MICROSEMI CORP, S-3, 2000-04-14

MICROSEMI CORP
S-3, 2000-04-14
SEMICONDUCTORS & RELATED DEVICES

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As Filed with the Securities and Exchange Commission on April 14, 2000
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
MICROSEMI CORPORATION
(Exact name of registrant as specified in its charter)
--------------
Delaware 95-2110371
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

2830 South Fairview Street
Santa Ana, California 92704
Tel: (714) 979-8220
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------
David R. Sonksen,
Vice President--Finance, Chief Financial Officer, Secretary and Treasurer
Microsemi Corporation
2830 South Fairview Street
Santa Ana, California 92704
Tel: (714) 979-8220
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
<TABLE>
<S> <C>
Nick E. Yocca, Esq. J. Jay Herron, Esq.
Nicholas J. Yocca, Esq. Michael L. Hawkins, Esq.
Stradling, Yocca, Carlson & Rauth, P.C. O'Melveny & Myers LLP
660 Newport Center Drive, Suite 1600 610 Newport Center Drive, 17th Floor
Newport Beach, California 92660 Newport Beach, California 92660
</TABLE>

--------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the registration statement is declared effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] _______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE
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<CAPTION>
===============================================================================================================
Proposed Proposed
Amounts maximum maximum Amount of
Title of class of to be offering price aggregate registration
securities to be registered registered(1) per share(2) offering price(2) fee(2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.20.................. 2,553,000 shares $25.4688 $65,021,718 $17,165.73
===============================================================================================================
</TABLE>
(1) Includes 333,000 shares subject to the underwriters' over-allotment option.
(2) The offering price could not be determined at the time of filing this
registration statement and the maximum offering price was estimated solely
for the purpose of calculating the amount of the registration fee payable
to the Securities and Exchange Commission (the "Commission"), as determined
in accordance with Rule 457(c), on the basis of the average of the high
($28.50) and low ($22.4375) prices as reported by the Nasdaq National
Market for the Common Stock on April 14, 2000.

--------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
===============================================================================
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. We may not sell these securities until +
+the registration statement is effective. This prospectus is not an offer to +
+sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 14, 2000

2,220,000 Shares

[LOGO OF MICROSEMI]

Common Stock

-----------

We are selling 2,000,000 shares of our common stock. Additionally, the
selling stockholders named in this prospectus are selling 220,000 shares. We
will not receive any proceeds from the sale of shares by the selling
stockholders.

Our common stock is listed on the Nasdaq National Market under the symbol
"MSCC." The last reported sale price of our common stock on April 13, 2000 was
$28.25 per share.

-----------

Investing in our common stock involves risks.
See "Risk Factors" beginning on page 4.

-----------

<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price........................................... $ $
Underwriting discount........................................... $ $
Proceeds, before expenses, to Microsemi Corporation ............ $ $
Proceeds, before expenses, to the selling stockholders ......... $ $
</TABLE>

The underwriters named in this prospectus may purchase up to an additional
333,000 shares of common stock from us, not the selling stockholders, under
certain circumstances. The underwriters expect to deliver the shares to
purchasers on or about , 2000.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

-----------

A.G. Edwards & Sons, Inc.

CIBC World Markets

Needham & Company, Inc.

Prospectus dated May , 2000
<PAGE>

[GRAPHIC: Picture of a boy standing inside a circular translucent
plastic model of our logo, holding in his right hand a
mock-up of a mobile communication device.]

enable color enable color enable color
protect heartbeats protect heartbeats
amplify sound amplify sound amplify
extend battery life extend battery life
hearing improve hearing improve
MMSM(TM) MMSM(TM) MMSM(TM) MMSM(TM) MMSM(TM)
communicate in space communicate in
[Line of text obscured by the graphic described above]
class d class d class d class d
mobile phone mobile phone mobile
SCSI SCSI SCSI SCSI SCSI
RangeMAX(TM) RangeMAX(TM) RangeMAX(TM)
mobile wireless mobile wireless
AudioMAX(TM) AudioMAX(TM) AudioMAX(TM)
broadband broadband broadband
[Three lines of text obscured by the graphic described above]
connect business connect business
power computing power computing
semi.com www.Microsemi.com www.Micro
Powermite(TM) Powermite(TM) Powermite(TM)

<PAGE>

Solutions for mobile connectivity
power
management
LCD Backlight Drivers
Class D Audio
Pentium Switchers [Graphic: A mock up of a mobile wireless communication
Low Drop Out device beside two electronic components]
Regulators
SCSI Terminators

APPLICATIONS [LOGO]
Palm Top Computers
Notebooks/Desktops
Hearing Aid Solutions

transient
suppression
ESD Protection
Lightning Suppression
Low Cap High Speed [Graphic: electronic component]
Modular Solutions

APPLICATIONS
Mobile Phones [Graphic [Graphic: [Graphic: Chest
USB Port Protection Handheld notebook x-ray picture
Gigabit Ethernet Phone] computer] of human with
Cable Modems implanted heart
Fiber Optic Repeaters pacer]

mobile computers/ medical
connectivity peripherals

<PAGE>

[Graphic: RF
A mock up of a microwave
mobile wireless and opto
communication device]

Solutions for InGaP Power Amplifiers
mobile connectivity
SiGe Gain Blocks
RF Power Transistors

APPLICATIONS
[LOGO] Mobile Phones/Radios
Base Stations
Cable Modems
Wireless LAN

power
conditioning
Diodes and Rectifiers
Zeners and Regulators
Transistors and SCRs
MOSFETs and IGBTs

[Graphics:
electronic
component]

APPLICATIONS
Mobile Phones
[Graphic: [Graphic [Graphic: [Graphic Battery Charges
Man Looking View of Person, Astronaut Power Supplies
at PBX cockpit wearing a on space Fiber Optic Repeaters
monitor] instruments safety suit, walk in Satellites
at night] welding] Earth orbit]

tele- military industrial space
communication aerospace commercial satellite

<PAGE>

TABLE OF CONTENTS

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Page
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Prospectus Summary.................................................... 1
Risk Factors.......................................................... 4
Use of Proceeds....................................................... 14
Price Range of Common Stock and Dividend Policy....................... 15
Capitalization........................................................ 16
Selected Consolidated Financial Data.................................. 17
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 18
Business.............................................................. 23
Management............................................................ 32
Principal and Selling Stockholders.................................... 35
Description of Capital Stock.......................................... 37
Underwriting.......................................................... 38
Certain United States Federal Tax Consequences to Non-U.S. Holders of
Common Stock......................................................... 40
Legal Matters......................................................... 43
Experts............................................................... 43
Where You Can Find More Information................................... 43
Index to Consolidated Financial Statements............................ F-1
</TABLE>

In this prospectus, unless the context otherwise requires, the terms "we,"
"us," "our," "the company," "the Company" and "Microsemi" refer to Microsemi
Corporation and its majority-owned subsidiaries. Our "fiscal year" refers to a
fifty-two or fifty-three week period ending on or about September 30 of each
year.

You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. Our website is located at www.microsemi.com. Information
on the website is not part of this prospectus. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information provided by this prospectus is accurate as of any
date other than the date on the front of this prospectus.

Microsemi(R), RangeMAX(R), AudioMAX(R), Powermite(R), Powermite Squared(R),
Powermite Two(R), Powermite II(R), LinFinity(TM), LMI(R), LOCAP(R),
THINKEY(TM), SHELFET(TM), TVSARRAY(TM), PWRPAK(TM), BUSMAX(TM), ULTRAMAX(TM),
MMSM(TM) and THE INFINITE POWER OF INNOVATION(R) are some of our trademarks.
Other marks used herein are the property of their respective owners, which
includes us in some instances.
<PAGE>

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering, including "risk factors" and our consolidated financial statements
and related notes, included elsewhere in this prospectus and incorporated by
reference. This summary highlights selected information from this prospectus
and does not contain all of the information that may be important to you.

MICROSEMI

We are a leading designer, manufacturer and marketer of analog, mixed-signal
and discrete semiconductors. Our semiconductors manage and regulate power,
protect against transient voltage spikes and transmit, receive and amplify
signals. Our products include individual components as well as complete circuit
solutions that enhance our customers' end products by providing battery
optimization, reducing size or protecting circuits. Our commercial products are
used in dynamic high growth mobile connectivity applications, including mobile
phones and handheld Internet devices, and broadband communications applications
such as base stations, wireless LAN, cable and fiber optic systems. These
high growth opportunities have emerged from our ongoing capabilities in
designing and manufacturing semiconductors for military, satellite and medical
applications. Our diverse customer base includes Motorola, Lockheed Martin,
Seagate, Mitsubishi, Guidant, Samsung, Medtronic, Boeing, Palm, Dell and
Compaq.

Industry

We serve several end markets of the semiconductor industry. These end
markets include battery-operated products, communications and Internet
infrastructure, and military and aerospace. Battery-operated products include
portable digital assistants (PDAs), mobile phones, portable or implantable
medical equipment, hearing aids, notebook computers and wireless web tablets.
These products demand semiconductor solutions that extend battery life, operate
at high speed and provide small size, high reliability and complex power
functions. Communications and Internet infrastructure includes networking,
fiber optic communications and base stations that require high speed and high
bandwidth products.

The major drivers for these markets include:

. Growth in wireless Internet connectivity and wireless broadband systems
(W-CDMA, IMT-2000, CMDA2000);

. Growth in sales of mobile phones;

. Growth in consumer demand for highly sophisticated multipurpose handheld
devices;

. New and emerging wireless or battery-operated applications; and

. The convergence of voice, video, and data transmission.

Our Solutions

We offer leading products combining innovative semiconductor design, process
and product packaging solutions that are optimized for a given application
utilizing our system engineering expertise. Many of our customers produce or
develop products in mobile connectivity, communication infrastructure and
computers/peripherals. We first developed our technology and expertise for
military and aerospace, satellite, communications and implantable medical
applications. We have created innovative product solutions that we believe
increase efficiency and play time, reduce component size, enable high speeds,
lower costs, provide high reliability and robustness, reduce power consumption
or offer other increased functionality relative to competing products in the
marketplace today.

1
<PAGE>

We categorize our product solutions into four general groups:

. Power Management. Our power management semiconductors are used to route,
control and manage power efficiently as it is delivered to subsystems.
Our devices typically will perform a circuit function in place of
alternatives that use multiple components.

. RF/Microwave and Opto Electronic. Our RF/microwave and opto electronic
semiconductors are used to assist the transmission or reception of
wired, wireless, fiber optic and RF signals. Our devices are used in
both wired and wireless systems, which typically operate at frequencies
greater than 150MHz, usually at 500 to 900MHz for land mobile radio, 1.7
to 1.9GHz for digital PCS, 2.4 to 2.5GHz for BlueTooth-enabled
technology, 5.2 to 5.7GHz for wireless LAN, and from 28 to 31GHz for
LMDS.

. Transient Protection. Our transient protection semiconductors are
designed to protect sensitive integrated circuits from all types of
transient threats, ranging from electrostatic discharge to induced
lightning. Our voltage-clamping devices quickly absorb large amounts of
energy for short periods of time.

. Power Conditioning. Our power conditioning semiconductors are used in
the rectification and switching of raw electrical power. Our diodes,
zeners, transistors and MOSFET's are used to condition raw AC or DC
power for use by power management devices.

Our Strategy

Our goal is to expand our leading position as a supplier of technologies for
the high growth wireless, handheld mobile connectivity, medical and fiber optic
markets. Our strategy has the following key elements:

. Provide system-engineered product solutions;

. Leverage and enhance expertise in innovative package technologies;

. Pursue strategic technology acquisitions and alliances;

. Develop new process technologies for high growth markets; and

. Leverage internal and external manufacturing capabilities.

Microsemi was incorporated in Delaware on September 27, 1960. Our principal
executive office is located at 2830 South Fairview Street, Santa Ana,
California 92704, and our telephone number is (714) 979-8220. Our website is
located at www.microsemi.com. Information on the website is not part of this
prospectus.

The Offering

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<S> <C>
Common stock offered by us........................ 2,000,000 shares

Common stock offered by the selling stockholders.. 220,000 shares

Common stock to be outstanding after the
offering......................................... 13,453,193 shares(1)

Use of proceeds................................... Repayment of bank debt and general corporate
purposes. See "Use of Proceeds."

Nasdaq National Market symbol..................... MSCC
</TABLE>
- --------
(1) The information above assumes that the underwriters do not exercise the
option that we have granted to them to purchase additional shares in the
offering and is based on the shares outstanding as of March 31, 2000. It
excludes 1,397,524 shares of common stock subject to outstanding options
with a weighted average exercise price of $14.01 per share and 344,912
shares of common stock presently available for future grants under our 1987
Stock Plan, as amended.

2
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Summary Consolidated Financial Data
(in thousands, except per share data)

<TABLE>
<CAPTION>
Three Months
Fiscal Years Ended Ended (1)
-------------------------------------- ---------------------
September 28, September 27, October 3, January 3, January 2,
1997 1998 1999 1999 2000
------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales............... $163,234 $164,710 $185,081 $39,417 $54,588
Gross profit............ 45,960 47,285 40,870 10,861 13,568
Income from operations.. 22,519 20,459 5,089 4,113 2,403
Net income.............. 11,051 11,322 1,499 2,280 966

Earnings per share:
Basic................. $ 1.30 $ 1.05 $ 0.13 $ 0.20 $ 0.09
Diluted............... $ 1.03 $ 0.98 $ 0.13 $ 0.20 $ 0.09

Shares used in per share
calculations:
Basic................. 8,493 10,735 11,131 11,408 10,920
Diluted............... 11,901 11,956 11,244 11,523 11,027
</TABLE>

<TABLE>
<CAPTION>
January 2, 2000
------------------------
Actual As Adjusted (2)
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<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.............................. $ 7,712 $21,605
Working capital........................................ 43,856 57,749
Total assets........................................... 177,797 191,690
Total debt, including current portion.................. 54,043 15,043
Stockholders' equity................................... 83,410 136,303
</TABLE>
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(1) The three months ended January 3, 1999 comprised 14 weeks, and the three
months ended January 2, 2000 comprised 13 weeks.
(2) As adjusted to give effect to our sale of 2,000,000 shares of common stock
in this offering at an assumed public offering price of $28.25 per share
and our use of the estimated net proceeds. See "Use of Proceeds" and
"Capitalization."

3
<PAGE>

RISK FACTORS

Before you invest in our common stock, you should carefully consider the
risks described below. You should also refer to the other information included
in this prospectus and the information incorporated in this prospectus by
reference before you decide to invest in our common stock.

Downturns in the highly cyclical semiconductor industry would adversely affect
our operating results and the value of our business.

