipt of your signed
Election Form within three business days of its arrival. If you do not receive confirmation of our
receipt, it is your responsibility to ensure that we have properly received your election.
If you think the information regarding your eligible options set forth below is incorrect, or if
you have any questions about the offer, please telephone P. Steven Melman at +1 (408) 938-6445 or
send an email to tenderoffer@pdf.com.
* * *
From: [Name]
I have received the Offer to Exchange dated June 10, 2008 (the offer"), this Election Form,
the form of Restricted Stock Agreement (the Agreement) and the PDF Solutions, Inc. 2001 Stock
Plan (the 2001 Plan").
I understand that by electing to participate in the offer, I will exchange all of my
outstanding stock options that have an exercise price per share that is equal to or greater than
U.S. $10.00, all of which are listed below (eligible options"), for restricted stock rights
covering the number of shares of Company common stock set forth below. I further understand that
the restricted stock rights will be granted under the PDF Solutions, Inc. 2001 Stock Plan and that
they represent the right to receive a certain number of shares of common stock of PDF Solutions,
Inc. (the Company") upon the vesting of the restricted stock rights. I will not be required to
pay anything to receive restricted stock rights or shares pursuant to restricted stock rights in
connection with the offer.
Eligible Options/Restricted Stock Rights
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Total Vested
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Total |
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Total Number of
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Outstanding |
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Outstanding/ |
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Number of |
Grant
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Grant
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Exercise Price
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Shares Subject to
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Options
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Unexercised
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Restricted Stock |
Number
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Date
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(USD)
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Option at Grant
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as of June 5, 2008
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Options
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Rights |
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Please note that the Company will not issue any fractional restricted stock rights. The
applicable amounts in the column headed Number of Restricted Stock Rights have been rounded up to
the nearest whole number.
The Company has further informed me that restricted stock rights received in the offer will be
unvested as of their grant date and will be subject to the applicable vesting schedule set forth
below.
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Year During Which Eligible Options were |
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Granted |
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Vesting Schedule of Restricted Stock Rights |
2000 - 2003 |
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50% on 5/15/2009 and 50% 6 months thereafter |
2004 |
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25% on 5/15/2009 and 25% every 6 months thereafter |
2005 |
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16.7% on 5/15/2009 and 16.66% every 6 months thereafter |
2006 and later years |
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12.5% on 5/15/2009 and 12.5% every 6 months thereafter |
Only a whole number of restricted stock rights will vest in any period, and any fractional
restricted stock right that would otherwise vest will be carried over to the next vesting period.
The Company has advised me that I must continue to provide service to the Company or one of its
subsidiaries through the required vesting periods to become entitled to receive or retain the
underlying shares of common stock vesting at the end of each vesting period. The Company has
notified me that if I choose not to participate in the offer, I will keep all of my eligible
stock options, I will receive no restricted stock rights, and my outstanding eligible stock options
will retain their current vesting provisions, exercise price and other terms.
I have reviewed the list of my eligible stock options set forth above and I confirm that it is
an accurate and complete list of my eligible stock options and that I do hold all of the listed
stock options.
If, before the expiration of the offer, I wish to exercise any of the eligible options I am
electing to exchange, I acknowledge that I cannot do so unless I first properly withdraw this
election in accordance with procedures set forth in Part III, Section 5 of the Offer to Exchange.
I acknowledge that upon the occurrence of any of the conditions set forth in Part III, Section
7 of the Offer to Exchange, the Company may terminate or amend the offer and postpone its
acceptance and cancellation of any eligible options I elect for exchange.
2
I acknowledge that the restricted stock rights will be subject to the terms and conditions set
forth in the 2001 Plan
and the Agreement, which will constitute an agreement between the Company and me. I have reviewed
the form of Agreement provided to me. I understand and acknowledge that the Company will deliver a
final Agreement (with all the blanks filled in) to me via the Citigroup Global Markets Inc. website
at www.benefitaccess.com as soon as practicable after the grant date.
I hereby represent and warrant that I have full power and authority to elect to exchange the
options exchanged hereby and that, when and to the extent such options are accepted for exchange by
the Company, such options will be free and clear of all security interests, liens, restrictions,
charges, encumbrances, conditional sales agreements, or other obligations relating to the sale or
transfer thereof, and such options will not be subject to any adverse claims. Upon request, I will
execute and deliver any additional documents deemed by the Company to be necessary or desirable to
complete the exchange of the options I am electing to exchange.
By signing this Election Form, I acknowledge that my election to exchange my eligible options
pursuant to the procedure(s) described in Part III, Section 4 of the Offer to Exchange and in the
instructions to this Election Form will constitute my acceptance of the terms and conditions of the
offer. The Companys acceptance for exchange of options offered to be exchanged pursuant to the
offer will constitute a binding agreement between the Company and me, upon the terms and subject to
the conditions of the Offer to Exchange and this Election Form.
I acknowledge that I expect no financial compensation from the exchange and cancellation of my
options. I also acknowledge that, in order to participate in the offer, I must be an eligible
employee, consultant or director of the Company or one of its subsidiaries from the date when I
elect to exchange my eligible options through the date when the restricted stock rights are granted
and otherwise be eligible to participate under the 2001 Plan. I further acknowledge that, if I do
not remain an eligible employee, consultant or director of the Company or one of its subsidiaries,
I will not receive any restricted stock rights or any other consideration for the options that I
elect to exchange and that are accepted for exchange pursuant to the offer.
I hereby give up all ownership interest in the options that I elect to exchange, which
represent all of my eligible options, and I have been informed that they will become null and void
on the date the Company accepts my options for exchange. I agree that I will have no further right
or entitlement to purchase shares of the Companys common stock under the eligible options accepted
by the Company for exchange or have any other rights or entitlements under such options. I
acknowledge that this election is entirely voluntary. I also acknowledge that this election will be
irrevocable on the date the Company accepts my options for exchange.
I acknowledge that the Company has advised me to consult with my own advisors as to the
consequences of participating or not participating in the offer to exchange.
By signing below (i) I hereby elect to participate in the Offer to Exchange dated June 10,
2008, subject to all of the terms and conditions set forth therein, to exchange all of my
outstanding eligible stock options listed above for the restricted stock rights covering the number
of shares of Company common stock listed above, (ii) to the extent that I have not previously
accepted any or all of the eligible stock options previously granted to me, I hereby agree to the
terms and conditions set forth in the applicable stock option agreements previously provided, (iii)
I hereby irrevocably waive the right to exercise all of my outstanding eligible stock options
listed above and, therefore, to claim the delivery of the shares underlying these options, and (iv)
I hereby irrevocably waive the right to claim any loss of opportunity as a result of the waiver of
the right to exercise all of my outstanding eligible stock options listed above.
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Participant Signature
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Date and Time |
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Participant Name Printed
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PDF Solutions, Inc. Office Location |
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Daytime Telephone Number
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Email Address |
3
INSTRUCTIONS AND AGREEMENTS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Delivery of Election Form. PDF Solutions, Inc. (the Company) must receive your signed and
dated Election Form before the offer expires at 9 p.m. U.S. Pacific Time on July 9, 2008. Any
Election Form received after that time will not be accepted. If the offer is extended by the
Company beyond that time, you may submit your election at any time until the extended expiration of
the offer.
The method of delivery of any document is at your election and risk. If you choose to submit a
signed Election Form, your election will be effective upon receipt. If hand delivery is not
feasible, we recommend that you send it via electronic delivery or facsimile, and then follow up
with a telephone call or email to confirm receipt by the deadline. If delivery is by mail, we
recommend that you use registered mail with return receipt requested. In all cases, you should
allow sufficient time to ensure timely delivery.
The Company will not accept any alternative, conditional, or contingent offers to exchange options.
All eligible individuals electing to exchange options, by execution of this Election Form, waive
any right to receive any notice of the acceptance of their election to exchange, except as provided
for in the offer to exchange.
2. Withdrawal of Election. Elections to exchange made pursuant to the offer may be withdrawn
at any time prior to the expiration of the offer. If the offer is extended by the Company beyond
that time, you may withdraw your election at any time until the extended expiration of the offer.
To withdraw your tendered options, you must deliver a Notice of Withdrawal with the required
information while you still have the right to withdraw the election. Withdrawal elections may not
be rescinded and any eligible options withdrawn from the offer will thereafter be deemed not
properly tendered for purposes of the offer. To re-elect to exchange options that you have
withdrawn, you must again follow the procedures described in these Instructions to deliver a new
signed Election Form prior to the expiration of the offer.
3. Signatures on this Election Form. If this Election Form is signed by the option holder, the
signature must correspond with the name as written on the face of the stock option agreement(s) to
which the options are subject. If your name has been legally changed since your stock option
agreement was signed, please submit proof of the legal name change.
If this Election Form is signed by a trustee, executor, administrator, guardian, attorney-in-fact,
or other person acting in a fiduciary or representative capacity, that person should so indicate
when signing, and proper evidence satisfactory to us of the authority of that person so to act must
be submitted with this Election Form.
4. Requests for Assistance or Additional Copies. If you have any questions or need assistance,
please telephone P. Steven Melman at +1 (408) 938-6445 or send an email to
tenderoffer@pdf.com. If you would like to request additional copies of the Offer to
Exchange or this Election Form, please email the Offering Administrator at
tenderoffer@pdf.com. All copies will be furnished promptly at the Companys expense. You
may also contact the Company by fax or through regular mail using the contact information listed
above. You may also use the above contact information to overnight courier or hand deliver your
correspondence to the Company.