The semiconductor industry is highly cyclical, and the value of our business
may decline during the "down" portion of these cycles. During recent years, we,
as well as many others in our industry, experienced significant declines in the
pricing of, as well as demand for, our products and lower facilities
utilization. Although markets for semiconductors have improved, they may stop
improving or experience renewed, possibly more severe and prolonged, downturns
in the future. The markets for our products depend on continued demand in the
mobile connectivity, telecommunications, computers/peripherals, military and
aerospace, space/satellite, industrial/commercial and medical markets, and
these end-markets may experience changes in demand that could adversely affect
our operating results and financial condition.

The semiconductor business is highly competitive and increased competition
could reduce the value of an investment in our company.

The semiconductor industry, including the areas in which we do business, is
highly competitive. We expect intensified competition from existing competitors
and new entrants. Competition is based on price, product performance, product
availability, quality, reliability and customer service. Even in strong
markets, pricing pressures may emerge. For instance, competitors may attempt to
gain a greater market share by lowering prices. The market for commercial
products is characterized by declining selling prices. We anticipate that our
average selling prices will continue to decrease in future periods, although
the timing and amount of these decreases cannot be predicted with any
certainty. The pricing pressure in the semiconductor industry in recent years
was due primarily to the Asian currency crisis, industry-wide excess
manufacturing capacity and weak economic growth outside the United States. We
compete in various markets with companies of various sizes, many of which are
larger and have greater financial and other resources than we have, and thus
may be better able to pursue acquisition candidates and to withstand adverse
economic or market conditions. In addition, companies not currently in direct
competition with us may introduce competing products in the future. We have
numerous competitors. Some of our current major competitors are Motorola, Inc.,
Dallas Semiconductor Corporation, General Semiconductor, Inc., National
Semiconductor Corporation, Texas Instruments, Inc., Philips Electronics, ON
Semiconductor, L.L.C., Fairchild Semiconductor Corporation, Micrel
Incorporated, International Rectifier Corporation, Semtech Corporation, Linear
Technology Corp., Alpha Industries, Inc., Diodes, Inc., Vishay Intertechnology,
Inc. and its subsidiary Siliconix Incorporated. Some of our competitors in
developing markets are Triquint Semiconductor, Inc., Mitel Corporation, RF
Micro Devices, Inc., Conexant Systems, Inc., Anadigics, Inc. and Alpha
Industries, Inc. We may not be able to compete successfully in the future or
competitive pressures may harm our financial condition or our operating
results.

New technologies could result in the development of competing products and a
decrease in demand for our products.

Our failure to develop new technologies or to react to changes in existing
technologies could materially delay our development of new products, which
could result in product obsolescence, decreased revenues and/or

4
<PAGE>

a loss of our market share to competitors. Rapidly changing technologies and
industry standards, along with frequent new product introductions, characterize
much of the semiconductor industry. Our financial performance depends on our
ability to design, develop, manufacture, assemble, test, market and support new
products and enhancements on a timely and cost-effective basis. A fundamental
shift in technologies in our product markets could have a material adverse
effect on our competitive position within the industry.

Failure to protect our proprietary technologies or maintain the right to use
certain technologies may negatively affect our ability to compete.

We rely heavily on our proprietary technologies. Our future success and
competitive position may depend in part upon our ability to obtain or maintain
protection of certain proprietary technologies used in our principal products.
We generally do not have, nor do we generally intend to apply for, patent
protection on any aspect of our technology. Our reliance upon protection of
some of our technology as "trade secrets" will not necessarily protect us from
the use by other persons of our technology, or their use of technology that is
similar or superior to that which is embodied in our trade secrets. Others may
be able to independently duplicate or exceed our technology in whole or in
part. We cannot assure you that we will be able to maintain the confidentiality
of our technology, dissemination of which could have a material adverse effect
on our business. In addition, litigation may be necessary to determine the
scope and validity of our proprietary rights. In instances in which we hold any
patents or patent licenses, any patents held by us may be challenged,
invalidated or circumvented, or the rights granted under any patents may not
provide us competitive advantages. Patents often provide only narrow protection
and require public disclosure of information that may otherwise be subject to
trade secret protection. Also patents expire and are not renewable. Obtaining
or protecting our proprietary rights may require us to defend claims of
intellectual property infringement by our competitors. While we are not
currently engaged as a defendant in intellectual property litigation that we
believe will have a material adverse effect, we could become subject to
lawsuits in which it is alleged that we have infringed upon the intellectual
property rights of others.

If any such infringements exist, arise or are claimed in the future, we may
be exposed to substantial liability for damages and may need to obtain licenses
from the patent owners, discontinue or change our processes or products or
expend significant resources to develop or acquire non-infringing technologies.
We cannot assure you that we would be successful in such efforts or that such
licenses would be available under reasonable terms. Our failure to develop or
acquire non-infringing technologies or to obtain licenses on acceptable terms
or the occurrence of related litigation itself could have a material adverse
effect on our operating results and financial condition.

Our future business could be adversely affected by delays in our development of
compound semiconductor technology.

We are developing process technology to manufacture compound semiconductors
such as gallium arsenide (GaAs), indium gallium phosphide (InGaP), silicon
germanium (SiGe), indium gallium arsenide phosphide (InGaAsP) and silicon
carbide (SiC) primarily to manufacture power amplifiers and certain other
components. We are pursuing this development effort with a third party foundry.
We cannot guarantee that our efforts will result in commercially successful
products. Certain of our competitors are already offering this capability and
our customers may purchase their requirements for these products from our
competitors. The third party foundries that we use may delay or fail to deliver
to us technology and products. Our business and prospects could be materially
and adversely affected by our failure to develop this technology.

Future compound semiconductor products may not successfully compete with
silicon-based products.

Our choices of technologies for development and future implementation may
not reflect future market demand. The production of GaAs, InGaP, SiGe, InGaAsP
or SiC integrated circuits is more costly than the production of silicon
circuits, and we believe it will continue in the future to be more costly. The
costs differ

5
<PAGE>

because of higher costs of raw materials, lower production yields and higher
unit costs associated with lower production volumes. Silicon semiconductor
technologies are widely used process technologies for integrated circuits, and
these technologies continue to improve in performance. As a result, we must
offer products that provide vastly superior performance to that of silicon for
specific applications in order for them to be competitive with silicon
products. If we do not offer products that provide sufficiently superior
performance to offset the cost differential and otherwise successfully compete
with silicon-based products, our operating results may be materially and
adversely affected. In addition, other alternatives exist and are being
developed, and may have superior performance or lower cost.

We may not be able to develop new products to satisfy changes in demand.

We cannot assure you that we will successfully identify new product
opportunities and develop and bring products to market in a timely and cost-
effective manner, or that products or technologies developed by others will not
render our products or technologies obsolete or noncompetitive. In addition, to
remain competitive, we must continue to reduce package sizes, improve
manufacturing yields and expand our sales. We may not be able to accomplish
these goals.

We must commit resources to product production prior to receipt of purchase
commitments and could lose some or all of the associated investment.

We sell products primarily pursuant to purchase orders for current delivery,
rather than pursuant to long-term supply contracts. Many of these purchase
orders may be revised or canceled without penalty. As a result, we must commit
resources to the production of products without any advance purchase
commitments from customers. Our inability to sell products after we devote
significant resources to them could have a material adverse effect on our
business, financial condition and results of operations.

Variability of our manufacturing yields may affect our gross margins.

Our manufacturing yields vary significantly among products, depending on the
complexity of a particular integrated circuit's design and our experience in
manufacturing that type of integrated circuit. We have in the past experienced
difficulties in achieving planned yields, which have adversely affected our
gross margins.

The fabrication of integrated circuits is a highly complex and precise
process. Problems in the fabrication process can cause a substantial percentage
of wafers to be rejected or numerous integrated circuits on each wafer to be
nonfunctional, thereby reducing yields. These difficulties include:

. defects in masks, which are used to transfer circuit patterns onto our
wafers;

. impurities in the materials used;

. contamination of the manufacturing environment; and

. equipment failure.

Because a large portion of our costs of manufacturing are relatively fixed,
and average selling prices for our products tend to decline over time, it is
critical for us to improve the number of shippable integrated circuits per
wafer and increase the production volume of wafers in order to maintain and
improve our results of operations. Yield decreases can result in substantially
higher unit costs, which could materially and adversely affect our operating
results and have done so in the past. Moreover, our process technology has
primarily used standard silicon semiconductor manufacturing equipment, and
production yields of compound integrated circuits have been relatively low
compared with silicon integrated circuit devices. We cannot assure you that we
will be able to continue to improve yields in the future or that we will not
suffer periodic yield problems, particularly during the early production of new
products or introduction of new process technologies. In either case, our
results of operations could be materially and adversely affected.

6
<PAGE>

Our inventories may become obsolete.

The life cycles of some of our products depend heavily upon the life cycles
of the end products into which our products are designed. We estimate that
current life cycles for cellular and PCS telephone handsets, and in turn our
cellular and PCS products, are approximately 12 to 24 months. Products with
short life cycles require us to manage closely our production and inventory
levels. Inventory may also become obsolete because of adverse changes in end-
market demand. For instance, in fiscal year 1999, we recorded a charge of $6.0
million for obsolete inventory. We may in the future be adversely affected by
obsolete or excess inventories which may result from unanticipated changes in
the estimated total demand for our products or the estimated life cycles of the
end products into which our products are designed.

Our international operations and sales expose us to material risks.

Sales to customers for delivery outside of the United States represented
approximately 22%, 23% and 35% of net sales for fiscal 1997, 1998 and 1999,
respectively. We expect revenues from foreign markets to continue to represent
a significant portion of total revenues. We maintain facilities or contract
with entities in Thailand, the Philippines, Taiwan, Ireland, Hong Kong, India,
Mexico and China. There are risks inherent in doing business internationally,
including:

. changes in, or impositions of, legislative or regulatory requirements,
including tax laws in the United States and in the countries in which we
manufacture or sell our products;

. trade restrictions;

. transportation delays;

. work stoppages;

. economic and political instability;

. changes in import/export regulations, tariffs and freight rates;

. difficulties in collecting receivables and enforcing contracts
generally; and

. currency exchange rate fluctuations.

In addition, the laws of certain foreign countries may not protect our
products or intellectual property rights to the same extent as do U.S. laws.
Therefore, the risk of piracy of our technology and products may be greater in
these foreign countries. Although we have not experienced any material adverse
effect on our operating results as a result of these and other factors, we
cannot assure you that such factors will not have a material adverse effect on
our financial condition and operating results in the future.

Delays in beginning production at new facilities, implementing new production
techniques or resolving problems associated with technical equipment
malfunctions could adversely affect our manufacturing efficiencies.

Our manufacturing efficiency will be an important factor in our future
profitability, and we cannot assure you that we will be able to maintain or
increase our manufacturing efficiency. Our manufacturing processes are highly
complex, require advanced and costly equipment and are continually being
modified in an effort to improve yields and product performance. We have from
time to time experienced difficulty in beginning production at new facilities
or in effecting transitions to new manufacturing processes. As a consequence,
we have experienced delays in product deliveries and reduced yields. We may
experience manufacturing problems in achieving acceptable yields or experience
product delivery delays in the future as a result of, among other things,
capacity constraints, construction delays, upgrading or expanding existing
facilities or changing our process technologies, any of which could result in a
loss of future revenues. Our operating results also could be adversely affected
by the increase in fixed costs and operating expenses related to increases in
production capacity if revenues do not increase proportionately.

7
<PAGE>

Interruptions, delays or cost increases affecting our materials, parts,
equipment or subcontractors may impair our competitive position.

Our manufacturing operations depend upon obtaining adequate supplies of
materials, parts and equipment, including silicon, mold compounds and
leadframes, on a timely basis from third parties. Our results of operations
could be adversely affected if we are unable to obtain adequate supplies of
materials, parts and equipment in a timely manner or if the costs of materials,
parts or equipment increase significantly. From time to time, suppliers may
extend lead times, limit supplies or increase prices due to capacity
constraints or other factors. Although we generally use materials, parts and
equipment available from multiple suppliers, we have a limited number of
suppliers for some materials, parts and equipment. While we believe that
alternate suppliers for these materials, parts and equipment are available, an
interruption could materially impair our operations.

Some of our products are assembled and tested by third-party subcontractors.
We do not have any long-term agreements with these subcontractors. As a result,
we may not have assured control over our product delivery schedules or product
quality. Due to the amount of time typically required to qualify assemblers and
testers, we could experience delays in the shipment of our products if we are
forced to find alternative third parties to assemble or test them. Any product
delivery delays in the future could have a material adverse effect on our
operating results and financial condition. Our operations and ability to
satisfy customer obligations could be adversely affected if our relationships
with these subcontractors were disrupted or terminated.

We depend on third party subcontractors in Asia for assembly and packaging
of a portion of our products. The packaging of our products is performed by a
limited group of subcontractors and some of the raw materials included in our
products are obtained from a limited group of suppliers. Although we seek to
reduce our dependence on our sole and limited source suppliers, disruption or
termination of any of these sources could occur and such disruptions or
terminations could harm our business and operating results. In the event that
any of our subcontractors were to experience financial, operational, production
or quality assurance difficulties resulting in a reduction or interruption in
supply to us, our operating results would suffer until alternate
subcontractors, if any, became available.

Our fixed costs may reduce operating results if our sales fall below
expectations.

Our expense levels are based, in part, on our expectations as to future
sales. Many of our expenses, particularly those relating to our capital
equipment and manufacturing overhead, are relatively fixed. We may be unable to
reduce spending quickly enough to compensate for reductions in sales.
Accordingly, shortfalls in sales may materially and adversely affect our
operating results.

Our reliance on government contracts for a portion of our sales could have a
material adverse effect on our results of operations.

Some of our sales in fiscal year 1999 were derived from customers whose
principal sales were to the United States Government. If we experience
significant reductions or delays in procurements of our products by the United
States Government or terminations of government contracts or subcontracts, our
operating results could be materially and adversely affected. Generally, the
United States Government and its contractors and subcontractors may terminate
their contracts with us for cause or for convenience. We have in the past
experienced terminations of government contracts. Certain contracts are also
subject to price renegotiation in accordance with U.S. Government procurement
provisions. We cannot guarantee that we will not experience terminations or
renegotiations of government contracts in the future. A portion of our sales
are to military and aerospace markets, which are subject to the uncertainties
of governmental appropriations and national defense policies and priorities.
These sales are derived from direct and indirect business with the U.S.
Department of Defense, or DOD, and other U.S. government agencies. Since fiscal
year 1990, we have experienced declining defense-related sales, primarily as a
result of contract award delays and reduced military program funding.
Furthermore, on August 22, 1994, the DOD adopted acquisition reform.
Thereafter, the policy has been to utilize best commercial practices instead of
mandatory use of military standard parts. Military-related business has
declined as a percentage of net sales since fiscal year 1990.

8
<PAGE>

There may be unanticipated costs associated with increasing our capacity.

We anticipate that any future growth of our business will require increased
manufacturing capacity. We expect to convert a portion of our existing silicon
device manufacturing capacity to compound semiconductor production capability.
Expansion activities such as these are subject to a number of risks, including:

. unavailability or late delivery of the advanced, and often customized,
equipment used in the production of our products;

. delays in bringing new production equipment on-line;

. delays in supplying products to our existing customers; and

. unforeseen environmental or engineering problems relating to existing or
new facilities.

These and other risks may affect the ultimate cost and timing of our present
expansion or any future expansion of our capacity.

We may fail to attract or retain the qualified technical, sales, marketing and
managerial personnel required to operate our business successfully.

Our future success depends, in part, upon our ability to attract and retain
highly qualified technical, sales, marketing and managerial personnel.
Personnel with the necessary expertise are scarce and competition for personnel
with these skills is intense. Also, attrition in personnel can result from,
among other things, changes related to acquisitions, as well as retirement or
disability. We may not be able to retain existing key technical, sales,
marketing and managerial employees or be successful in attracting, assimilating
or retaining other highly qualified technical, sales, marketing and managerial
personnel in the future. If we are unable to retain existing key employees or
are unsuccessful in attracting new highly qualified employees, our business,
financial condition and results of operations could be materially and adversely
affected.

Failure to manage our expansion effectively could adversely affect our ability
to increase our revenues and improve our earnings.

Our ability to successfully offer our products in the semiconductor market
requires effective planning and management processes. We continue to increase
the scope of our operations and have increased our headcount. Our past growth,
and our expected future growth, may place a significant strain on our
management systems and resources, including our financial and managerial
controls, reporting systems and procedures. In addition, we will need to
continue to train and manage our workforce worldwide.

We may engage in future acquisitions that dilute the ownership interests of our
stockholders, cause us to incur debt and assume contingent liabilities.

As part of our business strategy, we expect to review acquisition prospects
that would complement our current product offerings, enhance our design
capability or offer other growth opportunities. While we have no current
agreements and no active negotiations underway with respect to any
acquisitions, we may acquire businesses, products or technologies in the
future. In the event of future acquisitions, we could:

. use a significant portion of our available cash, including the cash
proceeds remaining from this offering;

. issue equity securities, which would dilute current stockholders'
percentage ownership;

. incur substantial debt;

. incur or assume contingent liabilities, known or unknown;

9
<PAGE>

. incur amortization expenses related to goodwill or other intangibles;
and

. incur large, immediate accounting write-offs.

Such actions by us could harm our operating results and/or the price of our
common stock.

We have acquired and may continue to acquire other companies and may be unable
successfully to integrate such companies with our operations.

During fiscal years 1998, 1999 and 2000, we acquired six businesses or
companies, and we acquired additional product lines and assets. We may continue
to expand and diversify our operations with additional acquisitions. If we are
unsuccessful in integrating these companies or product lines with our
operations, or if integration is more difficult than anticipated, we may
experience disruptions that could have a material adverse effect on our
business, financial condition and results of operations. Some of the risks that
may affect our ability to integrate or realize any anticipated benefits from
companies we acquire include those associated with:

. unexpected losses of key employees or customers of the acquired company;

. conforming the acquired company's standards, processes, procedures and
controls with our operations;

. coordinating our new product and process development;

. hiring additional management and other critical personnel;

. increasing the scope, geographic diversity and complexity of our
operations;

. difficulties in consolidating facilities and transferring processes and
know-how;

. other difficulties in the assimilation of acquired operations,
technologies or products;

. diversion of management's attention from other business concerns; and

. adverse effects on existing business relationships with customers.

You will be relying on the judgment of our management regarding our use of a
portion of our proceeds.

We will use approximately $39 million of the net proceeds of this offering
to repay outstanding debt. We have not designated any specific uses for the
balance of the net proceeds from this offering. We expect to use the balance of
the net proceeds for general corporate purposes, including working capital and
potential acquisitions. Consequently, our management will have significant
flexibility in applying the net proceeds of this offering and will have the
ability to change the application of the proceeds of this offering.

Our products may be found to be defective, product liability claims may be
asserted against us and we may not have sufficient liability insurance.

One or more of our products may be found to be defective after we have
already shipped the products in volume, requiring a product replacement or
recall. We may also be subject to product returns that could impose substantial
costs and have a material and adverse effect on our business, financial
condition and results of operations. Our aerospace (including aircraft),
military, medical and satellite businesses in particular expose us to potential
liability risks that are inherent in the manufacturing and marketing of high
reliability electronic components for critical applications.

We may be subject to product liability claims with respect to our products.
Our product liability insurance coverage may be insufficient to pay all such
claims. Product liability insurance may become too costly for us or may become
unavailable to us in the future. We may not have sufficient resources to
satisfy any product liability claims not covered by our insurance.

10
<PAGE>

Environmental liabilities could adversely impact our financial position.

Federal, state and local laws and regulations impose various restrictions
and controls on the discharge of materials, chemicals and gases used in our
semiconductor manufacturing processes. In addition, under some laws and
regulations, we could be held financially responsible for remedial measures if
our properties are contaminated or if we send waste to a landfill or recycling
facility that becomes contaminated, even if we did not cause the contamination.
Also, we may be subject to common law claims if we release substances that
damage or harm third parties. Further, future changes in environmental laws or
regulations may require additional investments in capital equipment or the
implementation of additional compliance programs in the future. Any failure to
comply with environmental laws or regulations could subject us to serious
liabilities and could have a material adverse effect on our operating results
and financial condition.

In the conduct of our manufacturing operations we have handled and do handle
materials that are considered hazardous, toxic or volatile under federal, state
and local laws. The risk of accidental release of such materials cannot be
completely eliminated. In addition, we operate or own facilities located on or
near real property that was formerly owned and operated by others. These
properties were used in ways that involved such hazardous materials.
Contaminants may migrate from or within or through property. These risks may
give rise to claims. Where third parties are responsible for contamination, the
third parties may not have funds, or make funds available when needed, to pay
remediation costs imposed under environmental laws and regulations.

In Broomfield, Colorado, we have an agreement with prior owners of our
property concerning clean-up costs associated with TCE and other contaminants
present in the soil and groundwater. We have agreed to pay 10% and they have
agreed to pay 90% of these costs. They have also agreed to indemnify us from
claims by third parties. We are not yet able to predict a possible range of the
total costs that may be incurred in connection with this property.

Some of our facilities are located near major earthquake fault lines.

Our corporate headquarters, two of our major operating facilities, and
certain other critical business operations are located near major earthquake
fault lines. We could be materially and adversely affected in the event of a
major earthquake. Although we maintain earthquake insurance, the insurance
coverage may be insufficient, and in the future our insurance coverage may be
limited or discontinued.

Delaware law and our charter documents contain provisions that could discourage
or prevent a potential takeover of our company that might otherwise result in
our stockholders receiving a premium over the market price for their shares.

Provisions of Delaware law and our certificate of incorporation and bylaws
could make more difficult the acquisition of our company by means of a tender
offer, a proxy contest, or otherwise, and the removal of incumbent officers and
directors. These provisions include:

. Section 203 of the Delaware General Corporation Law, which prohibits a
merger with a 15%-or-greater stockholder, such as a party that has
completed a successful tender offer, until three years after that party
became a 15%-or-greater stockholder; and

. the authorization in the certificate of incorporation of undesignated
preferred stock, which could be issued without stockholder approval in a
manner designed to prevent or discourage a takeover.

The volatility of our stock price could affect your investment in our stock and
our future financial position.

The market price of our stock has fluctuated widely. Between November 11,
1998 and November 23, 1999 our common stock price dropped from approximately
$13.75 to $6.25 per share. Between November 23, 1999

11
<PAGE>

and March 13, 2000, the price of our common stock rose from approximately $6.25
to $51.00 per share. At the close of business on April 13, 2000, the price of
our common stock was $28.25 per share. The current market price of our common
stock may not be indicative of future market prices, and we may not be able to
sustain or increase the value of your investment in our common stock.

Declines in the market price of our stock would adversely affect our ability
to retain personnel with higher-priced stock incentives, to acquire businesses
or assets in exchange for stock and/or to conduct future financing activities
with the sale of stock.

We may not make the sales that are indicated by our order backlog and our
backlog number may become less meaningful.

Lead times for the release of purchase orders depend upon the scheduling
practices of individual customers, and delivery times of new or non-standard
products can be affected by scheduling factors and other manufacturing
considerations. The rate of booking new orders can vary significantly from
month to month. Customers frequently change their delivery schedules or cancel
orders. For these various reasons, our order backlog may not be an indication
of future sales.

As the percentage of our business represented by space/satellite and
military products declines, we anticipate that backlog will become less
meaningful. Our space/satellite business was characterized by long lead times;
however our other end markets tend to place orders with short lead times.
Prospective investors should not place undue reliance on our backlog numbers or
changes in backlog numbers. We determine backlog based on firm orders which are
scheduled for delivery within 12 months.

There may be some potential effects of system outages.

Risks are presented by electrical or telecommunications outages, computer
hacking or other general system failure. To try to manage our operations
efficiently and effectively, we rely heavily on our internal information and
communications systems and on systems or support services from third parties.
Any of these are subject to failure. For instance, we believe that our Y2K
project teams identified all of our material Y2K issues in the course of our
assessments, and we believe that no material Y2K failures will be uncovered in
the future. However, given the pervasiveness and the complexity of the issues,
both internal and external, problems may exist or arise. System-wide or local
failures that affect our information processing could have material adverse
effects on our business, financial condition, results of operations and cash
flows. In addition, insurance coverage for the risks described above may be
unavailable.

There may be potential U.S. tax effects on foreign purchasers of common stock.

Each prospective purchaser should consult a tax advisor with respect to
current and possible future tax consequences of acquiring, holding and
disposing of common stock as well as any tax consequences that may arise under
the laws of the U.S., any state in the U.S., or of any municipality or other
local taxing jurisdiction. In addition, if you are not a citizen or resident of
the U.S., or a corporation or partnership created in or organized under the
laws of the U.S., or any political subdivision thereof, then you should consult
your tax advisor about U.S. federal income and estate taxes, as well as
foreign, state and local tax consequences that may be relevant to you in light
of your personal circumstances.

Special note regarding forward looking statements.

Some of the statements in this prospectus or incorporated by reference are
forward-looking, including, without limitation, the statements under the
captions "Prospectus Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business." You
can identify these statements by the use of words like "may," "will," "could,"
"should," "project," "believe," "anticipate," "expect," "plan," "estimate,"
"forecast," "potential," "intend," "continue" and variations of

12
<PAGE>

these words or comparable words. In addition, all of the non-historical
information herein is forward-looking. Forward-looking statements do not
guarantee future performance and involve risks and uncertainties. Actual
results may differ substantially from the results that the forward-looking
statements suggest for various reasons, including those discussed under "Risk
Factors." These forward-looking statements are made only as of the date of this
prospectus. We do not undertake to update or revise the forward-looking
statements, whether as a result of new information, future events or otherwise.

The forward-looking statements included in this prospectus are based on,
among other items, current assumptions that we will be able to meet our current
operating cash and debt service requirements, that we will be able to
successfully resolve disputes and other business matters as anticipated, that
competitive conditions within the semiconductor, integrated circuit and custom
diode assembly industries will not affect us materially or adversely, that we
will retain existing key personnel, that our forecasts will reasonably
anticipate market demand for our products, and that there will be no other
material adverse change in our operations or business. Other factors that could
cause results to vary materially from current expectations are discussed
elsewhere in this prospectus. Assumptions relating to the foregoing involve
judgments that are difficult to make and future circumstances that are
difficult to predict accurately or correctly. Forecasting and other management
decisions are subjective in many respects and thus susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impact of which may cause us to alter our forecasts, which
may in turn affect our results. Readers are cautioned against giving undue
weight to any of our forward-looking statements.

13
<PAGE>

USE OF PROCEEDS

Our net proceeds from this offering will be approximately $52.9 million,
based on an estimated public offering price of $28.25 per share and after
deducting the estimated underwriting discount and offering expenses. If the
underwriters exercise their over-allotment option in full, our net proceeds are
estimated to be $61.8 million. We will not receive any of the proceeds from the
sale of shares by the selling stockholders.

We anticipate using the net proceeds to us from this offering to:

. repay all of the indebtedness outstanding under our bank credit
agreement, approximately $39 million; and

. provide funds for general corporate purposes, including capital
expenditures and possible acquisitions.

Our bank credit agreement requires us to use a portion of our net proceeds
from this offering to repay all of our indebtedness under this agreement. In
any event, we must repay our indebtedness under this agreement in full by March
2003. After repayment, the revolving portion of our bank credit agreement would
continue to be available for our use. Indebtedness under our bank credit
agreement accrues interest at variable rates. At January 2, 2000, the weighted
average interest rate on our bank credit agreement borrowings was 8.09%.
Amounts borrowed from the bank within the past twelve months were used to
acquire LinFinity Microelectronics, Microsemi Microwave Products and Micro
WaveSys.

We currently have no agreements and are not in active negotiations with
respect to any future acquisitions. Until we use the net proceeds as described
above, we intend to invest the net proceeds in short-term government securities
or other investment grade interest-bearing obligations.

14
<PAGE>

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Our common stock is traded on the Nasdaq National Market under the symbol "
MSCC. " The following table sets forth the high and low closing prices at which
our common stock has traded, as reported on the Nasdaq National Market.

<TABLE>
<CAPTION>
Price Range
------------------
High Low
-------- ---------
<S> <C> <C>
Fiscal Year Ended September 27, 1998
1st Quarter................................................ $17 3/4 $13 7/8
2nd Quarter................................................ 22 15 1/2
3rd Quarter................................................ 16 1/2 9 15/16
4th Quarter................................................ 11 1/2 6 5/8

Fiscal Year Ended October 3, 1999
1st Quarter................................................ $12 7/8 $ 7 3/8
2nd Quarter................................................ 12 3/4 7
3rd Quarter................................................ 9 7/8 7 1/4
4th Quarter................................................ 10 1/4 7 1/16

Fiscal Year Ending October 1, 2000
1st Quarter................................................ $ 8 7/8 $ 6 11/16
2nd Quarter................................................ 48 8 7/16
3rd Quarter (through April 13, 2000)....................... 34 1/16 26 3/4
</TABLE>

On April 13, 2000, the last reported sale price of the common stock on the
Nasdaq National Market was $28.25 per share. There were approximately 465
record holders of our common stock as of October 3, 1999.

We have not paid dividends in the last five years and have no current plans
to do so.

15
<PAGE>

CAPITALIZATION

The following table sets forth our unaudited cash and cash equivalents and
capitalization as of January 2, 2000, as adjusted to give effect to our sale
and issuance of 2,000,000 shares of common stock in this offering at an assumed
price of $28.25 per share and application of our net proceeds from the sale.
You should read this table in conjunction with "Selected Consolidated Financial
Data," "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and our consolidated financial statements, all of which are
included elsewhere in this prospectus.