5. Irregularities. All questions as to the number of shares subject to options to be accepted
for exchange and the number of restricted stock rights to be granted, and any questions as to form
of documents and the validity (including eligibility and time of receipt), form, and acceptance of
any options elected to be exchanged will be determined by the Company in its sole discretion, which
determinations shall be final and binding on all interested persons. The Company reserves the right
to reject any or all elections to exchange options that the Company determines not to be in
appropriate form or the acceptance of which may, in the opinion of the Companys counsel, be
unlawful. The Company also reserves the right to waive any of the conditions of the offer and any
defect or irregularity in any election to exchange options, and the Companys interpretation of the
terms of the offer (including these instructions) will be final and binding on all parties. No
election to exchange options will be deemed to be properly made until all defects and
irregularities have been cured or waived. Unless waived, any defects or irregularities in
connection with an election to exchange options must be cured within such time as the Company shall
determine. Neither the Company nor any other person is or will be obligated to give notice of any
defects or irregularities in the election to exchange options, and no person will incur any
liability for failure to give any such notice.
6. Additional Documents to Read. You should be sure to read the Offer to Exchange, this
Election Form, the 2001 Plan, and the form of Restricted Stock Agreement before deciding to
participate in the offer.
4
7. Important Tax Information. You should consult your own tax advisor and refer to Part III,
Section 14 of the Offer to
Exchange, which contains important U.S. federal income tax information. If you live or work
outside the United States, or are otherwise subject to a tax liability in a foreign jurisdiction,
you should refer to Part III, Section 15 and Appendix B to the Offer to Exchange for a discussion
of the tax consequences which may apply to you.
8. Data Privacy. By accepting the offer, you hereby explicitly and unambiguously consent to
the collection, use, and transfer, in electronic or other form, of your personal data as described
in this document by and among, as applicable, the Company and/or any affiliate for the exclusive
purpose of implementing, administering and managing your participation in the offer.
You have been advised that your employer, the Company, and/or any affiliate may hold certain
personal information about you, including, but not limited to, your name, home address and
telephone number, date of birth, social insurance number or other identification number, salary,
nationality, job title, any shares of stock or directorships held in the Company, details of all
options, or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested
or outstanding in your favor, for the purpose of implementing, administering, and managing the
Company stock and other employee benefit plans and this offer (Data). You have been advised that
Data may be transferred to any third parties assisting in the implementation, administration, and
management of the offer, that these recipients may be located in your country, or elsewhere, and
that the recipients country may have different data privacy laws and protections than in your
country. You have been advised that you may request a list with names and addresses of any
potential recipients of the Data by contacting your local human resources representative. You
authorize the recipients to receive, possess, use, retain, and transfer the Data, in electronic or
other form, for the purposes of implementing, administering, and managing your participation in the
Companys stock and other employee benefit plans and this offer. You have been advised that Data
will be held only as long as is necessary to implement, administer, and manage your participation
in the stock and other employee benefit plans and this offer. You have been advised that you may,
at any time, view Data, request additional information about the storage and processing of Data,
require any necessary amendments to Data or if you are a resident of certain countries, refuse or
withdraw the consents herein, in any case without cost, by contacting in writing your local human
resources representative. You have been advised that refusing or withdrawing your consent may
affect your ability to participate in this offer.
9. Acknowledgement and Waiver. By accepting this offer, you acknowledge that: (i) the offer is
established voluntarily by the Company, it is discretionary in nature, and it may be extended,
modified, suspended, or terminated by the Company at any time as provided in the offer; (ii) the
grant of restricted stock rights is voluntary and occasional and does not create any contractual or
other right to receive future grants of restricted stock rights or options, or benefits in lieu of
restricted stock rights or options, even if restricted stock rights or options have been granted
repeatedly in the past; (iii) all decisions with respect to future grants under any the Company
stock plan, if any, will be at the sole discretion of the Company; (iv) your acceptance of the
offer will not create a right to employment or be interpreted to form an employment agreement with
the Company, its subsidiaries, or its affiliates and will not interfere with the ability of your
current employer, if applicable, to terminate your employment relationship at any time with or
without cause; (v) your acceptance of the offer is voluntary; (vi) the future value of the
Companys shares is uncertain and cannot be predicted with certainty; (vii) the offer, the
exchanged options, and the restricted stock rights are outside the scope of your employment
contract, if any, and are not part of normal or expected compensation or salary for any purposes,
including, but not limited to, calculating any severance, resignation, redundancy, end of service
payments, bonuses, long-service awards, pension or retirement benefits, or similar payments;
(viii) if you accept the offer and receive an award of restricted stock rights and obtain shares of
Company common stock pursuant to such award, the value of the shares acquired may increase or
decrease in value; (ix) you have been advised the risks associated with your participation in the
offer as described in Certain Risks of Participating in the Offer contained in the Offer to
Exchange; and (x) no claim or entitlement to compensation or damages arises from diminution in
value of any restricted stock rights or shares acquired pursuant to the restricted stock rights you
may receive as a result of participating in the offer and you irrevocably release the Company and
its subsidiaries and affiliates from any such claim that may arise.
10. Tax Liability. Regardless of any action that the Company, its subsidiaries, or its
affiliates take with respect to any or all income tax, social insurance, payroll tax, payment on
account, or other tax-related withholding obligations (tax obligations), you acknowledge that the
ultimate liability for all tax obligations legally due by you is and remains your sole
responsibility and that the Company, its subsidiaries, and its affiliates (i) make no
representations or undertakings regarding the treatment of any tax obligations in connection with
any aspect of the cancellation of eligible options or the grant of restricted stock rights, the
vesting of restricted stock rights and delivery of shares of Company common stock pursuant to the
restricted stock rights, the subsequent sale of shares of Company common stock acquired pursuant to
the restricted stock rights and the receipt of any dividends; and (ii) do not commit to structure
the terms of the offer, including cancellation of the eligible options and/or the grant of
restricted stock rights, to reduce or eliminate your liability for tax obligations.
5
You agree to pay or make adequate arrangements satisfactory to the Company, its subsidiaries,
and its affiliates to satisfy all withholding obligations of the Company, its subsidiaries, and its
affiliates for your tax obligations. Unless you are notified otherwise by the Company, by electing
to participate in the offer and by accepting your Restricted Stock Agreement,
you will authorize the Companys designated broker to, on each vesting date, sell that portion
of any shares that are issued upon vesting necessary to obtain sufficient proceeds to satisfy any
applicable tax, withholding or other liabilities (note that the full amount of the proceeds will be
applied to satisfy any applicable tax, withholding or other liability, even if it may exceed the
minimum amount required to satisfy such tax, withholding or other liability). The Company will
have no obligation to deliver shares pursuant to your restricted stock rights until your tax
obligations have been satisfied.
11. Electronic Delivery of Documents. Any document relating to participation in the offer or
any notice required or permitted by the Offer to Exchange, this Election Form or a Notice of
Withdrawal shall be given in writing and shall be deemed effectively given only upon receipt by the
Company. The Offer to Exchange, this Election Form, a Notice of Withdrawal, the 2001 Plan, and any
other communications to eligible option holders in connection with the offer (collectively, the
documents) may be delivered to you electronically. In addition, you may deliver electronically
to the Company this Election Form or a Notice of Withdrawal. Such means of electronic delivery may
include, but do not necessarily include, the delivery of a link to a Company intranet site or the
Internet site of a third party involved in administering the offer, the delivery of the document
via email, or such other means of electronic delivery specified by the Company. By executing this
Election Form, you acknowledge that you have read this Instruction and consent to the electronic
delivery of the documents. You acknowledge that you may receive from the Company a paper copy of
any documents delivered electronically at no cost to you by contacting the Company by telephone or
in writing using the contact information on the first page of this Election Form. You further
acknowledge that you will be provided with a paper copy of any documents if the attempted
electronic delivery of such documents fails. Similarly, you have been advised that you must provide
the Company or any designated third party administrator with a paper copy of any documents if the
attempted electronic delivery of such documents fails. You may revoke your consent to the
electronic delivery of documents described in this Instruction or may change the electronic mail
address to which such documents are to be delivered (if you have provided an electronic mail
address) at any time by notifying the Company of such revoked consent or revised email address by
telephone, postal service or electronic mail. Finally, you have been advised that you are not
required to consent to electronic delivery of documents described in this Instruction.
12. Governing Law and Documents. The Election Form is governed by, and subject to, United
States federal and Delaware state law, as well as the terms and conditions set forth in the Offer
to Exchange. For purposes of litigating any dispute that arises under the Election Form, the
parties hereby submit to and consent to the exclusive jurisdiction of California and agree that
such litigation shall be conducted in the courts of Santa Clara County, California, or the federal
courts for the United States for the Northern District of California, where this offer is made
and/or to be performed.
13. Translations. If you have received this or any other document related to the offer
translated into a language other than English and if the translated version is different than the
English version, the English version will control.
6
exv99wxayx1yxcy
Exhibit (a)(1)(C)
NOTICE OF WITHDRAWAL
OF OPTIONS PREVIOUSLY TENDERED FOR EXCHANGE
PURSUANT TO THE OFFER TO EXCHANGE DATED JUNE 10, 2008
If you previously elected to participate in the offer from PDF Solutions, Inc. to exchange certain
outstanding stock options for restricted stock rights by submitting a signed Election Form and you
would like to withdraw your election to exchange all of your eligible stock options, you must
notify us of your withdrawal before 9 p.m. U.S. Pacific Time on July 9, 2008.
If you wish to notify us of your withdrawal, you must complete, sign, date and return this Notice
of Withdrawal so that PDF receives it before the expiration date deadline. You must send this
entire Notice of Withdrawal via electronic delivery, facsimile, regular mail, overnight courier, or
hand delivery using the following contact information:
Via Electronic Delivery:
Scan the completed and signed Election Form and email it to tenderoffer@pdf.com.
Via Facsimile:
PDF Solutions, Inc., Attn: P. Steven Melman, +1 (408) 938-6478.
Via Regular Mail, Overnight Courier or Hand Delivery:
PDF Solutions, Inc., Attn: P. Steven Melman, 333 West San Carlos Street, Suite 700, San Jose, California 95110, USA.
Your withdrawal will be effective as of the date and time that PDF receives this Notice of
Withdrawal by any of the methods described above. While not a condition to your withdrawal, if you
submitted your Notice of Withdrawal by way of electronic delivery or facsimile, PDF also asks that
you make a copy for your own files and then please submit the original Notice of Withdrawal by any
of the methods described above. It is your responsibility to ensure that your withdrawal is
received by PDF by the deadline.
PDF must receive your election to withdraw before 9 p.m. U.S. Pacific Time on July 9, 2008, unless
the offer is extended, in which case this Notice of Withdrawal must be received before the extended
expiration of the offer.
You may confirm that your documents have been received by sending an email to the Offering
Administrator at tenderoffer@pdf.com. PDF intends to electronically confirm receipt of your
Notice of Withdrawal within three business days of its arrival. If you do not receive confirmation
of our receipt, it is your responsibility to ensure that PDF properly received your Notice of
Withdrawal.
If you have questions regarding the withdrawal of your election, please telephone P. Steven Melman
at +1 (408) 938-6445 or send an email to tenderoffer@pdf.com.
* * *
From: [Name]
To: PDF Solutions, Inc.
I previously received the Offer to Exchange dated June 10, 2008 (the offer), an Election
Form, the form of Restricted Stock Agreement (the Agreement), and the PDF Solutions, Inc. 2001
Stock Plan.
I signed and returned the Election Form, thereby electing to exchange all of my outstanding
eligible stock options listed in the Election Form for restricted stock rights. I now wish to
withdraw my tendered options from the offer. I understand that by signing this Notice of Withdrawal
and delivering it pursuant to the procedure described in Part III, Section 5 of the Offer to
Exchange and the instructions above, I will be withdrawing my election with respect to all of my
outstanding eligible options.
By withdrawing my election, I understand that I will not receive any restricted stock rights
for, and will continue to hold, all of my outstanding eligible options, which will continue to be
governed by the terms and conditions of the applicable existing stock
option
agreement(s) between
PDF Solutions, Inc. and me.
I understand that if I wish to change this withdrawal of my tendered options and once again
accept the offer for any options that I have withdrawn, I must submit a new signed Election Form
prior to the expiration of the offer.
By signing below, I hereby elect to withdraw from the Offer to Exchange dated June 10,
2008, subject to all of the terms and conditions set forth therein, and elect not to exchange any
of my outstanding eligible stock options for restricted stock rights.
I have completed and signed this Notice of Withdrawal exactly as my name appears on my
original Election Form.
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Participant Signature
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Date and Time |
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Participant Name Printed
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PDF Solutions, Inc. Office Location |
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Daytime Telephone Number
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Email Address |
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exv99wxayx1yxdy
f
Exhibit (a)(1)(D)
PDF SOLUTIONS, INC.
2001 STOCK PLAN
RESTRICTED STOCK AGREEMENT
This Restricted Stock Agreement (the Agreement) is made and entered into as of July
10, 2008 by and between you and PDF Solutions, Inc., a Delaware corporation (the Company), pursuant to the PDF Solutions, Inc. 2001 Stock Plan (the Plan). To
the extent any capitalized terms used in this Agreement are not defined, they shall have the
meaning ascribed to them in the Plan, which is attached to, and made a part of, this Agreement. In
the event of a conflict between the terms and provisions of the Plan and the terms and provisions
of this Agreement, the Plan terms and provisions shall prevail.
In consideration of the mutual agreements herein contained and intending to be legally bound
hereby, the parties agree as follows:
1. Stock Purchase Right. Pursuant to the Plan, the Company hereby grants to you, and
you hereby accept from the Company, a Stock Purchase Right consisting of the right to acquire
the total number of Shares Granted as specified for this
Agreement under the tab Grant Listing for your account at
www.benefitaccess.com, on the terms and conditions set forth herein and in the Plan.
2. Vesting of Stock Purchase Right. So long as your Service continues, the Stock
Purchase Right shall vest in accordance with the following schedule: [50%] [25%] [16.66%] [12.5%]
of the Shares subject to the Stock Purchase Right will vest on May 15, 2009 and [50%] [25%]
[16.66%] [12.5%] of the Shares subject to the
Stock Purchase Right will vest every six (6) months
thereafter. Notwithstanding the foregoing, upon a consummation of a Change in Control any unvested
portion of the Stock Purchase Right will fully vest.
3. Termination of Service. In the event of the termination of your Service for any
reason, the unvested portion of the Stock Purchase Right shall be immediately forfeited without
consideration.
4. Settlement of Stock Purchase Right. Shares shall be issued at the time and to the
extent that the Stock Purchase Right vests from time to time, provided that the Company shall have
no obligation to issue Shares pursuant to this Agreement unless and until you have satisfied any
applicable obligations pursuant to Section 5 below and such issuance otherwise complies with all
applicable laws, rules and regulations. Prior to the time the Stock Purchase Right is settled upon
vesting, you will have no rights other than those of a general creditor of the Company. The Stock
Purchase Right represents an unfunded and unsecured obligation of the Company.
5. Withholding Taxes. You agree to make arrangements satisfactory to the Company for
the satisfaction of any applicable tax or other obligations that arise in connection with the Stock
Purchase Right and any Shares issued pursuant thereto. Specifically, unless you are notified
otherwise by the Company, by accepting this Agreement, you authorize the Companys designated
broker to, on each vesting date, sell that portion of any Shares
that are issued upon vesting necessary to obtain sufficient proceeds to satisfy any applicable
tax, withholding or other liability (note that the full amount of the proceeds will be applied to
satisfy any applicable tax, withholding or other liability, even if it may exceed the minimum
amount required to satisfy such tax, withholding or other liability). Notwithstanding the
foregoing, any sale of your Shares must be made in compliance with all applicable laws, rules and
regulations and the Companys insider trading policies and no sales shall occur pursuant to this
provision or otherwise unless and until such laws, rules and regulations are satisfied. The
Company shall not be required to issue Shares pursuant to this Agreement unless and until the
obligations described herein are satisfied.
6. Tax and Legal Advice. You represent, warrant and acknowledge that the Company has
made no warranties or representations to you with respect to any applicable tax or legal
consequences of the transactions contemplated by this Agreement and you are in no manner relying on
the Company or the Companys representatives for an assessment of such tax or legal consequences.
YOU UNDERSTAND THAT THE TAX AND OTHER LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. YOU SHOULD
CONSULT YOUR OWN TAX OR LEGAL ADVISOR REGARDING THIS AGREEMENT, THIS STOCK PURCHASE RIGHT AND
SHARES TO BE ISSUED PURSUANT TO THIS STOCK PURCHASE RIGHT. YOU UNDERSTAND THAT THE COMPANY IS NOT
PROVIDING ANY TAX OR LEGAL ADVICE, NOR IS THE COMPANY MAKING ANY RECOMMENDATION REGARDING YOUR
ACCEPTANCE OF THIS GRANT. NOTHING STATED HEREIN IS INTENDED OR WRITTEN TO BE USED, AND CANNOT BE
USED, FOR THE PURPOSE OF AVOIDING TAXPAYER PENALTIES.
7. Non-Transferability of the Stock Purchase Right. The Stock Purchase Right shall
not be transferable other than by will or the laws of descent and distribution. The designation of
a beneficiary or entry into a will or similar arrangement does not constitute a transfer. The
terms of this Agreement shall be binding upon your executors, administrators, heirs, successors and
assigns.
8. Restriction on Transfer. Regardless of whether the transfer or issuance of the
Shares to be issued pursuant to this Stock Purchase Right have been registered under the Securities
Act or have been registered or qualified under the securities laws of any state, the Company may
impose additional restrictions upon the sale, pledge or other transfer of the Shares (including the
placement of appropriate legends on stock certificates, if any, and the issuance of stop-transfer
instructions to the Companys transfer agent) if, in the judgment of the Company and the Companys
counsel, such restrictions are necessary in order to achieve compliance with the provisions of the
Securities Act, the securities laws of any state, or any other law, including the laws of any other
country.
9. Representations, Warranties, Covenants, and Acknowledgments. You hereby agree
that, in the event the Company and the Companys counsel deem it necessary or advisable in the
exercise of their discretion, the transfer or issuance of the Shares issued pursuant to this Stock
Purchase Right may be conditioned upon you making certain representations, warranties, and
acknowledgments relating to compliance with applicable securities laws.
2
10. Compliance with Law. Depending on your country of residence, there may be
additional restrictions on this Stock Purchase Rights or Shares to be issued pursuant to this Stock
Purchase Right which are set forth in the attached Appendix A to this Restricted Stock Agreement.
Furthermore, you understand that the laws of the country in which you are working at the time of
grant or vesting of the Stock Purchase Right or at the subsequent sale of any Shares issued
pursuant to the Stock Purchase Right (including any rules or regulations governing securities,
foreign exchange, tax, labor or other matters), may subject you to additional procedural or
regulatory requirements that you are solely responsible for and must independently fulfill in
relation to the Stock Purchase Right or ownership or sale of Shares.
11. Voting and Other Rights. Subject to the terms of this Agreement, you shall not
have any voting rights or any other rights and privileges of a stockholder of the Company unless
and until Shares are issued upon vesting of this Stock Purchase Right.