<TABLE>
<CAPTION>
January 2, 2000
------------------
As
Actual Adjusted
-------- --------
(in thousands)
<S> <C> <C>
Cash and cash equivalents.................................. $ 7,712 $ 21,605
======== ========
Total debt, including current portion...................... $ 54,043 $ 15,043
-------- --------
Stockholders' equity:
Common stock, $0.20 par value; authorized 20,000,000
shares; 10,920,000 shares issued, actual; 12,920,000
shares issued, as adjusted ............................. 2,184 2,584
Capital in excess of par value of common stock .......... 46,695 99,188
Retained earnings........................................ 35,527 35,527
Accumulated other comprehensive loss..................... (996) (996)
-------- --------
Total stockholders' equity................................. 83,410 136,303
-------- --------
Total capitalization....................................... $137,453 $151,346
======== ========
</TABLE>

16
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)

You should read the following selected consolidated financial data along
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and our consolidated financial statements and the related notes,
each of which is included in this prospectus. We derived the income statement
data for the three years in the period ended October 3, 1999 and the balance
sheet data as of September 27, 1998 and October 3, 1999 from our consolidated
financial statements, which have been audited by PricewaterhouseCoopers LLP,
independent accountants, and are included in this prospectus. We derived the
income statement data for the two years in the period ended September 29, 1996
and the balance sheet data as of September 30, 1995, September 29, 1996 and
September 28, 1997 from our audited consolidated financial statements which are
not included in this prospectus. We derived the income statement data for the
three months ended January 3, 1999 and January 2, 2000 and the balance sheet
data as of January 3, 1999 and January 2, 2000 from our unaudited consolidated
financial statements, which are included in this prospectus. In the opinion of
our management, the unaudited financial information includes all adjustments,
consisting of only normal recurring adjustments, considered necessary for a
fair presentation of such information. Our results of operations for the three-
month period ended January 2, 2000 are not necessarily indicative of the
results that we may achieve for the full fiscal year.

<TABLE>
<CAPTION>
Fiscal Years Ended Three Months Ended
------------------------------------------------------------------ ---------------------
September 30, September 29, September 28, September 27, October 3, January 3, January 2,
1995 1996 1997 1998 1999 1999 2000
------------- ------------- ------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales............... $133,881 $157,435 $163,234 $164,710 $185,081 $ 39,417 $ 54,588
Cost of sales........... 97,331 114,300 117,274 117,425 144,211 28,556 41,020
-------- -------- -------- -------- -------- -------- --------
Gross profit........... 36,550 43,135 45,960 47,285 40,870 10,861 13,568
-------- -------- -------- -------- -------- -------- --------
Operating expenses:
Selling................ 7,864 9,027 9,226 10,939 14,010 3,131 4,244
General and
administrative........ 12,352 13,916 12,833 13,839 14,424 2,984 4,182
Amortization of
goodwill and
intangible assets..... 63 221 221 516 1,395 285 394
Research and
development........... 755 1,020 1,161 1,532 4,002 348 2,345
Acquired in-process
research and
development........... -- -- -- -- 1,950 -- --
-------- -------- -------- -------- -------- -------- --------
Total operating
expenses............... 21,034 24,184 23,441 26,826 35,781 6,748 11,165
-------- -------- -------- -------- -------- -------- --------
Income from operations.. 15,516 18,951 22,519 20,459 5,089 4,113 2,403
-------- -------- -------- -------- -------- -------- --------
Other income (expenses):
Interest expense....... (5,022) (4,440) (3,684) (2,148) (3,112) (552) (1,048)
Other.................. (234) (545) (329) (50) (36) 116 87
-------- -------- -------- -------- -------- -------- --------
Total other (expenses).. (5,256) (4,985) (4,013) (2,198) (3,148) (436) (961)
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes.................. 10,260 13,966 18,506 18,261 1,941 3,677 1,442
Provision for income
taxes.................. 4,207 5,866 7,455 6,939 442 1,397 476
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 6,053 $ 8,100 $ 11,051 $ 11,322 $ 1,499 $ 2,280 $ 966
======== ======== ======== ======== ======== ======== ========
Earnings per share:
Basic.................. $ 0.79 $ 1.03 $ 1.30 $ 1.05 $ 0.13 $ 0.20 $ 0.09
Diluted................ $ 0.64 $ 0.80 $ 1.03 $ 0.98 $ 0.13 $ 0.20 $ 0.09
Shares used in per share
calculation:
Basic.................. 7,659 7,828 8,493 10,735 11,131 11,408 10,920
Diluted................ 11,606 11,772 11,901 11,956 11,244 11,523 11,027

<CAPTION>
September 30, September 29, September 28, September 27, October 3, January 3, January 2,
1995 1996 1997 1998 1999 1999 2000
------------- ------------- ------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 3,965 $ 4,059 $ 6,145 $ 9,610 $ 7,624 $ 7,364 $ 7,712
Working capital......... 45,714 49,556 55,813 57,063 43,050 54,677 43,856
Total assets............ 103,534 113,014 135,194 145,088 181,601 143,993 177,797
Long-term debt.......... 48,398 46,420 47,621 18,667 31,381 17,778 29,605
Stockholders' equity.... 21,110 29,408 41,909 87,017 82,444 86,521 83,410
</TABLE>

17
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

We were incorporated in 1960 and operated as a supplier of high reliability
discrete semiconductor products to the military and aerospace markets. In the
mid-1980's, we began to apply these capabilities to supply high reliability
products to the implantable medical market. In 1987, we raised $40 million
through the issuance of convertible debentures to fund internal growth and
acquisitions in these markets. In recent years, we have made acquisitions and
established alliances to enter the mobile connectivity and communications
markets.

In April 1999, we completed the acquisition of LinFinity Microelectronics,
Inc., or LinFinity, a supplier of analog and mixed signal ICs for power
management applications. In June 1999, we completed the acquisition of L3 Narda
Microwave Semiconductor, a supplier of varactor tuning diodes which serves
communications products OEMs. We now call this business Microsemi Microwave
Products, or MMP. In February 2000, we completed the acquisition of the HBT
Business Products Group of Infinesse, which facilitates our entry into the
mobile handset power amplifier business. We call this business Micro WaveSys.

Our sales are derived principally from sales of our semiconductor products
to electronic systems OEMs. In fiscal year 1999, sales to our eighty largest
customers accounted for 70% of our total revenues, and no single customer
represented more than 6% of our total sales.

We sell our products, through our direct sales force, manufacturers'
representatives and distributors, to our domestic and international customers.
We recognize revenues at the time of shipment. The evaluation and qualification
cycle prior to the initial sale for our military, space and medical products
may span up to a year or more, while the sales cycle for our other products is
usually considerably shorter. Sales to customers for delivery outside the
United States represented approximately 22%, 23% and 35% of net sales for
fiscal years 1997, 1998 and 1999, respectively. We expect revenues from foreign
markets to continue to represent a significant portion of total revenues. We
maintain facilities in or contract with significant operations in Thailand, the
Philippines, Taiwan, Ireland, Hong Kong, India, Mexico and China.

Our cost of sales consists of purchased products, materials, salaries and
related expenses for manufacturing personnel, manufacturing overhead and
warranty expense. We outsource a portion of our assembly and testing
operations, and we conduct wafer fabrication, engineering, quality assurance,
test and assembly at our domestic plants.

Our gross profit margins vary among our product families. Our gross margins
are generally lower for low cost commodity products. Our overall gross margins
have fluctuated from period to period as a result of shifts in product mix, the
introduction of new products, decreases in average selling prices and our
ability to reduce product costs.

Selling expenses consist primarily of commissions paid to manufacturers'
representatives, salaries and related expenses for personnel engaged in sales,
marketing and field support activities and other costs associated with the
promotion of our products. We intend to pursue aggressive selling and marketing
campaigns. We expect that our sales and marketing expenses will increase in
future periods.

18
<PAGE>

General and administrative expenses consist primarily of salaries and
related expenses for administrative, finance and human resources personnel,
professional fees and other corporate expenses. We expect that, in support of
our continued growth and our operations as a public company, general and
administrative expenses will continue to increase, in absolute terms, for the
foreseeable future.

Research and development expenses consist primarily of salaries and related
expenses for design engineers and other technical personnel, the costs of
developing prototypes and fees paid to consultants. We charge all research and
development expenses to operations as incurred. Additionally, research and
development acquired through acquisitions is charged to operations in the
period the acquisition is completed. We believe that continued investment in
research and development is critical to our long-term success. We expect that
our research and development expenses will increase from present levels.

The following table sets forth items included in selected income statement
data as percentages of net sales.

<TABLE>
<CAPTION>
Fiscal Years Ended Three Months Ended
-------------------------------------- ---------------------
September 28, September 27, October 3, January 3, January 2,
1997 1998 1999 1999 2000
------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales............... 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales........... 71.8 71.3 77.9 72.4 75.1
Gross profit............ 28.2 28.7 22.1 27.6 24.9

Operating expenses:
Selling............... 5.7 6.6 7.6 7.9 7.8
General and
administrative....... 7.9 8.4 7.8 7.6 7.7
Amortization of
goodwill and
intangible assets.... 0.1 0.3 0.8 0.7 0.7
Research and
development.......... 0.7 0.9 2.2 0.9 4.3
Acquired in-process
research and
development.......... -- -- 1.1 -- --
Total operating
expenses............. 14.4 16.3 19.3 17.1 20.5
Income from operations.. 13.8 12.4 2.7 10.4 4.4

Other income (expenses):
Interest expense...... (2.3) (1.3) (1.7) (1.4) (1.9)
Other................. (0.2) -- -- 0.3 0.2
Total other expenses.. (2.5) (1.3) (1.7) (1.1) (1.8)

Income before income
taxes.................. 11.3 11.1 1.0 9.3 2.6
Provision for income
taxes.................. 4.6 4.2 0.2 3.5 0.9
Net income.............. 6.8 6.9 0.8 5.8 1.8
</TABLE>

Results of Operations for the Quarter Ended January 2, 2000 Compared to the
Quarter Ended January 3, 1999

The quarter ended January 2, 2000 comprised 13 weeks, and the quarter ended
January 3, 1999 comprised 14 weeks.

Net sales for the first quarter of fiscal year 2000 increased $15.2 million
to $54.6 million from $39.4 million for the first quarter of fiscal year 1999.
The increase was attributable primarily to higher sales of our power
management and RF products to the telecommunications, mobile connectivity and
computers/peripherals markets. The increase in sales for the first quarter of
fiscal year 2000 included $17.4 million from our LinFinity and MMP divisions,
which we acquired in April and June 1999, respectively. Excluding sales from
LinFinity and MMP, sales for the first quarter of fiscal year 2000 decreased
$2.2 million compared to the same quarter of fiscal year 1999. This decrease
was primarily due to lower sales of our space/satellite products.

19
<PAGE>

Gross profit increased $2.7 million to $13.6 million for the first quarter
of fiscal year 2000 from $10.9 million for the first quarter of fiscal year
1999. However, gross margin percentage for the first quarter of fiscal year
2000 was 24.9%, down from 27.6% in the first quarter of the prior fiscal year.
Gross profit in the first quarter of fiscal year 2000 included $5.7 million
from the LinFinity and MMP divisions. Excluding gross profit from LinFinity and
MMP, gross profit for the first quarter of the current year decreased $3.0
million compared to the same quarter of the prior fiscal year. This decrease
and the decline in gross profit percentage to 21.2% (excluding LinFinity and
MMP) were due to lower capacity utilization and lower shipments in the
space/satellite business.

Selling and general and administrative expenses increased $2.3 million to
$8.4 million for the first quarter of fiscal year 2000 compared to the
corresponding period of the prior year. The increase was primarily due to the
additions of LinFinity and MMP.

Research and development for the first quarter of fiscal year 2000 increased
$2.0 million to $2.3 million from $0.3 million for the first quarter of fiscal
year 1999. The increase was due to higher spending to develop our power
management and RF products for telecommunications, medical and computer
markets.

Interest expense increased $0.5 million due to increases in borrowings to
finance the LinFinity and MMP acquisitions.

Our effective income tax rates of 33% and 38% in the quarters ended January
2, 2000 and January 3, 1999, respectively, were the combined result of taxes
computed on consolidated income. The lower effective tax rate in the current
quarter is primarily attributable to adjustments to the accrual rate due in
significant part to a higher proportion of income earned within lower tax rate
jurisdictions.

Results of Operations for Fiscal Year 1999 Compared to Fiscal Year 1998

Net sales for fiscal year 1999 increased $20.4 million to $185.1 million
from $164.7 million for fiscal year 1998. Our total sales included $27.3
million from our LinFinity and MMP divisions, which we acquired in April and
June 1999, respectively. Excluding sales from LinFinity and MMP, net sales for
the 1999 fiscal year decreased $6.9 million compared to fiscal year 1998.
During fiscal year 1999, the demand for space/satellite products was lower than
in prior years; however, the decrease was partially offset by an increase in
other commercial products.

Gross profit decreased $6.4 million to $40.9 million for the 1999 fiscal
year from $47.3 million for the prior year. Gross profit in fiscal year 1999
included $8.5 million from the LinFinity and MMP divisions. As a percentage of
sales, gross profit decreased to 22.1% for fiscal year 1999 from 28.7% for
fiscal year 1998. The decrease was due to change of product sales mix, with
lower sales of space/satellite products, which typically have higher margins
than other commercial products, the effects of pricing pressure and lower
utilization of plant capacity. Gross profit was also adversely affected by a
$6.0 million inventory charge to cost of sales. The charge was made because of
reductions in estimates of utilization and realizable value of certain
inventories which resulted from recent changes in market conditions and
customer requirements. We have experienced heightened competition and
commercialization of our military business, lower demands for our commercial
space/satellite products and recent initiatives by space/satellite customers to
use lower cost parts in their programs.

Selling and general and administrative expenses increased $3.6 million to
$28.4 million for fiscal year 1999 compared to $24.8 million in fiscal year
1998. The increase was primarily due to the addition of the LinFinity and MMP
divisions and two design centers located in San Jose and San Diego, California.

Research and development increased $2.5 million to $4.0 million for fiscal
year 1999 compared to $1.5 million in fiscal year 1998. The increase was
primarily due to our acquisition of LinFinity in April 1999.

The charge for acquired in-process research and development of $2.0 million
was also related to our LinFinity acquisition.

20
<PAGE>

Interest expense increased $1.0 million to $3.1 million for fiscal year 1999
from $2.1 million in fiscal year 1998, due to increases in borrowings to
finance our acquisitions.

Our effective income tax rates of 23% and 38% for fiscal years 1999 and
1998, respectively, were the combined results of taxes computed on foreign and
domestic income. The decrease in our fiscal year 1999 effective tax rate was
primarily attributable to changes in the proportion of income earned within
various taxing jurisdictions and the tax rates applicable to such taxing
jurisdictions, the benefit of a foreign sales corporation and the benefit of
tax credits.