12. Authorization to Release Necessary Personal Information. You hereby authorize and
direct your employer to collect, use and transfer in electronic or other form, any personal
information (the Data) regarding your employment, the nature and amount of your
compensation and the facts and conditions of your participation in the Plan (including, but not
limited to, your name, home address, telephone number, date of birth, social security number (or
any other social or national identification number), salary, nationality, job title, number of
Shares held and the details of all Awards or any other entitlement to Shares awarded, cancelled,
exercised, vested, unvested or outstanding) for the purpose of implementing, administering and
managing your participation in the Plan. You understand that the Data may be transferred to the
Company or any of its Parent, Subsidiaries or Affiliates, or to any third parties assisting in the
implementation, administration and management of the Plan, including any requisite transfer to a
broker or other third party assisting with the administration of this Stock Purchase Right under
the Plan or with whom Shares acquired pursuant to this Stock Purchase Right or cash from the sale
of such Shares may be deposited. You acknowledge that recipients of the Data may be located in
different countries, and those countries may have data privacy laws and protections different from
those in the country of your residence. Furthermore, you acknowledge and understand that the
transfer of the Data to the Company or any of its Parent, Subsidiaries or Affiliates, or to any
third parties is necessary for your participation in the Plan. You may at any time withdraw the
consents herein by contacting your local human resources representative in writing. You further
acknowledge that withdrawal of consent may affect your ability to realize benefits from this Stock
Purchase Right, and your ability to participate in the Plan.
3
13. No Entitlement or Claims for Compensation.
(a) Your rights, if any, in respect of or in connection with this Stock Purchase Right or any
other Award is derived solely from the discretionary decision of the Company to permit you to
participate in the Plan and to benefit from a discretionary Award. By accepting this Stock
Purchase Right, you expressly acknowledge that there is no obligation on the part of the Company to
continue the Plan and/or grant any additional Awards to you. This Stock Purchase Right is not
intended to be compensation of a continuing or recurring nature or part of your normal or expected
compensation, and in no way represents any portion of your salary, compensation or other
remuneration for purposes of pension benefits, severance, redundancy, resignation or any other
purpose.
(b) Neither the Plan nor this Stock Purchase Right or any other Award granted under the Plan
shall be deemed to give you a right to become or remain an Employee,
Consultant or Director of the Company, a Parent, a Subsidiary or an Affiliate. The Company, its Parents, Subsidiaries and
Affiliates, reserve the right to terminate your Service at any time, with or without cause, and for
any reason, subject to applicable laws, the Companys Articles of Incorporation and Bylaws and a
written employment agreement (if any), and you shall be deemed irrevocably to have waived any claim
to damages or specific performance for breach of contract or dismissal, compensation for loss of
office, tort or otherwise with respect to the Plan, this Stock Purchase Right or any outstanding
Award that is forfeited and/or is terminated by its terms or to any future Award.
14. Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient when delivered personally or sent by telegram or fax or forty-eight
(48) hours after being deposited in the mail, as certified or registered mail, with postage
prepaid, and addressed to the Company at its principal corporate offices and to you at the address
maintained for you in the Companys records.
15. Entire
Agreement; Enforcement of Rights. This Agreement, including Appendix A
hereto (which is attached to and is a part of this Agreement), together with the Plan, sets forth
the entire agreement and understanding of the parties relating to the subject matter herein and
therein and merges all prior discussions between the parties. Except as contemplated under the
Plan, no modification of or amendment to this Agreement, nor any waiver of any rights under this
Agreement, shall be effective unless in writing signed by the parties to this Agreement. The
failure by either party to enforce any rights under this Agreement shall not be construed as a
waiver of any rights of such party.
16. Governing Law. This Agreement and all acts and transactions pursuant hereto and
the rights and obligations of the parties hereto shall be governed, construed and interpreted in
accordance with the laws of the State of Delaware, without giving effect to principles of conflicts
of law.
4
17. Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, the parties agree to renegotiate such provision in good faith.
In the event that the parties cannot reach a mutually agreeable and enforceable replacement for
such provision, then (i) such provision shall be excluded
from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such
provision were so excluded and (iii) the balance of this Agreement shall be enforceable in
accordance with its terms.
18. Successors
and Assigns. The rights and benefits of this Agreement shall
inure to the benefit of, and be enforceable by, the Companys successors and assigns. The rights and
obligations of you under this Agreement may not be assigned without the prior written consent of
the Company.
19. Electronic Delivery. The Company may, in its sole discretion, decide to deliver
any documents related to this Stock Purchase Right under the Plan and participation in the Plan or
future Awards that may be granted under the Plan by electronic means or to request your consent to
participate in the Plan by electronic means. You hereby consent to receive such documents by
electronic delivery and, if requested, to agree to participate in the Plan through an on-line or
electronic system established and maintained by the Company or a third party designated by the
Company.
20. Language. If you have received this Agreement or any other document related to
the Plan translated into a language other than English and if the translated version is different
than the English version, the English version will control.
21. Acceptance of Agreement. You must expressly accept the terms and conditions of
your Stock Purchase Right as set forth in this Agreement by electronically accepting this Agreement
by December 31, 2008. If you do not accept this Agreement by December 31, 2008 in the manner
instructed by the Company or its designated broker/administrator, your Stock Purchase Right will be
forfeited.
* * * *
You acknowledge that by electronically accepting this Agreement, you agree to be bound by all terms
of this Agreement.
PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS
5
PDF SOLUTIONS, INC.
2001 STOCK PLAN
RESTRICTED STOCK AGREEMENT
APPENDIX A
This Appendix A includes additional specific terms that apply to you if you are resident in a
non-U.S. country. This Appendix A is part of the Restricted Stock Agreement and contains terms and
conditions material to participation in the Plan. Unless otherwise provided below, capitalized
terms used but not defined herein shall have the same meanings assigned to them in the Plan and the
Restricted Stock Agreement.
You understand and agree that the Company is neither responsible for any foreign exchange
fluctuations between your local currency and the U.S. Dollar that may affect the value of the
Companys Shares nor liable for any decrease in the value of the Shares.
Japan
If you are issued or transfer Shares with a value that exceeds ¥100,000,000, you must file a report
with the Ministry of Finance through the Bank of Japan within twenty (20) days of receiving the
Shares (provided, however, that if you acquire the Shares through a financial instruments firm in
Japan, this requirement will not apply).
In addition, if you are a resident of Japan and make or receive any cross-border payment of more
than ¥30,000,000 you must file a report with the Minister of Finance via the Bank of Japan
within ten (10) days.
Korea
Exchange control laws require Korean residents who realize US $500,000 or more from the sale of
Shares or the receipt of any dividends to repatriate the proceeds to Korea within eighteen (18)
months of the sale or the receipt of the dividends, as applicable.
Singapore
This offer of a Stock Purchase Right and the underlying Shares shall be made available only to an
employee of the Company or its Affiliates, in reliance of the prospectus exemption set out
in section 173(1)(f) the Securities and Futures Act (Chapter 289) of Singapore. In addition, you
agree, by your acceptance of this offer, not to sell any Shares within six (6) months of the date
of grant.
Please note that neither this Restricted Stock Agreement nor any other document or material in
connection with this offer of a Stock Purchase Right and the Shares has been or will be lodged,
registered or reviewed by any regulatory authority in Singapore.
You should not treat the contents of this document as advice relating to legal, taxation or
investment matters and are advised to exercise caution in relation to the offer and to consult your
own professional adviser(s) concerning the contents of this Restricted Stock Agreement.
Taiwan
The Plan is not registered in Taiwan with the Securities and Futures Bureau and is not subject to
the securities laws of Taiwan.
You may acquire and remit foreign currency (including proceeds from the sale of Shares) into Taiwan
up to US $5,000,000 per year. Remittance of funds for the purchase of Shares should be made
through an authorized foreign exchange bank.
exv99wxayx1yxey
Exhibit (a)(1)(E)
[FORM OF COMMUNICATION FROM P. STEVEN MELMAN TO ALL ELIGIBLE OPTION HOLDERS]
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From:
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P. Steven Melman |
Date:
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June 10, 2008 |
Subject:
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Announcement of PDF Stock Option Exchange Program |
We are pleased to announce that PDF has initiated a voluntary program in which our eligible
employees, consultants and directors are being offered the opportunity to exchange certain options
that are currently underwater for restricted stock rights, subject to certain restrictions.
The program begins today, June 10, 2008, and is scheduled to expire on July 9, 2008. The complete
terms and conditions of the program are described in a document called the Offer to Exchange,
which was filed earlier today with the Securities and Exchange Commission and attached to this
email.
All stock options that you hold with an exercise price per share that is equal to or greater than
U.S. $10.00 are eligible for the exchange.
To participate in our option exchange offer, you should review each of the following documents,
each of which is attached to this email:
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the Offer to Exchange; |
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a blank Election Form; |
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the form of Restricted Stock Agreement; and |
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the PDF Solutions, Inc. 2001 Stock Plan. |
You will be receiving a separate email shortly with your Election Form that includes the details of
your outstanding eligible stock options and the restricted stock rights that you would receive if
you elect to participate in the offer.
You may also obtain a copy of the Offer to Exchange and all related form documents on the internet
at www.sec.gov. If you need additional copies of any of the above documents, please email the
Offering Administrator at tenderoffer@pdf.com. Please review these materials carefully.
To participate, you must make your election before the expiration of the offer at 9 p.m. U.S.
Pacific Time on July 9, 2008.
Moreover, if you wish to withdraw from the exchange program after you have elected to exchange all
of your eligible options, you must submit to PDF the Notice of Withdrawal attached to this email in
accordance with the delivery requirements set forth in the Notice of Withdrawal prior to the
expiration of the offer at the time and date stated above.