Results of Operations for Fiscal Year 1998 Compared to Fiscal Year 1997

Net sales for fiscal year 1998 increased $1.5 million to $164.7 million,
from $163.2 million for fiscal year 1997. The increase in sales was primarily
due to our acquisition of BKC Semiconductors, Inc., or BKC, partially offset by
our sale of General Microcircuits, Inc., or GMI. We acquired BKC and Power
Products Corporation, or PPC, in fiscal year 1998. We also sold GMI in fiscal
year 1998. Total sales included $16.0 million generated by GMI, PPC and BKC in
fiscal year 1998. Revenues generated by GMI in fiscal year 1997 were $13.5
million. During fiscal year 1998, the demand for commercial space products was
lower than in prior years; however, the decrease was partially offset by an
increase in other commercial products and military sales.

Gross profit increased $1.3 million to $47.3 million for fiscal year 1998
from $46.0 million for the prior fiscal year due to higher sales. As a
percentage of sales, gross profit increased to 28.7% for fiscal year 1998 from
28.2% for fiscal year 1997. The increase was primarily due to higher gross
profit from PPC and BKC sales compared to lower gross profit for GMI sales in
fiscal year 1997.

Selling and general and administrative expenses increased $2.7 million to
$24.8 million for fiscal year 1998 compared to $22.1 million in fiscal year
1997. The increase was primarily due to the addition of PPC and BKC, partially
offset by the decrease in selling and general and administrative expenses
resulting from the sale of GMI in December 1997.

Research and development expenses increased $0.3 million to $1.5 million for
fiscal year 1998 compared to fiscal year 1997.

Interest expense decreased $1.6 million to $2.1 million for fiscal year 1998
from $3.7 million in fiscal year 1997, due to lower borrowings, principally due
to the conversions of debentures and notes payable into shares of common stock.

Our effective income tax rates of 38% and 40% for fiscal years 1998 and
1997, respectively, were the combined results of taxes computed on foreign and
domestic income. The decrease in our fiscal year 1998 effective tax rate was
primarily attributable to expected changes in the proportion of income earned
within various taxing jurisdictions and the tax rates applicable to such taxing
jurisdictions.

Liquidity & Capital Resources

Net cash provided by operating activities was $15.6 million, $12.6 million
and $16.1 million for fiscal years 1997, 1998 and 1999, respectively. The
increase in cash provided by operating activities in 1999 compared to 1998 was
primarily attributable to increases in non-cash charges for depreciation,
inventories and acquired in-process research and development. The decrease in
cash provided by operating activities in 1998 compared to 1997 was primarily
attributable to increases in inventories and a decrease in accounts payable.

Net cash provided by operating activities was $1.3 million and $7.2 million
for the first quarters of fiscal years 1999 and 2000, respectively. The
increase in cash provided by operating activities in fiscal year 2000 was
primarily attributable to changes in earnings, accounts receivable, inventories
and other assets.

Net cash used in investing activities was $11.3 million, $15.6 million and
$40.3 million in 1997, 1998 and 1999, respectively. The increase in fiscal year
1999 compared to fiscal year 1998 was primarily due to our

21
<PAGE>

acquisitions of LinFinity and MMP. The increase in fiscal year 1998, compared
to fiscal year 1997, was primarily due to the acquisition of BKC, partially
offset by the sale of GMI.

Net cash used in investing activities was $1.0 million and $2.7 million for
the first quarters of fiscal years 1999 and 2000, respectively. The increase
was primarily due to a higher level of purchases of property and equipment.

Net cash provided by financing activities in 1999 was $6.7 million and $22.3
million for fiscal years 1998 and 1999, respectively. Net cash used in
financing activities was $2.2 million in fiscal year 1997. The net cash
provided by financing activities in fiscal years 1999 and 1998 was proceeds
from bank loans to finance acquisitions; partially offset by payments of our
debt. The net cash used in financing activities in fiscal year 1997 was
primarily a result of payments on our debt.

Net cash used in financing activities was $2.5 million and $4.3 million for
the first quarters of fiscal years 1999 and 2000, respectively. The cash used
in financing activities in the first quarter of fiscal year 2000 was primarily
a result of payments on our debt. The net cash used in financing activities in
the first quarter of fiscal year 1999 was primarily a result of the repurchases
of our common stock.

Our operations in fiscal year 1999 and in the three months ended January 2,
2000, were funded with internally generated funds and borrowings under our
revolving line of credit, which expires in March 2003. Under this line of
credit, we can borrow up to $30.0 million. As of January 2, 2000, $15.5 million
was borrowed, $4.4 million was utilized under an outstanding letter of credit
and $10.1 million was available under this credit facility. At January 2, 2000,
we had $7.7 million in cash and cash equivalents.

In June 1999, we finalized a lease agreement for a building located in Santa
Ana, California. The lease requires a current rental payment of $23,217 per
month. This transaction was recorded as a purchase at the present value of the
lease payments.

In February 2000, we acquired the HBT Products Group of Infinesse for cash
of $1.5 million, common stock of the Company and debt of $4.5 million. We now
call this business Micro WaveSys.

Based upon information currently available, we believe that we can meet our
current operating cash and debt service requirements with internally generated
funds together with available borrowings.

Recently Issued Accounting Standard

In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which will become effective for us in fiscal year 2001. SFAS 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. We do
not expect SFAS 133 to materially affect our financial position or results of
operations.

22
<PAGE>

BUSINESS

We are a leading designer, manufacturer and marketer of analog, mixed-signal
and discrete semiconductors. Our semiconductors manage and regulate power,
protect against transient voltage spikes and transmit, receive and amplify
signals. Our products include individual components as well as complete circuit
solutions that enhance our customers' end products by providing battery
optimization, reducing size or protecting circuits. Our commercial products are
used in dynamic high growth mobile connectivity applications, including mobile
phones and handheld Internet devices, and broadband communications applications
such as base stations, wireless LAN, cable and fiber optic systems. These high
growth opportunities have emerged from our ongoing capabilities in designing
and manufacturing semiconductors for military, satellite and medical
applications. Our diverse customer base includes Motorola, Lockheed Martin,
Seagate, Mitsubishi, Guidant, Samsung, Medtronic, Boeing, Palm, Dell and
Compaq.

Industry

The major drivers for these markets include:

. Growth in wireless Internet connectivity and wireless broadband systems
(W-CDMA, IMT-2000, CMDA2000). The build out of multiple wireless
broadband systems increases the need for multiple semiconductor
solutions in both base stations and mobile handsets. These systems also
have the ability to transmit data at higher rates enabling additional
services such as mobile Internet connectivity and other data
applications.

. Growth in sales of mobile phones. According to Strategies Unlimited,
unit sales of mobile phones are expected to grow approximately 25% on a
compound annual basis from 1998 through 2004. Manufacturers continue to
increase the breadth of services available and to reduce the size of
their mobile phones. These factors, combined with lower cost wireless
service, increase the demand for mobile phones.

. Growth in consumer demand for highly sophisticated multipurpose handheld
devices. PDAs and wireless web tablets are allowing consumers to
conveniently take computing with them wherever they travel. According to
International Data Corporation, the demand for PDAs is expected to grow
approximately 27% on a compound annual basis from 1998 through 2003.

. New and emerging wireless or battery-operated applications. Improvements
in semiconductor technologies have created opportunities for other
mobile industrial and commercial applications, such as portable medical
diagnostic equipment, point-of-sale readers and electric vehicles.

. The convergence of voice, video, and data transmission. As voice, video
and data converge into one digital stream, the demands placed on
traditional and emerging transmission systems will change. Service
providers and equipment manufacturers are looking to modify and
supplement existing infrastructures to address these new demands.
Specialized semiconductors, used to increase switching speeds, handle
high power levels and sense multiple optical wavelengths, will enable
the expansion of additional functionalities over the current
infrastructure.

The military and aerospace markets have similar needs for high reliability
semiconductor products to address high performance applications. In these
markets, customers generally have the most stringent requirements for product
robustness and reliability due to their respective end uses, for example in
electronic systems of satellites, missiles and aircraft.

23
<PAGE>

Our Solutions

We offer leading products combining innovative semiconductor design, process
and product packaging solutions that are optimized for a given application
utilizing our system engineering expertise. Many of our customers produce or
develop products in mobile connectivity, communication infrastructure and
computers/peripherals. We first developed our technology and expertise for
military and aerospace, satellite, communications and implantable medical
applications. We have created innovative product solutions that we believe
increase efficiency and play time, reduce component size and costs, enable high
speeds, provide high reliability and robustness, reduce power consumption or
offer other increased functionality relative to competing products in the
marketplace today.

We categorize our product solutions into four general groups:

Our Strategy

. Provide System-Engineered Product Solutions. We continue to identify and
solve circuit and application problems with innovative circuit and
process technologies for power management, RF/microwave and opto
electronic, transient protection and power conditioning. In power
management our existing application-specific standard products, such as
our RangeMAX line of LCD Lamp Drivers, give us a competitive advantage
in power management, size, efficiency and cost effectiveness. Color
PDAs, notebooks, in-flight entertainment, AutoPC and wireless web
tablets are examples of the end applications that benefit from these
features.

. Leverage and Enhance Expertise in Innovative Package Technologies. We
intend to continue our development of packaging technologies that
improve the performance of semiconductor devices. Our proprietary
technologies enable us to meet demanding industry requirements for
significant size reduction and battery optimization. Our packaging
expertise is applied to developing application specific solutions that
enhance our existing and future silicon and compound technology product
solutions. Our Powermite family of products for mobile phone
applications is at least 30% smaller than today's alternative solutions,
while having at least the same power handling capability.

24
<PAGE>

. Pursue Strategic Technology Acquisitions and Alliances. We intend to
expand our production capacity, new product development, process
technologies, industry expertise and customer base through acquisitions
and alliances. In recent years we have accelerated and supplemented our
internal growth in commercial markets through key acquisitions of and
alliances with companies that are leaders in the wireless, computing and
mobile connectivity markets. Examples of this strategy include our
acquisition of LinFinity, which provided us with expertise in managing
light, sound and power for computers and peripherals, and our alliance
with Advanced Power Technology, which expanded our implantable medical
product portfolio.

. Develop New Process Technologies for High Growth Markets. We intend to
leverage our core competencies in silicon semiconductor processes to
develop process technologies in advanced compound semiconductors. We are
currently developing compound semiconductors, such as gallium arsenide,
indium gallium phosphide, silicon germanium, indium gallium arsenide
phosphide and silicon carbide to develop products that have superior
performance characteristics versus silicon in wireless, broadband cable
and fiber optic systems.

. Leverage Internal and External Manufacturing Capability. We have strong
internal manufacturing capability as well as access to numerous merchant
market foundries and contract manufacturers. As a result we are able to
optimize the manufacturing model for a given product, end market or
application.

Strategy in Action

The following examples illustrate the effective implementation of our
strategy:

. Development of a Key Product Solution for Palm IIIC and Other PDAs. We
are a manufacturer of pulse width modulator (PWM) integrated circuits
used to vary electric pulses to control the speed of an electric motor.
We are a leader in supplying PWMs to military applications as our
products are capable of withstanding extreme temperatures and delivering
power more efficiently than competitive products. These products were
developed initially to serve military motor control applications in
tanks, planes and missiles. We recently modified this product technology
to vary electric pulses to Cold Cathode Fluorescent Lamps that light TFT
Color LCD Displays (or flat panel displays) in consumer applications.
Our product solution, called RangeMAX, is a system-engineered technology
that optimizes display efficiency, offers full-range lamp dimming and
extends working temperature range. Today, the RangeMAX is used by
companies such as Palm Computing in their handheld Palm IIIC color PDAs
and by Ford Visteon in their Auto PC multimedia and navigational
computers.

. Development of Powermite PIN Diode for Consumer Two-Way Radio
Products. We are a leading supplier of products used to detect
radiation. Our devices, called PIN diodes, are used in sensing the
potentially damaging effects of radiation and turn military electronic
systems on or off. We modified this product technology for use in a
similar sensing circuit required in military mobile communications where
it switched high power radio antennas from transmit to receive. We
enhanced the product offering by combining our chip used in the
radiation detector with our patented high density Powermite packaging
technology. By doing so, we developed a "must have" product solution for
handheld consumer mobile radios that require the power of a military
radio antenna in a fraction of the size. Today, companies such as
Motorola, Research in Motion, Maxon and Yaesu use Powermite PIN Diodes
in their handheld consumer mobile radios and two-way pagers. To
complement this product offering and to build on our success in this end
market, we signed an agreement with Motorola's Semiconductor Components
Group (which later became ON Semiconductor L.L.C.) in December 1999 to
provide additional RF transistor products that are used to generate the
RF transmission signal.

25
<PAGE>

. Development of Undersea Fiber Optic Repeater Products. We have been a
major supplier to global wireless satellite communication programs such
as Teledesic, ICO and GlobalStar. We identified fiber optic systems as
having similarly stringent demands for product quality, reliability and
lifecycle. We supply transient protection devices, high voltage diodes
or opto couplers to Alcatel Submarine Networks, Tyco, Pirelli Lightwave
Transmission Systems and Mitsubishi Electric for undersea fiber optic
repeater networks. With our recent acquisition of the Micro WaveSys
business, we are adding photo-detectors for this market.

Products

We categorize our broad product solutions into power management,
RF/microwave and opto electronic, transient protection and power conditioning.
Significant product families from each category are represented below.

Power Management Products

. RangeMAX Backlight Control Integrated Circuits (ICs). These devices
control the power that lights lamps in handheld and desktop liquid
crystal displays (LCDs). Our patented technology extends dimming range,
saves power and reduces the size of backlight modules. We have developed
specific versions for automotive, computing and handheld applications.

. Class D (Digital) Audio Products. Class D Audio amplifier ICs are used
in energy conscious applications where heat dissipation and high
fidelity sound are important. This product line is based on our proven
PWM technology, which creates a high power amplifier without the need
for heatsinks. This product is ideal for portable audio and automotive
audio applications. Our system engineers have extensive expertise in
optimizing battery efficiency and are developing low power versions of
these amplifiers in order to serve the hearing aid market.

. Low Drop Out (LDO) Regulators. These devices are primarily used to
efficiently step down voltages from a power source to the voltages
required to run a microprocessor and associated circuitry. These devices
integrate, into one system-engineered solution, the functions of
numerous discrete components. Our success with these products has been
primarily in notebook and desktop computers where the integration
provided by these products reduces board-level cost as compared with
discrete component solutions.

. Small Computer Standard Interface (SCSI) Terminators. These integrated
circuits provide industry standard connectivity for cables used between
computing devices and their peripheral devices such as printers,
scanners and keyboards. They match the data rates established to allow
simple interconnection of computing hardware. We offer a broad range of
single and dual termination devices that meet the SCSI specifications.

. Battery Bypass Modules for Satellites. We have developed an industry
standard concept for bypassing faulty satellite batteries while in
orbit. Our patented concept eliminates the need for cooling systems,
which reduces overall satellite weight and lowers launch cost. The
device, which uses a semiconductor element to create a permanent
mechanical battery shut off switch in a weightless environment, is used
by most next generation satellite programs.