Over the next few weeks, we will be conducting question and answer sessions for eligible
individuals at various times depending upon your location. In these meetings, I will assist you in
answering your questions. The sessions are not intended to provide a comprehensive overview of the
program in lieu of reading the offer materials. Shortly, you will be notified of the time and place
of these meetings. If you have any questions at any other time during the offer period, you may
email your questions to tenderoffer@pdf.com.
Finally, please note that participation in the option exchange program is VOLUNTARY. PDF makes no
recommendation about whether you should or should not elect to exchange your eligible options. You
must make your own decision regarding participation in the option exchange program. We recommend
that you to seek professional advice from your financial and tax advisors.
YOU WILL HAVE UNTIL 9 P.M. U.S. PACIFIC TIME ON JULY 9, 2008, TO ELECT TO PARTICIPATE IN THE
EXCHANGE OFFER.
Thank You,
P. Steven Melman
exv99wxayx1yxfy
Exhibit (a)(1)(F)
[EMAIL COMMUNICATION TO CERTAIN OFFICERS OF PDF SOLUTIONS, INC. DATED JUNE 10, 2008]
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To:
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Certain Officers of PDF Solutions, Inc. |
From:
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P. Steven Melman |
Date:
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June 10, 2008 |
Subject:
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Announcement of PDF Stock Option Exchange Program |
Internal Communication
In connection with the offer from PDF Solutions, Inc. to exchange certain outstanding stock options
which commenced today, June 10, 2008, the following documents are being sent to employees,
consultants and directors with eligible stock options: the Offer to Exchange, the Election Form,
the form of Restricted Stock Agreement, and the PDF Solutions, Inc. 2001 Stock Plan, each of which
is attached for your review. Also attached is a PowerPoint presentation regarding the exchange
program which we will make available
to individuals during question and answer meetings held between now and the close of the offer on
July 9, 2008.
The exchange program begins today, June 10, 2008, and ends at 9 p.m. U.S. Pacific Time on July 9,
2008.
WHAT WE WANT YOU TO DO
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Read carefully through all the attached materials |
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Address any questions to P. Steven Melman at +1 (408) 938-6445 or send an email to
tenderoffer@pdf.com |
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Encourage individuals to read their communication materials carefully |
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Remind individuals of their deadlines |
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Direct individuals to consult with their own financial advisor as to their decision to
participate in the exchange program |
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Understand your role, especially on your communication with individuals |
WHAT YOU CANNOT SAY OR DO
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You cannot advise individuals as to their participation in the exchange program |
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You cannot encourage or discourage individuals to exchange or not exchange their
eligible stock options |
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You cannot interpret any communication for individuals, simply repeat what is stated in
the documentation |
Please note that the tender offer will only be made through an Offer to Exchange which will be sent
to eligible employees, consultants and directors today and is also available at http://www.sec.gov.
Please review the material carefully and contact P. Steven Melman if you have any questions.
Thank you
P. Steven Melman
exv99wxayx1yxgy
Exhibit (a)(1)(G)
[FORM OF QUESTION AND ANSWER MEETING ANNOUNCEMENT]
To PDF Solutions, Inc. Optionholders Eligible to Participate in the Offer to Exchange
There
will be a meeting held on , 2008 to discuss the terms of the Offer to Exchange
relating to certain stock options and to answer any questions you may have. The meetings will
start at [and will be held in
]. [You may participate in the
meeting by using the following dial-in number
].
Thank you,
P. Steven Melman
exv99wxayx1yxhy
PDF Solutions, Inc.
Option Exchange Program
Exhibit (a)(1)(H)
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Agenda
Overview
Objectives
Eligibility
Who is Eligible?
What Options are Eligible?
What are Restricted Stock Rights?
How will the Exchange Work?
Example of an Exchange
Tax Implications
Key Dates
Next Steps
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Overview
PDF is offering to exchange eligible options held by
eligible individuals for restricted stock rights.
Restricted stock rights are rights to acquire shares of
PDF common stock which will be issued when the
restricted stock rights vest.
The program is VOLUNTARY - participation is not
required.
You may elect to participate by completing the Election
Form and returning it to Steve Melman electronically, by
fax, by mail, or in person.
Enrollment begins on June 10, 2008 and will end on
July 9, 2008.
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Objectives
To reduce the number of shares subject to outstanding
options and reduce the dilutive impact of such awards to
our stockholders.
To promote the interests of our stockholders by
incentivizing and retaining key employees while
reinforcing the equity component of our market-
competitive compensation program.
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Eligibility: Who is Eligible?
All individuals with eligible options who are
either employed by or rendering services
to the company or one of its subsidiaries.
Includes individuals on personal leave of
absence or medical, maternity, worker's
compensation, military, or other statutorily
protected leave.
Includes individuals who work outside of
the U.S.
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Eligibility: What Options are Eligible?
All unexercised (vested or unvested)
outstanding stock options with an exercise
price of $10.00 or more are eligible to be
exchanged for restricted stock rights
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What are Restricted Stock Rights?
Restricted stock rights are rights to receive shares of PDF common
stock at no cost to the participant.
Shares of PDF common stock will only be issued if and when the
restricted stock rights vest.
Restricted stock rights issued in the exchange will be 0% vested on
the date of grant.
The first vest date for all restricted stock rights issued in the
exchange will be May 15, 2009.
The length of the vesting schedule for your restricted stock rights
will depend on when you were granted the options that you turn
in pursuant to the exchange.
Restricted stock rights will fully vest upon a change of control of
the company.
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What are Restricted Stock Rights?
(continued)
Vesting Applicable to Restricted Stock Rights:
Only a whole number of restricted stock rights will vest in any period. Any fractional restricted
stock right that would otherwise vest will be carried over to the next vesting period.
Year During Which
Exchanged Options were Granted Vesting Schedule of
Restricted Stock Rights
2000 - 2003 50% on 5/15/2009
and 50% 6 months thereafter
2004 25% on 5/15/2009
And 25% every 6 months thereafter
2005 16.7% on 5/15/2009
and 16.66% every 6 months thereafter
2006 and later years 12.5% on 5/15/2009
and 12.5% every 6 months thereafter
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How Will the Exchange Work?
If you would like to participate in the exchange, you must
elect to cancel all of your unexercised outstanding stock
options with an exercise price of $10.00 or more.
The program is an "all or nothing" exchange.
You may not submit only a portion of an option.
If you submit any eligible options, you must submit all of your
eligible options.
For every 4.2 shares subject to eligible options that you
elect to cancel, you will receive 1 restricted stock right.
Fractional restricted stock rights will be rounded up.
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Example of an Exchange
Grant A Grant B Grant C Grant D
Options Granted 5,000 5,000 5,000 5,000
Outstanding Options 0 2,500 2,200 5,000
Exercise Price $10.25 $9.00 $10.00 $13.00
Exchange Ratio 4.2 shares : 1 Restricted Stock Right 4.2 shares : 1 Restricted Stock Right 4.2 shares : 1 Restricted Stock Right 4.2 shares : 1 Restricted Stock Right
Restricted Stock Rights Issued 0 0 524 (rounded from 523.8) 1,191 (rounded from 1,190.4)
Grant A: Ineligible because no options are outstanding.
Grant B: Ineligible because exercise price below threshold for eligibility.
Grant C: Eligible because some options are outstanding and exercise price is above
threshold for eligibility.
Grant D: Eligible because all options are outstanding and exercise price is above
threshold for eligibility.
?If elect to participate, total of 1,715 restricted stock rights will be granted, 2,500 options
retained.
?If do not elect to participate, 9,700 options retained, no restricted stock rights granted.
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Tax Implications
Generally, there will be no immediate tax consequences resulting
from an election to participate in the exchange.
Taxable income will generally be recognized as the restricted stock
rights vest and shares are issued.
PDF may have an employment and income tax withholding
obligation at the time restricted stock rights vest and shares are
issued.
By electing to participate in the exchange and accepting restricted
stock rights, each participant will have given PDF, or its designated
broker, the right to sell vested shares to satisfy any applicable
withholding obligations.
Note: The items above are generalities and PDF is not implying that such generalities are
applicable to all participants, especially those in international locations. Eligible
participants should read Questions 43 & 44 on Page 13, Section 14 of Part III and
Appendix B of the Offer to Exchange. Additionally, each eligible participant should
consult their own tax advisor before electing to participate in the exchange and to
ensure that any applicable estimated taxes and other taxes are paid on a timely
basis.
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Key Dates
June 10, 2008
Exchange program commences
July 9, 2008
Enrollment closes at 9 p.m. U.S. Pacific Time
July 10, 2008
Exchanged options will be cancelled
Restricted stock rights will be issued
December 31, 2008
Participants must have accepted their restricted stock agreement
or they will forfeit the agreement and all of the restricted stock
rights
May 15, 2009
Initial vest date for all restricted stock rights
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If you fail to make an election,
you will be deemed to have
opted out of the Program
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Next Steps
Carefully read the Offer to Exchange.
Read and understand the election form and other forms
and documents delivered to you with the Offer to
Exchange.
If you have any questions, contact Steve Melman at +1
(408) 938-6445 or send an email to
tenderoffer@pdf.com.
Consider any personal financial implications and consult
with your personal financial and tax advisor.
Decide whether to participate and complete and submit
the election form before 9 p.m. U.S. Pacific Time on
July 9, 2008.
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This presentation is only a summary and
does not supersede any information in
the Offer to Exchange and any
attachments to the Offer to Exchange
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exv99wxayx1yxiy
Exhibit (a)(1)(I)
[FORM OF CONFIRMATION OF RECEIPT OF ELECTION FORM]
Confirmation of Receipt of Election Form
This Confirmation of Receipt of Election Form is related to the offer from PDF Solutions, Inc. to
exchange certain outstanding stock options.
We have received your Election Form electing to ACCEPT the offer to exchange all eligible
stock options as indicated in your Election Form.
Please note that you may change your election(s) at any time before 9 p.m. U.S. Pacific Time on
July 9, 2008.
If you have any questions, please telephone P. Steven Melman at +1 (408) 938-6445 or send an email
to tenderoffer@pdf.com.
Thank you,
P. Steven Melman
exv99wxayx1yxjy
Exhibit (a)(1)(J)
[FORM OF CONFIRMATION OF RECEIPT OF NOTICE OF WITHDRAWAL]
Confirmation of Receipt of Notice of Withdrawal
This Confirmation of Receipt of Notice of Withdrawal is related to the offer from PDF Solutions,
Inc. to exchange certain outstanding stock options.
We have received your Notice of Withdrawal electing to REJECT the offer to exchange all
eligible options as indicated in your Notice of Withdrawal.
Please note that you may change your election(s) at any time before 9 p.m. U.S. Pacific Time on
July 9, 2008.
If you have any questions, please telephone P. Steven Melman at +1 (408) 938-6445 or send an email
to tenderoffer@pdf.com.
Thank you,
P. Steven Melman
exv99wxayx1yxky
Exhibit (a)(1)(K)
[FORM OF REMINDER OF EXPIRATION OF OPTION EXCHANGE OFFER]
Reminder Offer to Exchange Expiration Date is Approaching
This is to remind you that the offer made to eligible employees, consultants and directors to
exchange certain outstanding stock options that commenced on June 10, 2008 is scheduled to expire
at 9 p.m. U.S. Pacific Time on July 9, 2008.
We currently have no plans to extend the expiration date. If you wish to exchange any of your
eligible stock options, you must complete and sign your Election Form and submit it to us so that
we receive it before 9 p.m. U.S. Pacific Time on July 9, 2008.
ALL ELECTIONS MUST BE SUBMITTED BEFORE 9 P.M. U.S. PACIFIC TIME, ON JULY 9, 2008. THERE WILL BE NO
EXCEPTIONS UNLESS WE DECIDE TO EXTEND THIS DEADLINE FOR ALL ELIGIBLE EMPLOYEES, CONSULTANTS AND
DIRECTORS. IF YOU DO NOT SUBMIT A SIGNED ELECTION FORM, NONE OF YOUR ELIGIBLE OPTIONS WILL BE
EXCHANGED AND YOUR ELIGIBLE OPTIONS WILL REMAIN OUTSTANDING, SUBJECT TO THEIR CURRENT EXERCISE
PRICES AND TERMS.
If you have any questions, please telephone P. Steven Melman at +1 (408) 938-6445 or send an email
to tenderoffer@pdf.com.
Thank you,
P. Steven Melman
exv99wxayx1yxly
Exhibit (a)(1)(L)
[FORM OF CONFIRMATION OF PARTICIPATION IN OPTION EXCHANGE OFFER]
Confirmation of Participation in Option Exchange Offer
Our offer to eligible employees, consultants and directors to exchange certain outstanding stock
options that commenced on June 10, 2008 expired at 9 p.m. U.S. Pacific Time on July 9, 2008.
This message confirms that on July 10, 2008, we accepted for exchange and canceled all of your
eligible stock options that you tendered for exchange with your Election Form.
Upon the terms and conditions described in the Offer to Exchange and your Election Form, we granted to you restricted stock rights in replacement of your canceled stock options.
Shortly, we will deliver to you a Restricted Stock Agreement via the Citibank Global Markets, Inc.
website at www.benefitaccess.com (in the form previously provided to you, but with the blanks
filled in). You will be required to accept the agreement by December 31, 2008. If you do not
accept the agreement by December 31, 2008, you will forfeit the agreement and all of your
restricted stock rights.
If you have any questions, please telephone P. Steven Melman at +1 (408) 938-6445 or send an email
to tenderoffer@pdf.com.
Thank you,
P. Steven Melman
exv99wxdyx4y
Exhibit (d)(4)
APPENDIX A
SUB-PLAN TO THE
PDF SOLUTIONS, INC. 2001 STOCK PLAN
(FRANCE)
OCTOBER 23, 2006
This Sub-Plan to the PDF Solutions, Inc. 2001 Stock Plan (France) (the Sub-Plan) was created
under and pursuant to the PDF Solutions, Inc. 2001 Stock Plan as Amended October 23, 2006 and is
intended to govern stock-options granted to French-resident employees of the French Subsidiary
which are intended to qualify for preferred treatment under French tax and social security laws.
All other types of Awards shall remain governed by the terms of the Plan.
The Committee may grant Options pursuant to this Sub-Plan to any Employee. All Sections and
subsections of the Plan are incorporated herein and shall apply to Options granted pursuant to this
Sub-Plan, except that Sections 4(c), 8 and 10(b) are not incorporated herein and the following
Sections and subsections of the Plan shall be modified as set forth below.
SECTION 2. DEFINITIONS. For purposes of this Sub-Plan, the following terms shall have the meanings
set forth in this Section 2. Unless otherwise defined in this Sub-Plan, including this Section 2,
capitalized terms used in this Sub-Plan shall have the meaning set forth in the Plan:
Disability means total and permanent disability established on the basis of medical evidence and
corresponding to the ranking in the second or third category provided in article L.341-4 of the
French social security code (Code de la sécurité sociale).
Employee means an individual who is employed in a salaried position by the French Subsidiary, who
is a resident of France for tax purposes on the date of grant of an Option hereunder and who does
not own more than ten percent (10%) of the share capital of the Company on the date of grant of any
Option hereunder.
Fair Market Value means the market price of Shares, determined by the Committee as follows:
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(i) |
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If the Shares were traded on a stock exchange on the date in question, then the
Fair Market Value shall be equal to the last trading price reported by the applicable
composite transactions report for such date; |
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(ii) |
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If the Shares were traded over-the-counter on the date in question and were
classified as a national market issue, then the Fair Market Value shall be equal to the
last-trading price quoted by the NASDAQ Global Market system for such date; |
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(iii) |
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If the Shares were traded over-the-counter on the date in question but were
not classified as a national market issue, then the Fair Market Value shall be equal to
the mean between the last reported representative bid and asked prices quoted by the
NASDAQ Global Market system for such date; and |
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(iv) |
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If none of the foregoing provisions is applicable, then the Fair Market Value
shall be determined by the Committee in good faith applying a reasonable valuation
method as it deems appropriate, provided however that such valuation method shall
comply with the terms of article L.225-177 of the French Code de Commerce. |
Whenever possible, the determination of Fair Market Value by the Committee shall be based on the
prices reported in the Wall Street Journal. Such determination shall be conclusive and binding on
all persons.
French Subsidiary means the share capital or voting power of which is at least ten percent (10%)
owned, directly or indirectly, by the Company, and any other French Company in which the Company
may come to own at least ten percent (10%) of the share capital or voting power, directly or
indirectly.
Key Employee means an Employee who has been selected by the Committee to receive an Option under
the Plan.
Option means an option, granted in accordance with articles L.225-177 et seq. of the French Code
de Commerce, giving the Optionee the right to acquire one share of Common Stock at the Exercise
Price established by the Committee on the date of grant of such option.
SECTION 4. ELIGIBILITY.
The following paragraphs of this section shall be amended to read as follows:
(a) General Rules. Only Employees shall be eligible for designation as Key Employees by the
Committee.
(b) Incentive Stock Options. Employees shall not be eligible for the grant of Incentive Stock
Options.
SECTION 5. SHARES SUBJECT TO PLAN.
The following paragraph shall be added as paragraph (f) of this section:
(f) Repurchase of Shares. If Awards granted hereunder give the right to acquire or receive
existing Shares of Common Stock, the Company shall repurchase such Shares prior to the date on
which the relevant Options become exercisable.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
The following paragraphs of this section shall be amended to read as follows:
(c) Exercise Price. An Options Exercise Price shall be established by the Committee and set forth
in a Stock Option Agreement. The Exercise Price of an Option shall not be less than 100% of the
Fair Market Value of a Share on a date of Grant, provided however that if the Company is listed on
a regulated market (within the meaning of French law) on such date, the Exercise Price of an Option
shall also not be lower than (i) 80% of the average market price of a Share over the twenty (20)
market trading days preceding the date of Grant and (ii) in the case of Options to purchase
existing Shares, 80% of the average price paid by the Company to repurchase its own Shares.
(f) Transferability of Options. No Option shall be transferable by the Optionee other than by the
laws of descent and distribution. An Option may be exercised during the lifetime of the Optionee
only by the Optionee. In case of death of the Optionee, his or her heirs shall have six (6) months
to exercise the Options granted to the Optionee, subject to the terms of the applicable Stock
Option Agreement. No Option or interest therein may be assigned, pledged or hypothecated by the
Optionee during his/her lifetime, whether by operation of law or otherwise, or be made subject to
execution, attachment or similar process.
The following paragraph shall be added as paragraph (i) of this section:
(i) Prohibited Periods. If the Company is or becomes listed on a regulated market (within the
meaning of French law), no Option shall be granted hereunder during the following periods: (i) the
twenty (20) market trading days after the detaching of a share coupon giving entitlement to a
dividend or capital increase; (ii) the ten (10) market trading days both preceding and following
the date on which the consolidated accounts of the Company (or if consolidated accounts are not
drawn up, the annual accounts) are made public; and (iii) the period elapsing between the date on
which the corporate bodies of the Company are made aware of information which, if made public,
could have a significant impact
on the market price of the Shares of the Company, and the date which is ten (10) market trading
days after the date on which such information is made public.
SECTION 9. PROTECTION AGAINST DILUTION.