. Implantable Cardio Defibrillator Phase Modules. We have provided
individual components to the implantable cardio pacemaker and
defibrillator market for more than 15 years. Using our extensive
knowledge of the system requirements, including circuit topologies and
innovative packaging, we are now offering functional blocks to
defibrillator manufacturers. These manufacturers are increasingly
relying on component manufacturers to provide solutions. Pacemakers and
defibrillators are required to last as long as seven to ten years while
implanted in the human body.

26
<PAGE>

RF/Microwave and Opto Electronic Products

. Indium Gallium Phosphide (InGaP) Hetero Junction Bipolar Transistors
(HBT) Power Amplifiers. These devices are monolithic high frequency
integrated circuits that are used to amplify wireless signals. We added
this product group with our acquisition of the Micro WaveSys business.
This subset of products is typically known as radio frequency integrated
circuits (RFICs). Our expertise in this area is in the development of
these high frequency devices used in mobile phones. A combination of
design and process expertise will allow us to provide these products to
3G wireless handset manufacturers.

. Power PIN Diodes. PIN Diodes are used most commonly to switch high
frequency signals. They are typically used in antenna "transmit/receive"
applications where they act as the switch that flips back and forth
between transmit and receive for full duplexing communication. Our high
power PIN diodes allow mobile radio manufacturers to incorporate these
functions into a small package size.

. RF Power Transistors. RFICs and advanced composite semiconductor
materials were developed to allow mobile phone and radio manufacturers
to transmit signals above 1GHz with higher reliably and lower power
consumption. There are several other radio applications that require
much lower frequency devices that take advantage of the low cost of
silicon based structures. Our RF power transistors are silicon devices
used in low frequency mobile radio, portable phone and base station
applications.

. Opto Electronic Products. These products are typically used to isolate
low voltage from high voltage circuits or to convert light to electrical
signals. We have developed a line of opto couplers (photo sensing
elements coupled with a switching element such as a transistor or SCR),
photo voltaic arrays (photo sensing circuits that outputs a high
voltage), and photodetectors (circuits that sense different wavelengths
of light). We supply silicon-based opto electronic products and are now
diversifying our products into compound semiconductor versions for high
speed fiber optic applications.

Transient Protection Products

. Transient Voltage Suppressor (TVS) Arrays. We have taken our IC
packaging expertise acquired with our acquisition of LinFinity and used
it to offer multiple individual TVS devices into one package. System
engineers have opted to use one device that houses two to four die per
package as opposed to individually packaged components that consume more
circuit board space. Our breadth of TVS offering and packaging expertise
has positioned us to be a leader in this sector of the market.

. Universal Serial Bus (USB) and Gigabit Ethernet Products. These devices
are a subset of our TVSArray products and protect communication ICs used
in high speed communications applications. Our devices can allow
transmission speeds far in excess of available bandwidth today and allow
designers to integrate TVS functions without impeding system
performance.

. TVS Lightning Protection Modules. These products combine as many as 50
TVS devices into one integrated module. These modules are designed to
handle extremely large currents induced by direct lightning strikes or
power surges induced by nearby strikes. The main application for our
high reliability products in this group is protection of avionics
electronics.

. Pacemaker Protection Products. This product group combines two
technologies, TVS and Thyristors, into an integrated solution called a
Thyristor Surge Protection Device. These devices are designed to protect
implanted electronics from destruction during external defibrillation.
These devices allow implantable device manufacturers to reduce this
portion of the circuit by as much as 50%. In implantable electronics,
device size is a key factor in selecting products.

27
<PAGE>

Power Conditioning Products

. Rectifiers. Rectifiers conduct electricity in one direction and block it
in the "reverse" direction. They are used to convert AC into DC which is
used to power electronic equipment. The current carried over power lines
and into homes, offices and factories is alternating current; however,
most electronic equipment requires direct current to operate. We offer a
wide selection of rectifier products including bridge rectifiers, fast
efficient rectifiers, glass-passivated rectifiers, plastic rectifiers
and Schottky rectifiers.

. Small Signal Diodes. Small signal diodes perform various functions such
as signal blocking, routing and switching at lower current levels. These
components are used in a variety of products, including
telecommunications equipment, personal computer motherboards, power
supplies and consumer electronics.

. Small Signal Transistors. Small signal transistors provide amplification
and switching functions. These products provide the critical signal
switching and amplification functions that are essential to most modern
electronic systems.

. Zener Diodes. Zener products are used in a wide variety of specialized
functions for complex electronic circuits. These devices are used as
voltage regulators, voltage reference and voltage suppressors against
electrostatic discharge threats.

. Power Metal Oxide Silicon Field Effect Transistors (MOSFETs). MOSFETs
provide voltage controlled efficient switching functions that are
essential in battery powered applications. We have established alliances
with Advanced Power Technology and Intersil Corporation to offer these
products.

28
<PAGE>

Markets and Customers

We maintain a diversified customer base in the markets we serve. No single
customer accounted for more than 6% of our revenue in fiscal year 1999.
Outlined in the table below are our end markets, end applications and major
customers.

<TABLE>
<CAPTION>
End Markets End Applications Major Customers
- ------------------------------------------------------------------------------------
<S> <C> <C>
Mobile/Connectivity Mobile Phones Motorola
Web Tablets Samsung
PDAs Mitsubishi
Pagers Palm
Mobile Radios

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

Telecommunications Fiber Optic Repeaters Alcatel
Base Stations Ericsson
Routers/Hubs Nokia
Telecom Switches Nortel

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

Computers/Peripherals Notebook Computers Compaq
Desktop Computers Dell
Modems Seagate
USB Peripherals Gigabyte
Hard Drives

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

Industrial/Commercial Power Supplies Magnetek
Generators Delco
Welders Mercury Marine
Automotive Lucent

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

Military/Aerospace Avionics Lockheed Martin
Missiles Boeing
Radar Honeywell
Communications Raytheon

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

Space/Satellite Solar Panel Protection Lockheed Martin
Battery Bypass Switches Boeing
Power Distribution Tecstar
Launch Vehicles Bosch
Communications

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

Medical Pacemakers Medtronic
Defibrillators Guidant
Hearing Aids St. Jude Medical
Medical Imaging GE Medical
</TABLE>

Our products are marketed through our direct sales force and domestic
electronic component sales representatives to original equipment manufacturers.
We employ industrial distributors to service our customers' needs for standard
catalog products. For fiscal year 1999, our domestic sales accounted for
approximately 65% of revenues, of which sales representatives and distributors
accounted for approximately 30% and 24%, respectively. We have nine domestic
and three international direct sales offices in metropolitan areas. Sales to
customers for delivery outside the United States accounted for approximately
35% of fiscal year 1999 sales.

29
<PAGE>

Research and Development

We believe that timely development and introduction of new products are
essential to maintaining our competitive position. The principal focus of our
research and development activities has been to improve processes and to
develop product solutions for high growth markets. We currently conduct most of
our product development efforts in-house. We also employ outside consultants in
order to expand our product design capabilities.

We incurred expense of approximately $1,161,000, $1,532,000 and $4,002,000,
in fiscal years 1997, 1998 and 1999, respectively, for research and
development, none of which was customer sponsored.

During fiscal 1999, we expended approximately $2,611,000 to develop new
products for computing, wireless and medical applications. Here we focus our
product development on solutions for next generation handheld computing and
mobile connectivity devices as well as implanted medical products. We have
expanded our design engineering base from two to more than 30 experienced
analog/mixed signal design engineers in the last year to address these fast
growing markets.

In the satellite and military and aerospace markets minimal amounts (less
than 2% of the total revenues) are spent on research and development. Most of
the research and development expenditures for these markets are targeted at
cost reduction initiatives.

Manufacturing Facilities

Our principal manufacturing operations are located in Santa Ana and Garden
Grove, California; Broomfield, Colorado; Scottsdale, Arizona and Watertown,
Massachusetts. Each facility operates its own wafer processing, assembly,
testing and screening departments. The following table lists our facilities.

<TABLE>
<CAPTION>
Sq. ISO
MSCC Division Location Feet Certifications Type
- ---------------------- ------------------- ------- -------------- ------------------------------
<S> <C> <C> <C> <C>
Corporate Headquarters Santa Ana, CA 123,000 ISO9001 Manufacturer/Wafer Fab
Microsemi LinFinity Garden Grove, CA 115,000 ISO9001 Manufacturer/Wafer Fab/Fabless
Microsemi Scottsdale Scottsdale, AZ 139,000 ISO9001 Manufacturer/Wafer Fab
Microsemi Chatsworth Chatsworth, CA 15,000 Fabless
Microsemi Colorado Broomfield, CO 110,000 ISO9001 Manufacturer/Wafer Fab
Microsemi PPC Riviera Beach, FL 41,000 ISO9001 Manufacturer/Wafer Fab
Microsemi RF Products Montgomeryville, PA 20,000 Manufacturer/Wafer Fab
Microsemi Watertown Watertown, MA 168,000 ISO9001 Manufacturer/Wafer Fab
Microsemi Microwave
Products Lowell, MA 47,000 Manufacturer/Wafer Fab
Micro Power Products Carlsbad, CA 6,000 Design Center/Fabless
Microsemi Europe Ennis Ireland 80,000 ISO9002 Assembly
Microsemi Bombay Bombay, India 40,000 Assembly
Microsemi Hong Kong Hong Kong 38,000 ISO9002 Assembly
</TABLE>

Competition

We encounter differing degrees of competition for our various products,
depending upon the nature of the product and the particular market served.
Generally, the semiconductor industry is highly competitive and subject to
price erosion, and many of our competitors are larger companies with greater
financial resources. We believe that we are distinguished from our competitors
by our comprehensive line of products and our ability to combine these products
into compact, cost-effective packages and system-level solutions. We compete on
the bases of breadth of product line, quality, price, reliability,
service (including technical advice and support), overall performance of the
products and the delivery time to the customer. Some of our current major
competitors are Motorola, Inc., Dallas Semiconductor Corporation, General
Semiconductor, Inc., National Semiconductor Corporation, Texas Instruments,
Inc., Philips Electronics, ON Semiconductor, L.L.C., Fairchild Semiconductor
Corporation, Micrel Incorporated, International Rectifier Corporation, Semtech
Corporation, Linear Technology Corp., Alpha Industries, Inc., Diodes,

30
<PAGE>

Inc., Vishay Intertechnology, Inc. and its subsidiary Siliconix Incorporated.
Some of our competitors in developing markets are Triquint Semiconductor, Inc.,
Mitel Corporation, RF Micro Devices, Inc., Conexant Systems, Inc., Anadigics,
Inc. and Alpha Industries, Inc. We expect intensified competition from existing
competitors and new entrants.

Employees

On January 2, 2000, we employed 1,884 persons domestically including 148 in
engineering, 1,474 in manufacturing, 128 in marketing and 134 in general
management and administration. Additionally, we employ an aggregate of 555
persons in our international operations. None of our employees are represented
by a labor union. We have not experienced a work stoppage, and we believe our
employee relations are good.

Environmental Regulation

While we believe that we have the environmental permits necessary to conduct
our business and that our operations conform to present environmental
regulations, increased public attention has been focused on the environmental
impact of semiconductor operations. In the conduct of our manufacturing
operations, we have handled and do handle materials that are considered
hazardous, toxic or volatile under federal, state and local laws; and
therefore, we are subject to regulations related to the use, storage, discharge
and disposal of the materials. The risk of accidental release of such materials
cannot be completely eliminated. Along with the rest of the semiconductor
industry, we are subject to variable interpretations and governmental
priorities concerning environmental laws and regulations. Environmental
statutes have been interpreted to provide for joint and several liability and
strict liability regardless of actual fault. We may be required to incur costs
to comply with current or future environmental laws or regulations, and our
operations, business, or financial condition could be adversely affected by
such requirements.

In Broomfield, Colorado, the owner of a property located adjacent to a
manufacturing facility owned by one of our subsidiaries had filed suit against
the subsidiary and other parties, claiming that contaminants migrated to his
property, thereby diminishing its value. In August 1995, the subsidiary,
together with former owners of the manufacturing facility, agreed to settle the
claim and to indemnify the owner of the adjacent property for remediation
costs. Although TCE and other contaminants previously used at the facility are
present in soil and groundwater on the subsidiary's property, we vigorously
contest any assertion that the subsidiary caused the contamination. In November
1998, we signed an agreement with three former owners of this facility whereby
the former owners agreed to reimburse us for $530,000 of past costs, assume
responsibility for 90% of all future clean-up costs, and indemnify and protect
us against any and all third-party claims relating to the contamination of the
facility. State and local agencies in Colorado are reviewing current data and
considering study and cleanup options, and it is not yet possible to predict
costs for remediation. In the opinion of management, the final outcome of the
Broomfield, Colorado environmental matter will not have a material adverse
effect on our financial position or results of operations.

In addition, we operate or own other facilities located on or near real
properties that formerly were, or might have been, used in ways that involved
toxic and hazardous materials. In the event of a violation of environmental
laws, we could be held liable for damages and the costs of remediation.

Legal Proceedings

We are involved in various pending or threatened litigation matters arising
out of the normal conduct of our business, including those relating to
commercial transactions, contracts and environmental matters. In the opinion of
management, the final outcome of these matters will not have a material adverse
effect on our financial position or results of operations.

31
<PAGE>

MANAGEMENT

The following table sets forth the name, age and position of each of our
executive officers and directors and certain key employees as of March 31,
2000.

<TABLE>
<CAPTION>
Name Age Title
---- --- -----
<C> <C> <S>
Philip Frey, Jr. 72 Chairman of the Board, President and Chief Executive
Officer

David R. Sonksen 54 Vice President-Finance, Chief Financial Officer,
Treasurer and Secretary

Lane Jorgensen 58 Vice President and General Manager of Microsemi
Santa Ana

Harold R. McKeighan 57 Vice President and General Manager of Microsemi
Scottsdale

James J. Peterson 44 Vice President and General Manager of LinFinity

James R. Shiring 59 Vice President, East Coast Operations

Angelo Santamaria 37 Vice President and General Manager of Microsemi
Watertown

James M. Thomas 62 Vice President Human Resources

Andy T.S. Yuen 47 Vice President International Operations

Manuel F. Lynch 32 Director of Worldwide Marketing and Information
Systems

Ronald Courtois 48 Vice President and General Manager of MicroPower
Products Division

Michael E. Kim, Ph.D. 54 Vice President and General Manager of Micro WaveSys

Brad Davidson 44 Director

H.K. Desai 54 Director

Martin H. Jurick 62 Director

Robert B. Phinizy 73 Director

Joseph M. Scheer 73 Director
</TABLE>

Executive Officers

Philip Frey, Jr. has served as our Chairman of the Board since 1987 and
President and Chief Executive Officer since 1971.

David R. Sonksen has served as our Vice President-Finance, Chief Financial
Officer and Treasurer and Secretary since 1986. Prior to joining us, he was
Vice President and Controller of Western Digital from 1981 to 1986.