The following paragraph of this section shall be amended to read as follows:
(a) Adjustments. In the event of a subdivision of the outstanding Shares, 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 price of Shares, a combination or consolidation of the
outstanding Shares (by reclassification or otherwise) into a lesser number of Shares, a
recapitalization, reorganization, merger, liquidation, spin-off or a similar occurrence, the
Committee shall make such adjustments as it, in its reasonable discretion, deems appropriate in
order to prevent the dilution or enlargement of rights hereunder in one or more of:
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the number of Shares available for future Awards and the per person Share
limits under Section 5; |
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the number of Shares covered by each outstanding Award; or |
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(iii) |
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the Exercise Price under each outstanding Option; |
provided, however, that, if the Company implements a share capital amortization or reduction
inducing a cancellation of shares, a change in the allocation of profits, a free award of shares, a
share capital increase inducing an additional issue of shares through a capitalization of reserves,
profits or issuance premium, a distribution of reserves or an issue of Shares or instruments giving
access to the share capital for which existing stockholders benefit from a subscription right, the
Company shall, to the extent required under French law, take all measures necessary to protect the
interest of Optionees in accordance with the conditions set forth under article L.228-99 of the
French Code de Commerce and the Decree 67-236 of March 23, 1967, as modified by Decree 2005-112 of
February 10, 2005, so that (i) the exercise price of outstanding Options granted under this
Sub-Plan shall be adjusted in accordance with relevant articles of the Decree 67-236 of March 23,
1967 and (ii) the number of Shares subject to outstanding Options granted under this Sub-Plan shall
then be adjusted so that the sum of the exercise prices remains constant, provided, however, that
the adjusted number of Shares shall be rounded up to the nearest whole unit and that the exercise
price of Options to subscribe to newly issued Shares of the Company shall never be less than the
nominal value of such Shares.
The following paragraph shall be added as paragraph (c) to this section:
(c) Fractional Shares. Any adjustment of Shares pursuant to this Section 9 shall be rounded up to
the nearest whole number of Shares. Under no circumstances shall the Company be required to
authorize or issue fractional shares and no consideration shall be provided as a result of any
fractional shares not being issued or authorized.
SECTION 13. DURATION AND AMENDMENTS.
The following paragraphs of this section shall be amended to read as follows:
(a) Term of the Plan. The Plan, as set forth herein, shall become effective on the date of its
adoption by the Board. The Plan shall terminate on the date that is ten (10) years after its
adoption by the Board and may be terminated on any earlier date pursuant to Section 13(b). No
Options may be granted under this Sub-Plan on or after the date that is thirty-eight (38) months
following the date of approval of the Sub-Plan by the Board unless authorization is given by the
Board to do so. Such authorization may be granted for a further period of up to thirty-eight (38)
months.
(b) Right to Amend or Terminate the Plan. The Board may amend or terminate the Plan at any time
and for any reason. The termination of the Plan, or any amendment thereof, shall not affect any
Award previously granted under the Plan. No Awards shall be granted under the Plan after the
Plans termination. An amendment of the Plan shall be subject to the approval of the Companys
stockholders only to the extent required by applicable laws, regulations or rules.
Without limiting the generality of the foregoing, the Board shall be entitled to make such
amendments to this Sub-Plan and to the terms and conditions of any Options granted hereunder as are
necessary to ensure that such Options benefit from the most favorable tax and social security
treatment available under French law from the perspective of the Company and its Subsidiaries, as a
first priority, and the Participants, as a second priority.
The following Section shall be added to this Sub-Plan:
SECTION 14. NO ENTITLEMENTS.
A Participants rights, if any, in respect of or in connection with any Option is derived solely
from the discretionary decision of the Company to permit the individual to participate in this
Sub-Plan and to benefit from a discretionary Option. By accepting an Option under the Sub-Plan, a
Participant expressly acknowledges that there is no obligation on the part of the Company to
continue the Plan or the Sub-Plan and/or grant any additional Options. Any Option granted
hereunder is not intended to be compensation of a continuing or recurring nature, or part of a
Participants normal or expected compensation, and in no way represents any portion of a
Participants salary, compensation, or other remuneration for purposes of pension benefits,
severance, redundancy, resignation or any other purpose.
The Company and its Subsidiaries reserve the right to terminate the service of any person at any
time, and for any reason, subject to applicable laws, the Companys Articles of Incorporation and
Bylaws and a written employment agreement (if any), and such terminated person shall be deemed
irrevocably to have waived any claim to future vesting, damages or specific performance for breach
of contract or dismissal, compensation for loss of office, tort or otherwise with respect to the
Plan or any outstanding Option that is forfeited and/or is terminated by its terms or to any future
Option.
exv99wxdyx5y
Exhibit (d)(5)
GRANT NO.
PDF SOLUTIONS, INC.
2001 STOCK PLAN
STOCK OPTION AGREEMENT
(FRANCE)
PDF Solutions, Inc. (the Company), hereby grants an Option to purchase shares of its common
stock (the Shares) to the French resident Optionee named below. The terms and conditions of the
Option are set forth in this cover sheet, in the attachment and in the Companys 2001 Stock Plan
(the Plan), as amended by the Sub-Plan to the PDF Solutions, Inc. 2001 Stock Plan France (the
Sub-Plan).
Date of Option Grant:
, [YEAR]
Name of Optionee:
Optionees Identification Number:
Number of Shares Covered by Option:
Exercise Price per Share: $
Vesting Schedule:
Subject to all the terms of the attached Agreement, you shall vest as to fifty percent (50%)
of the total number of Shares covered by this Option, as shown above, on the one (1)-year
anniversary of the Date of Option Grant and you shall vest as to fifty percent (50%) of the total
number of Shares covered by this Option on the second (2nd)-year anniversary of the Date of Option
Grant. No additional Shares will vest after your Service has terminated for any reason.
Mandatory Holding Period:
The Shares subject to this Option may not be transferred, assigned or hypothecated in any
manner before the four (4)-year anniversary of the Date of Option Grant (the Holding Period),
except where such transfer does not lead to any liability of the Company and the Subsidiary in
terms of social security charges or in the event of a Change In Control, if the Company decides to
waive this Holding Period. Any shares issued prior to the expiration of the Holding Period may be
delivered with a legend to reflect the foregoing restrictions. Notwithstanding the foregoing, the
Optionee will not be required to hold Shares purchased pursuant to the exercise of the Option
beyond the third (3rd)-annual anniversary of the date the Option is exercised.
By signing this cover sheet, you agree to all of the terms and conditions described in the
attached Agreement and in the Plan and Sub-Plan, copies of which are also enclosed.
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Optionee: |
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(Signature)
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Company:
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PDF SOLUTIONS, INC. |
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By: |
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Keith Jones, Chief Financial Officer
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Attachment
PDF SOLUTIONS, INC.
2001 STOCK PLAN
STOCK OPTION AGREEMENT
(FRANCE)
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The Plan and
Other Agreements
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The text of the Plan (as amended by the
Sub-Plan) is incorporated in this Agreement by
reference. Certain capitalized terms used in
this Agreement are defined in the Plan, as
amended by the Sub-Plan. |
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This Agreement and the Plan (as amended by the
Sub-Plan) constitute the entire understanding
between you and the Company regarding this
Option. Any prior agreements, commitments or
negotiations concerning this Option are
superseded. |
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Preferential Tax Treatment
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This Option is intended to qualify for
preferential treatment under French tax and
social security laws. |
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Vesting & Exercisability
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This Option is only exercisable on or after the
fourth (4th)-annual anniversary of the Date of
Option Grant and before the Option expires and
then only with respect to the vested portion of
the Option. |
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This Option will vest according to the Vesting
Schedule on the attached cover sheet. |
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Term
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Your Option will expire in any event (except in
the case of your death) at the close of
business at Company headquarters on the day
before the one hundred fourteenth
(114th) monthly anniversary of the
Date of Option Grant, as shown on the cover
sheet. Your Option will expire earlier if your
Service terminates for any reason other than
your death, as described below. |
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Mandatory Holding Period
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The Shares you may acquire upon exercise of
this Option are subject to a mandatory Holding
Period, as defined in the attached cover sheet.
All Shares subject to this Option which you
may own at the time your Service terminates for
any reason other than your death or Disability
shall remain subject to the Holding Period
defined in the attached cover sheet. |
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Termination General
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If your Service terminates for any reason, other than for
death, Disability or Cause, as defined below, then: |
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The unvested portion of your Option, if any, will
expire immediately upon your termination date. |
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The vested portion of your Option, if any, will
expire at the close of business at Company headquarters on
the 90th day after your termination date; provided that, if
you would be prohibited from exercising the vested portion
of your Option during the 90 days following your
termination date because your Service terminates before the
fourth (4th)-annual anniversary of the Date of Option Grant
(see Vesting & Exercisability above), the vested portion of
your Option, if any, will expire on the 90th day after the
fourth (4th)-annual anniversary of the Date of Option
Grant. |
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Termination for
Cause
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If your Service is terminated for Cause, as determined by
the Board in its sole discretion, then you shall
immediately forfeit all rights to your Option and the
Option shall immediately expire. For purposes of this
Agreement, Cause shall mean the termination of your
Service due to your commission of any act of fraud,
embezzlement or dishonesty; any unauthorized use or
disclosure of confidential information or trade secrets of
the Company (or any Parent, Subsidiary or Affiliate); or
any other intentional misconduct adversely affecting the
business or affairs of the Company (or any Parent,
Subsidiary or Affiliate) in a material manner. This
definition shall not restrict in any way the Companys or
any Parents, Subsidiarys or Affiliates right to
discharge you for any other reason, nor shall this
definition be deemed to be inclusive of all the acts or
omissions which constitute cause for purposes other than
this Agreement. |
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Death
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If your Service terminates because of your death, then: |
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The unvested portion of your Option, if any, will
expire immediately upon your death. |
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The vested portion of your Option, if any, will
expire at the close of business at Company headquarters on
the date twelve (12) months after the date of death,
irrespective of the normal term of the Option except that,
in no event, shall the Option continue beyond the close of
business at Company headquarters on the tenth
(10th) annual anniversary of the Date of Option
Grant. Notwithstanding the foregoing, if your estate or
heirs would be prohibited from exercising the vested
portion of your Option during the twelve (12)-month period |
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following the date of death because the date of death
occurs before the fourth (4th)-annual anniversary of the
Date of Option Grant (see Vesting & Exercisability above),
the vested portion of your Option, if any, will expire on
the date twelve (12) months after the fourth (4th)-annual
anniversary of the Date of Option Grant. During this
period, your estate or heirs may exercise the vested
portion of your Option. |
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Disability
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If your Service terminates because of your Disability, then: |
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The unvested portion of your Option, if any, will
expire immediately upon your termination date. |
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The vested portion of your Option, if any, will
expire at the close of business at Company headquarters on
the date twelve (12) months after your termination date;
provided that, if you would be prohibited from exercising
the vested portion of your Option during the twelve (12)-month period following your termination date because your
Service terminates before the fourth (4th)-annual
anniversary of the Date of Option Grant (see Vesting &
Exercisability above), the vested portion of your Option,
if any, will expire on the date twelve (12) months after
the fourth (4th)-annual anniversary of the Date of Option
Grant. |
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Leaves of Absence
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For purposes of this Option, your Service does not
terminate when you go on a bona fide leave of absence that
was approved by the Company in writing, if the terms of the
leave provide for continued Service crediting, or when
continued Service crediting is required by applicable law.
However, your Service will be treated as terminating ninety
(90) days after you went on leave, unless your right to
return to active work is guaranteed by law or by a
contract. Your Service terminates in any event when the
approved leave ends unless you immediately return to active
work. |
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The Company determines which leaves count for this purpose,
and when your Service terminates for all purposes under the
Plan. |
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Notice of Exercise
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When you wish to exercise this
Option, you must notify the Company
by filing the proper Notice of
Exercise form at the address given
on the form. Your notice must
specify how many Shares you wish to
purchase. Your notice must also
specify how your Shares should be
registered (in your name only or in
your and your spouses names as
community property or as joint
tenants with right of
survivorship). The notice will be
effective when it is received by
the Company. |
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If someone else wants to exercise
this Option after your death, that
person must prove to the Companys
satisfaction that he or she is
entitled to do so. |
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Form of Payment
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When you submit your notice of
exercise, you must include payment
of the Exercise Price for the
Shares you are purchasing. Payment
may be made in one (or a
combination) of the following
forms: |
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Cash, your personal check,
a cashiers check or a money order. |
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Shares which have already
been owned by you for more than six
(6) months and which are
surrendered to the Company. The
Fair Market Value of the Shares,
determined as of the effective date
of the Option exercise, will be
applied to the Exercise Price. |
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To the extent a public
market for the Shares exists as
determined by the Company, by
delivery (on a form prescribed by
the Company) 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. |
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Withholding Taxes
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You will not be allowed to exercise
this Option unless you make
acceptable arrangements to pay any
withholding or other taxes that may
be due as a result of the Option
exercise or sale of Shares acquired
under this Option. |
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Restrictions on Exercise and
Resale
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By signing this Agreement, you
agree not to exercise this Option
or sell any Shares acquired under
this Option at a time when
applicable laws, regulations or
Company or underwriter trading
policies prohibit exercise, sale or
issuance of Shares. The Company
will not permit you to exercise
this Option if the issuance of
Shares at that time would violate
any law or regulation. The Company
shall have the right to designate
one or more periods of time, each
of which shall not exceed one
hundred eighty (180) days in
length, during which this Option
shall not be exercisable if the
Company determines (in its sole
discretion) that such limitation on
exercise could in any way |
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facilitate a lessening of any
restriction on transfer pursuant to
the Securities Act or any state
securities laws with respect to any
issuance of securities by the
Company, facilitate the
registration or qualification of
any securities by the Company under
the Securities Act or any state
securities laws, or facilitate the
perfection of any exemption from
the registration or qualification
requirements of the Securities Act
or any applicable state securities
laws for the issuance or transfer
of any securities. Such limitation
on exercise shall not alter the
vesting schedule set forth in this
Agreement other than to limit the
periods during which this Option
shall be exercisable. |
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If the sale of Shares under the
Plan is not registered under the
Securities Act, but an exemption is
available which requires an
investment or other representation,
you shall represent and agree at
the time of exercise that the
Shares being acquired upon exercise
of this Option are being acquired
for investment, and not with a view
to the sale or distribution
thereof, and shall make such other
representations as are deemed
necessary or appropriate by the
Company and its counsel. |
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Transfer of Option
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Prior to your death, only you may
exercise this Option. You cannot
transfer or assign this Option.
For instance, you may not sell this
Option or use it as security for a
loan. If you attempt to do any of
these things, this Option will
immediately become invalid. You
may, however, dispose of this
Option in your will. |
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Regardless of any marital property
settlement agreement, the Company
is not obligated to honor a notice
of exercise from your spouse, nor
is the Company obligated to
recognize your spouses interest in
your Option in any other way. |
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Retention Rights
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Your Option or this Agreement does
not give you the right to be
retained by the Company (or any
Parent or any Subsidiaries or
Affiliates) in any capacity. The
Company (or any Parent and any
Subsidiaries or Affiliates)
reserves the right to terminate
your Service at any time and for
any reason, subject to applicable
laws. By accepting this Option,
upon your termination of Service,
you shall be deemed irrevocably to
have waived any claim to future
vesting, damages or specific
performance for breach of contract
or dismissal, compensation for loss
of office, tort or otherwise with
respect to the Plan (as amended by
the Sub-Plan), this Option or any
other option that is forfeited
and/or is terminated by its terms
or to any future option. |
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Stockholder Rights
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You, or your estate or heirs, have
no rights as a stockholder of the
Company until a certificate for
your Options Shares has been
issued. No adjustments are made
for dividends or other rights if
the applicable record date occurs
before your stock |
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certificate is
issued, except as described in the
Plan. |
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Adjustments
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In the event of a stock split, a
stock dividend or a similar change
in the Company stock, the number of
Shares covered by this Option
(rounded up to the nearest whole
number) and the exercise price per
Share may be adjusted (and rounded
down to the nearest whole number)
pursuant to the Plan (as amended by
the Sub-Plan). Your Option shall
be subject to the terms of the
agreement of merger, liquidation or
reorganization in the event the
Company is subject to such
corporate activity. |
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Legends
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All certificates representing the
Shares issued upon exercise of this
Option shall, where applicable,
have endorsed thereon the following
legends: |
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THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY BE TRANSFERRED ONLY
IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND
THE STOCKHOLDER, A COPY OF WHICH IS
ON FILE WITH THE SECRETARY OF THE
COMPANY BY THE HOLDER OF RECORD OF
THE SHARES REPRESENTED BY THIS
CERTIFICATE. |
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Applicable Law
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This Agreement will be interpreted
and enforced under the laws of the
State of California. |
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French Securities Laws
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Note that neither the Plan nor the
Sub-Plan entails the issue of an
information memorandum receiving
the visa of the Autorité des
Marchés Financiers and the Plan and
the Sub-Plan have not been
authorized by the Autorité des
Marchés Financiers. You can only
participate in the Plan to your own
account in accordance with the
provisions of French Decree no.
2006-557 of May 16, 2006, such as
codified in Articles D.411-1 to
D.411-4 of the French Financial and
Monetary Code. The direct or
indirect diffusion to the public in
France of the financial instruments
acquired as a result of
participation in the Plan is
strictly limited and may only be
carried out in accordance with
Articles L.411-1, L.411-2, L.412-1
and L.621-8 to L.621-8-3 of the
French Financial and Monetary Code. |
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Data Protection
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Optionee acknowledges that the
Company, its Subsidiaries and its
Affiliates may process confidential
or sensitive personal data about
Optionee. Such data includes but is
not limited to appropriate personal
and financial data about Optionee.
Optionee hereby gives explicit
consent to the Company to process
any such personal data and/or
sensitive personal data. Optionee
also hereby gives explicit consent
to the Company to transfer any such
personal data and/or confidential
or sensitive personal data outside
the country in which Optionee is
employed, as well as to the
providers of benefits or
administration services to the
Company or employees, and Optionee
agrees to the processing,
disclosing and transmitting of such
information as is disclosed. The
legal person for whom such personal
data is intended is the Company (or
any of its Subsidiaries or
Affiliates). Optionee understands
that he/she has the right of access
and correction to his/her personal
data by making a request to the
Companys Secretary. Optionee
further understands that the
Company or a Subsidiary may report
information regarding this Option
to any tax authorities and other
governmental agencies as may be
required to comply with applicable
law. |
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No Entitlements
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Optionees rights, if any, in respect of or in connection
with this Option are derived solely from the discretionary
decision of the Company to permit the Optionee to
participate in the Plan (as amended by the Sub-Plan) and
to benefit from a discretionary Option. By accepting this
Option, Optionee expressly acknowledges that there is no
obligation on the part of the Company to continue the Plan
or the Sub-Plan and/or grant any additional options to
Optionee. This Option is not intended to be compensation
of a continuing or recurring nature, or part of a
Optionees normal or expected compensation, and in no way
represents any portion of Optionees salary, compensation,
or other remuneration for purposes of pension benefits,
severance, redundancy, resignation or any other purpose. |
By signing the cover sheet of this Agreement, you agree to all of the terms and
conditions described above and in the Plan, as amended by the Sub-Plan.