Lane Jorgensen has served as our Vice President and General Manager of
Microsemi Santa Ana since 1992. Prior to joining us, he was President of ST
Semiconductor from 1986 to 1992. Prior to that he held management positions
with TRW Semiconductor and Corning Glass.

Harold R. McKeighan has served as our Vice President and General Manager of
Microsemi Scottsdale since 1985 and in 1987 also assumed responsibility for
Microsemi Colorado. Prior to 1985, he held various management positions with
us.

James J. Peterson has served as our Vice President and General Manager of
LinFinity since 1999. Prior to joining us, he was President of LinFinity
MicroElectronics from 1997 to 1999 (when we acquired LinFinity); he served as
Vice President of Sales of LinFinity MicroElectronics from 1996 to 1997 and
Senior Vice President, Worldwide Sales & Corporate Communications of Texas
Instruments Storage Products Group-Tustin from 1984 to 1996.

32
<PAGE>

James R. Shiring has served as our Vice President, East Coast Operations
since 1998. Prior to joining us, he was President of BKC Semiconductors Inc.
from 1996 to 1998 (when we acquired BKC). Prior to that he was Managing
Director, European Operations of CP Clare Corporation from 1982 to 1995.

Angelo Santamaria has served as our Vice President and General Manager of
Microsemi Watertown since 1997. Prior to assuming his present position, he
served as Operations Manager from 1995 to 1997. He started in 1985 as a process
engineer with the SPD division of Unitrode Corporation, which we acquired in
1992.

James M. Thomas has served as our Vice President Human Resources since 1989
and he was Director of Human Resources from 1981 to 1989. Prior to 1981, he
worked in human resource positions at Silicon Systems.

Andy T.S. Yuen has served as our Vice President International Operations
since 1989 and previously was manager of our Hong Kong and Bombay facilities
from 1976 to 1989.

Key Employees

Manuel F. Lynch has served as our Director of Worldwide Marketing and
Information Systems since 1997. Prior to that he was our Director of Sales from
1996 to 1997 and Manager of Information Systems and marketing communications
from 1995 to 1996. Prior to joining us, he was Director of Marketing
Communications for Solid State Devices, Inc. from 1990 to 1995.

Ronald Courtois has been Vice President and General Manager of our
MicroPower Products Division since 1999. He was a private consultant from 1998
to 1999. He was Vice President and General Manager of Mitel Semiconductor's
Medical ASIC business (previously operated as ABB HAFO) from 1990 to 1998. From
1980 to 1990, Mr. Courtois held various sales and marketing management
positions with TRW's LSI Products Division, a maker of high performance analog
and digital integrated circuits.

Dr. Michael E. Kim has been the Vice President and General Manager of our
Micro WaveSys business since its formation in February 2000. This business is
based on the RFIC business group from Infinesse Corp. (which was acquired by
Microsemi in February 2000), which was developing voice/data systems and GaAs
HBT RFIC components for commercial wireless applications. Prior to co-founding
Infinesse Corp., Dr. Kim worked at TRW from 1983 to 1992, where he led their
development efforts in GaAs HBT ICs. In addition, from 1978 until joining TRW,
he worked with Rockwell International Science Center in compound semiconductor
process development. Dr. Kim received his Ph.D. in Electrical Engineering and
Computer Science from M.I.T. in 1977.

Directors

Brad Davidson has been a director since 1984. Mr. Davidson has also been
President of Securities Pricing and Research, Inc. since 1986.

H.K. Desai has been a director since March 2000. Mr. Desai has been Chairman
of the Board of QLogic Corporation since 1999, its CEO since 1996, and its
President since 1995. QLogic Corporation is a leading designer and supplier of
semiconductor and board-level input/output, or I/O, and enclosure management
products. From May 1995 to August 1995, he was Vice President, Engineering
(Systems Products) at Western Digital Corporation, a manufacturer of disk
drives. From July 1990 until May 1995, he served as Director of Engineering,
and subsequently Vice President of Engineering of Emulex Corp. From 1980 until
joining Emulex in 1990, Mr. Desai was an Engineering Section manager at Unisys
Corporation, a computer system manufacturer.

33
<PAGE>

Martin H. Jurick has been a director since 1995 and is a private investor
and consultant. He was the Senior Vice President of Corporate Planning and a
director of Silicon Systems, Inc., later a division of Texas Instruments, from
1978 to 1999. He served as a director of Level One Communications from 1991 to
1999.

Robert B. Phinizy has been a director since 1992 and is a private investor
and consultant. He has been a director and the Corporate Secretary of
Genisco/Solaris since 1997. He was formerly Chairman, Chief Executive Officer
and President of Genisco Technology Corp. from 1972 to 1986. He has served as a
director and the Corporate Secretary of BioSonics, Inc. since 1993 and is also
a Retired Captain, United States Navy.

Joseph M. Scheer has been a director since 1994 and is a private investor
and consultant. He served as a director of Rawson-Koenig Inc., Houston, Texas,
from 1991 to 1997. He has served as a Member of the Advisory Board Soligen
Inc., Northridge, California since 1994. He served as a Director of Laserform,
Inc., Auburn Hills, Michigan from 1989 to 1994.

34
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following provides certain information with respect to the beneficial
ownership of our common stock as of March 31, 2000, both before and after
giving effect to the sale of shares of common stock in this offering. The
information relates to all of our directors and executive officers; all of our
directors and executive officers as a group; and anyone known to us to be
beneficial owner of more than 5% of our common stock.

The table below has been prepared on the assumption that the underwriters
do not exercise their over-allotment option. Some of the information is based
on holders' filings with the SEC, reporting information as of December 31,
1999.

<TABLE>
<CAPTION>
Number of Percentage Percentage
Shares Owned Owned
Beneficially Shares Before After
Name of Beneficial Owner Owned (1) Offered Offering Offering
- ------------------------ ------------ ------- ---------- ----------
<S> <C> <C> <C> <C>
Norman J. Wechsler.............. 1,376,786(2) -- 12.0% 10.2%
Wellington Management Company,
LLP............................ 1,030,300(3) -- 9.0% 7.7%
Philip Frey, Jr. ............... 963,803(4) 197,000 8.4% 5.7%
Brinson Partners, Inc........... 912,645(5) -- 8.0% 6.8%
Dimensional Fund Advisors Inc... 637,634(6) -- 5.6% 4.7%
FMR Corp........................ 606,140(7) -- 5.3% 4.5%
Michael E. Kim, Ph.D............ 312,500(8) -- 2.7% 2.3%
David R. Sonksen................ 47,743(9) 10,000 * *
Lane Jorgensen.................. 44,200(10) -- * *
Harold R. McKeighan............. 28,250(11) -- * *
Angelo Santamaria............... 11,875(12) -- * *
James M. Thomas................. 29,840(13) -- * *
Andy T. S. Yuen................. 48,400(14) -- * *
Brad Davidson................... 26,000(15) 5,000 * *
Martin H. Jurick................ 21,000(16) 3,000 * *
Robert B. Phinizy............... 22,000(17) 5,000 * *
Joseph M. Scheer................ 18,000(18) -- * *
All executive officers and
directors as a group........... 1,573,611(19) 220,000 13.5% 11.5%
</TABLE>
- --------
* Less than 1%.
(1) Includes any shares held by or for a spouse or minor child or as a
trustee. Unless otherwise indicated, the person possesses sole investment
and sole voting power. Includes the right to acquire shares of our common
stock under options that are exercisable on, or become exercisable within
60 days after, March 31, 2000.

(2) Includes 1,130,286 shares owned by Wechsler & Co., Inc. His mailing
address is 105 South Bedford Road, Suite 310, Mount Kisco, NY 10549.

(3) Wellington is an investment adviser and shares the power to dispose of all
the shares with its clients and has shared voting power as to 647,900 of
the shares. Wellington's mailing address is 75 State Street Boston, MA
02109.

(4) Includes 36,950 shares under options. Mr. Frey's mailing address is P. O.
Box 26890, Santa Ana, CA 92799-6890.

(5) Brinson has shared dispositive power with respect to all of its shares.
Brinson's mailing address is 209 South LaSalle Street, Chicago, IL 60604-
1295.

(6) Dimensional is an investment advisor and in this role possesses voting and
investment power for shares owned by clients for whom Dimensional acts as
investment manager. Dimensional's mailing address is 1299 Ocean Avenue,
11th Floor, Santa Monica, CA 90401.

(7) The Fidelity Low-Priced Stock Fund owns 1,150,000 of these shares. FMR
Corp.'s mailing address is 82 Devonshire Street, Boston, MA 02109.

35
<PAGE>

(8) Shares owned by Infinesse Corporation which is controlled by Dr. Kim.

(9) Includes 9,800 shares under options.

(10) Includes 38,200 shares under options.

(11) Includes 9,750 shares under options.

(12) Includes 11,875 shares under option.

(13) Includes 20,490 shares held with shared dispositive power and 9,350
shares under options.

(14) Includes 22,150 shares under options.

(15) Includes 16,000 shares under options.

(16) Includes 21,000 shares under options.

(17) Includes 22,000 shares under options.

(18) Includes 16,000 shares under options.

(19) Includes 213,075 shares under options.

Our Relationships with the Selling Stockholders

Philip Frey, Jr. is our Chairman of the Board, President and Chief
Executive Officer and holds the office of President of each of our
subsidiaries, and holds other executive offices and directorships with all of
our various subsidiaries. As shown in the preceding table, Mr. Frey is also an
owner of more than 5% of our common stock. As a participant in our stock
option plans, he owns some shares of our common stock that are registered for
resale. In addition, he was a purchaser of our convertible notes in 1992, and
his shares received upon conversion of the notes have been registered for
resale. Mr. Frey has signed a lock-up agreement and agreed not to sell any
shares of our common stock during the 90 days after this offering, except to
the extent that A.G. Edwards & Sons, Inc. approves, in its sole discretion.

David R. Sonksen is our Vice President-Finance, Chief Financial Officer,
Treasurer and Secretary and holds the office of Vice President and Secretary
of each of our subsidiaries, and holds other executive offices and
directorships with all of our various subsidiaries. As a participant in our
stock option plans, he beneficially owns some shares of our common stock that
are registered for resale. He has signed a lock-up agreement and agreed not to
sell any shares of our common stock during the 90 days after this offering,
except to the extent A.G. Edwards & Sons, Inc. approves, in its sole
discretion.

Martin H. Jurick, Brad Davidson and Robert B. Phinizy are directors.
Messrs. Jurick and Phinizy also have consulting relationships with us. As
participants in our stock option plans, they beneficially own some shares of
our common stock that are registered for resale. They have signed lock-up
agreements and have agreed not to sell any shares of our common stock during
the 90 days after this offering, except to the extent A.G. Edwards & Sons,
Inc. approves, in its sole discretion.

Each selling stockholder's mailing address is Post Office Box 26890, Santa
Ana, California 92799-6890.

36
<PAGE>

DESCRIPTION OF CAPITAL STOCK

We are authorized to issue 20,000,000 shares of Common Stock, $.20 par value
("Common Stock"), of which 11,453,193 shares were issued and outstanding at
March 31, 2000, and 1,000,000 shares of Preferred Stock, $1.00 par value
("Preferred Stock"), of which none was issued and outstanding at April 14,
2000.

Common Stock

Each stockholder is entitled to one vote for each share of Common Stock held
of record on all matters to be voted on by stockholders, and stockholders are
not entitled to cumulate votes for the election of directors. Stockholders have
no preemptive rights or other subscription rights. There are no conversion
rights or redemption rights with respect to shares of Common Stock. All
outstanding shares of Common Stock are, and those that we offer hereby will be,
when issued, validly issued, fully paid and nonassessable. Holders of Common
Stock are entitled to such dividends as may be declared by the Board of
Directors out of funds legally available therefor. On our liquidation,
dissolution or winding up, the holders of Common Stock are entitled to receive
pro rata our net assets remaining after the payment of debts, expenses and the
liquidation preference of any outstanding shares of Preferred Stock. The Common
Stock is quoted on the Nasdaq National Market under the symbol "MSCC."

Registration Rights

In June 1992, we granted registration rights with respect to shares of our
common stock that were issuable upon conversion of convertible subordinated
promissory notes. We have filed a registration statement on Form S-3 in order
to register the resale of those shares. Through the present we have maintained
the effectiveness of the Form S-3 registration. We estimate that 325,000 shares
of common stock remain unsold under the Form S-3. Of these shares, 80,000 are
subject to a lock-up agreement as described in "Principal and Selling
Stockholders."

Preferred Stock

Our Board of Directors, pursuant to the Certificate of Incorporation as
amended, is authorized to issue the Preferred Stock in one or more series and
to fix the voting rights, liquidation preferences, dividend rights, conversion
rights, redemption rights and terms, including sinking fund provisions, and
certain other rights and preferences of the Preferred Stock. The Board of
Directors, without stockholder approval, can therefore, issue Preferred Stock
with voting, conversion and other rights that could adversely affect the voting
power and other rights of, and amounts payable with respect to, the Common
Stock. This may be deemed to have a potential anti-takeover effect because the
issuance of Preferred Stock in accordance with such provision may delay, defer
or prevent a change of control regarding us and could adversely affect the
price of our Common Stock.

Delaware Law

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless either (i) prior to
the date on which the person becomes an interested stockholder, the Board of
Directors approves such transaction or business combination, (ii) the
stockholder acquires more than 85% of the outstanding voting stock of the
corporation (excluding shares held by directors who are officers or held in
certain employee stock plans) upon consummation of such transaction, or (iii)
the business combination is approved by the Board of Directors and by two-
thirds of the outstanding voting stock of the corporation (excluding shares
held by the interested stockholder) at a meeting of stockholders (and not by
written consent). A "business combination" includes a merger, asset sale or
other transaction resulting in a financial benefit to such interested
stockholder. For purposes of Section 203, "interested stockholder" is a person
who, together with affiliates and associates, owns (or within three years
prior, did own) 15% or more of the corporation's voting stock.

Transfer Agent and Registrar

The transfer agent and registrar for our Common Stock is ChaseMellon
Shareholder Services, 400 South Hope Street, 4th Floor, Los Angeles, California
90071, Attention: Stock Transfer Administration.

37
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the underwriting agreement among
Microsemi, the selling stockholders and the representatives on behalf of the
underwriters, the underwriters have agreed severally to purchase from Microsemi
the following number of shares of common stock at the offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus.

<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
A.G. Edwards & Sons, Inc............................................
CIBC World Markets Corp.............................................
Needham & Company, Inc..............................................
---------
Total............................................................. 2,220,000
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
certain conditions precedent, and that the underwriters are obligated to take
and pay for all of the shares of common stock offered hereby (other than those
covered by the over-allotment option described below) if any are taken.

The representatives of the underwriters have advised us that they propose to
offer such shares of common stock to the public at the offering price set forth
on the cover page of this prospectus and to certain dealers at such price less
a concession not in excess of $ per share. The underwriters may allow, and
such dealers may re-allow, a concession not in excess of $ per share to
certain other dealers. After the offering, the offering price and other selling
terms may be changed by the underwriters.

We have granted to the underwriters an option, exercisable for 30 days after
the date of this prospectus, to purchase up to 333,000 additional shares of
common stock at the offering price, less the underwriting discounts and
commissions set forth on the cover page of this prospectus, solely to cover
over-allotments. To the extent that the underwriters exercise such option, the
underwriters will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number set
forth next to such underwriter's name in the preceding table bears to the total
number of shares in such table, and Microsemi will be obligated, pursuant to
the option, to sell such shares to the underwriters.

Microsemi and each of its directors and executive officers, including the
selling stockholders, have agreed not to sell or otherwise dispose of any
shares of common stock for a period of 90 days after the date of this
prospectus without the prior written consent of A.G. Edwards & Sons, Inc. A.G.
Edwards & Sons, Inc. may, in its sole discretion, allow any of these parties to
dispose of common stock or other securities prior to the expiration of such 90-
day period. Except as discussed above, there are, however, no agreements
between A.G. Edwards & Sons, Inc. and these parties that would allow them to do
so as of the date of this prospectus.

The lock-up agreements do not apply to the selling stockholders' sales to
the underwriters contemplated by the underwriting agreement.

38
<PAGE>

The following table summarizes the discounts and commissions that Microsemi
and the selling stockholders will pay to the underwriters in the offering.
These amounts assume both no exercise and full exercise of the underwriters'
option to purchase additional shares of common stock.

<TABLE>
<CAPTION>
Paid by Selling
Paid By Microsemi Stockholders
----------------- -----------------
No Full No Full
Exercise Exercise Exercise Exercise
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Per Share................................ $ $ $ $
Total....................................
</TABLE>

Microsemi expects to incur expenses of approximately $500,000 in connection
with this offering. Microsemi and the selling stockholders have agreed to
indemnify the underwriters against certain liabilities, including liabilities
under the Securities Act.

Until the distribution of the common stock is completed, rules of the SEC
may limit the ability of the underwriters and certain selling group members to
bid for and purchase the common stock. As an exception to these rules, the
underwriters are permitted to engage in certain transactions that stabilize,
maintain or otherwise affect the price of the common stock.

If the underwriters create a short position in the common stock in
connection with the offering, i.e., if they sell a greater aggregate number of
shares of common stock than is set forth on the cover page of this prospectus,
the underwriters may reduce the short position by purchasing shares of common
stock in the open market. This is known as a "syndicate covering transaction."
The underwriters may also elect to reduce any short position by exercising all
or part of the over-allotment option described above.

The underwriters may also impose a penalty bid on certain selling group
members. This means that if the underwriters purchase common stock in the open
market to reduce the selling group members' short position or to stabilize the
price of the common stock, it may reclaim the amount of the selling concession
from the selling group members who sold those shares of common stock as part of
the offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.

Neither Microsemi nor the representatives make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
Microsemi nor the representatives make any representation that the underwriters
will engage in these transactions or that these transactions, once commenced,
will not be discontinued without notice.

A.G. Edwards & Sons, Inc. has provided, and A.G. Edwards & Sons, Inc., CIBC
World Markets Corp. and Needham & Company, Inc. may in the future provide,
financial advisory and investment banking services to Microsemi from time to
time.

CIBC World Markets Corp. is affiliated with Canadian Imperial Bank of
Commerce. Canadian Imperial Bank of Commerce will be repaid by Microsemi from
proceeds of this offering. See "Use of Proceeds."

39
<PAGE>

CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF COMMON STOCK

We recommend that each prospective purchaser of common stock should consult
a tax advisor with respect to current and possible future tax consequences of
acquiring, holding or disposing of common stock as well as any tax consequences
that may arise under the laws of any nation or nations, state, municipality or
other taxing jurisdiction, whether inside or outside the United States.

The following is a general discussion of certain United States federal
income and estate tax consequences of the purchase, ownership and disposition
of common stock by a Non-U.S. Holder. When we use the term "Non-U.S. Holder,"
we mean any person or entity that is not a United States Holder ("U.S.
Holder").

A U.S. Holder is any beneficial owner of common stock that is:

. a citizen or resident of the United States,

. a corporation or partnership created in or organized
under the laws of the United States or any political
subdivision thereof,

. an estate the income of which is subject to United States
federal income taxation regardless of its source, or

. a trust, (x) that is subject to the supervision of a
court within the United States and the control of one or
more United States persons as described in
section 7701(a)(30) of the U.S. Internal Revenue Code of
1986, as amended (the "Code"), or (y) that has a valid
election in effect under applicable United States
Treasury regulations to be treated as a United States
person.

This discussion does not address all aspects of United States federal income
and estate taxes and does not deal with other foreign, state and local tax
consequences that may be relevant to Non-U.S. Holders.

Also, special rules may apply to some Non-U.S. Holders, such as foreign
insurance companies, "controlled foreign corporations," "passive foreign
investment companies," "foreign personal holding companies," companies that
accumulate earnings for the purpose of avoiding tax, and expatriate United
States citizens, each of which is subject to special treatment under the Code.
All Non-U.S. Holders should consult their own tax advisors to determine the
United States federal tax consequences that may be relevant to them in light of
their own circumstances.

Although certain countries are parties to tax treaties with the United
States, the Code restricts the applicability of tax treaties strictly to
qualified residents, as defined in the Code, of the country that is a party to
the tax treaty. Non-U.S. Holders should consult their own tax advisors to
determine whether tax treaties apply to them in light of their own
circumstances.

Furthermore, this discussion is based on provisions, each of which is
subject to change, of the Code, of existing and proposed regulations
promulgated under the Code and of administrative and judicial interpretations
of the Code and such regulations, as they have existed prior to the date of
this prospectus.

Dividends

Dividends paid to a Non-U.S. Holder of common stock generally will be
subject to a United States federal income tax that is withheld by the payer, at
a 30% rate or a lower rate that may be specified by an applicable income tax
treaty. However, dividends that are effectively connected with the conduct of a
trade or business by the Non-U.S. Holder within the United States and, where a
tax treaty applies, are attributable to a United States permanent establishment
of the Non-U.S. Holder, are not subject to this withholding, but they are
subject instead to United States federal income tax on a net income basis at
applicable graduated individual or corporate rates, as applicable. Certain
certification and disclosure requirements must be complied with in order for
effectively connected income to be exempt from withholding. Any such
effectively connected dividends received by a foreign corporation may be
subject to an additional "branch profits tax" at a 30% rate or a lower rate as
may be specified by an applicable income tax treaty.

40
<PAGE>

Through December 31, 2000, dividends paid to an address outside the United
States are presumed to be paid to a resident of that country (unless the payer
has knowledge to the contrary) for purposes of the withholding tax discussed
above and, under the current interpretation of United States Treasury
regulations, for purposes of determining the applicability of a tax treaty
rate. However, United States Treasury regulations (the "Final Regulations")
provide that a Non-U.S. Holder of common stock who wishes to claim the benefit
of an applicable treaty rate (and avoid back-up withholding as discussed below)
for dividends paid after December 31, 2000, will be required to satisfy
applicable certification and other requirements.

A Non-U.S. Holder of common stock eligible for a reduced rate of United
States withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
Internal Revenue Service (the "IRS").

Gain on Disposition of Common Stock

A Non-U.S. Holder generally will not be subject to United States federal
income tax with respect to gain recognized on a sale or other disposition of
common stock unless (1) the gain is effectively connected with the conduct of a
trade or business of the Non-U.S. Holder in the United States, and, where a tax
treaty applies, is attributable to a United States permanent establishment of
the Non-U.S. Holder, (2) in the case of a Non-U.S. Holder who is an individual
and holds the common stock as a capital asset, such holder is present in the
United States for an aggregate of 183 days or more in the taxable year of the
sale or other disposition, as determined under the Code, and certain other
conditions are met, or (3) we are or had been a "United States real property
holding corporation" for United States federal income tax purposes.

An individual Non-U.S. Holder described in clause (1) above will be subject
to tax on the net gain derived from the sale under regular graduated United
States federal income tax rates. An individual Non-U.S. Holder described in
clause (2) above will be subject to a flat 30% tax on the gain derived from the
sale, which may be offset by United States source capital losses (even though
the individual is not considered a resident of the United States). If a Non-
U.S. Holder that is a foreign corporation falls under clause (1) above, it will
be subject to tax on its gain under regular graduated United States federal
income tax rates and, in addition, may be subject to a branch profits tax equal
to 30% of its effectively connected earnings and profits (within the meaning of
the Code) for the taxable year, as adjusted for certain items, unless it
qualifies for a lower rate or an exemption under an applicable income tax
treaty.

We believe that we are not, and we do not presently anticipate becoming, a
"United States real property holding corporation" for United States federal
income tax purposes.

Information Reporting and Backup Withholding

We must report annually to the IRS and to each Non-U.S. Holder the amount of
any dividends paid to such holder and any tax withheld with respect to such
dividends, regardless of whether withholding was required. Copies of the
information returns that report such dividends and withholding may also be made
available to the tax authorities in the country in which the Non-U.S. Holder
resides, under the provisions of an applicable income tax treaty.

Under current law, backup withholding at the rate of 31% (as opposed to the
general withholding tax rate of 30% described above) generally will not apply
to dividends paid to a Non-U.S. Holder at an address outside the United States
(unless the payer has knowledge that the payee is a United States person).
Under the Final Regulations, however, a Non-U.S. Holder will be subject to
backup withholding unless applicable certification requirements are met.

Payment of the proceeds of a sale of common stock within the United States
or conducted through certain United States-related financial intermediaries is
subject to both backup withholding and information reporting unless the
beneficial owner certifies under penalties of perjury that it is a Non-U.S.
Holder (and the payer does not have actual knowledge that the beneficial owner
is a United States person) or the holder otherwise establishes an applicable
exemption.

41
<PAGE>

Any amounts withheld under the backup withholding rules may be allowed as a
refund or a credit against such holder's United States federal income tax
liability provided that the required information is furnished to the IRS.

Federal Estate Tax

Common stock beneficially held by an individual Non-U.S. Holder at the time
of his or her death, as determined under the Code, will be included in such
Non-U.S. Holder's gross estate for United States federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise.

42
<PAGE>

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for us by Stradling, Yocca, Carlson & Rauth, a Professional Corporation,
Newport Beach, California. All attorneys who are members of, employed by or of
counsel with Stradling, Yocca, Carlson & Rauth, participating in such matter on
behalf of such firm beneficially owned as of April 14, 2000 an aggregate of
approximately 5,000 shares of our Common Stock. O'Melveny & Myers LLP, Newport
Beach, California, will pass upon certain legal matters for the underwriters.

EXPERTS

The consolidated financial statements as of October 3, 1999 and September
27, 1998 and for each of the three years in the period ended October 3, 1999,
included or incorporated by reference in this prospectus have been so included
or incorporated by reference in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. You may also obtain our SEC filings from the SEC's website at
http://www.sec.gov/.

The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. Statements made in this prospectus as to the
contents of any contract, agreement or other documents are not necessarily
complete, and, in each instance, we refer you to a copy of such document filed
as an exhibit to the registration statement or otherwise filed with the SEC.
The information incorporated by reference is considered to be part of this
prospectus. When we file information with the SEC in the future, that
information will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:

a. Our Annual Report on Form 10-K for the fiscal year ended October 3,
1999 including portions of our definitive Proxy Statement for the 2000
Annual Meeting of Stockholders incorporated therein by reference;

b. Our Quarterly Reports on Form 10-Q for the quarterly period ended
January 2, 2000; and

c. Our Current Report on Form 8-K filed on March 15, 2000 reporting
under Item 2 and Item 7 regarding the acquisition of assets from Infinesse
Corporation.

You may request a copy of these filings, at no cost, by writing or
telephoning us at:

Microsemi Corporation
Attention: David R. Sonksen, Secretary
2830 South Fairview Street
Santa Ana, California 92704
Telephone (714) 979-8220

43
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
MICROSEMI CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
Page
----

<S> <C>
Report of Independent Accountants....................................... F-2

Consolidated Balance Sheets at September 27, 1998, October 3, 1999 and
January 2, 2000 (unaudited)............................................ F-3

Consolidated Income Statements for each of the three fiscal years in the
period ended October 3, 1999 and the two fiscal quarters ended January
2, 2000 and January 3, 1999 (unaudited)................................ F-4

Consolidated Statements of Stockholders' Equity for each of the three
fiscal years in the period ended October 3, 1999 and the fiscal quarter
ended January 2, 2000 (unaudited)...................................... F-5

Consolidated Statements of Cash Flows for each of the three fiscal years
in the period ended October 3, 1999 and the two fiscal quarters ended
January 2, 2000 and January 3, 1999 (unaudited)........................ F-6

Notes to Consolidated Financial Statements.............................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Microsemi Corporation

In our opinion, the accompanying consolidated balance sheets and the related
consolidated income statements, statements of stockholders' equity and
statements of cash flows present fairly, in all material respects, the
financial position of Microsemi Corporation and its subsidiaries at October 3,
1999 and September 27, 1998, and the results of their operations and their cash
flows for each of the three fiscal years in the period ended October 3, 1999,
in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

Costa Mesa, California
November 22, 1999

F-2
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except per share amounts)

<TABLE>
<CAPTION>
September 27, October January 2,
1998 3, 1999 2000
------------- -------- ----------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 9,610 $ 7,624 $ 7,712
Accounts receivable, less allowance for
doubtful accounts, $2,457 at September
27, 1998, $3,805 at October 3, 1999 and
$3,958 at January 2, 2000............... 23,094 31,775 29,684
Inventories.............................. 54,433 56,925 55,630
Deferred income taxes.................... 6,049 7,282 7,282
Other current assets..................... 1,319 2,128 1,774
-------- -------- ---------
Total current assets................... 94,505 105,734 102,082
-------- -------- ---------
Property and equipment, net................ 35,554 54,946 54,710
-------- -------- ---------
Deferred income taxes...................... -- 862 862
-------- -------- ---------
Goodwill and other intangible assets, net.. 9,729 12,218 11,920
-------- -------- ---------
Other assets............................... 5,300 7,841 8,223
-------- -------- ---------
TOTAL ASSETS........................... $145,088 $181,601 $ 177,797
======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks and others........ $ 6,172 $ 18,545 $ 15,550
Current maturities of long-term debt..... 4,339 8,422 8,888
Accounts payable......................... 6,656 11,247 10,555
Accrued liabilities...................... 14,401 17,292 17,367
Income taxes payable..................... 5,874 7,178 5,866
-------- -------- ---------
Total current liabilities.............. 37,442 62,684 58,226
-------- -------- ---------
Long-term debt........................... 18,667 31,381 29,605
-------- -------- ---------
Other long-term liabilities.............. 1,962 5,092 6,556
-------- -------- ---------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.20 par value;
authorized 20,000 shares; issued 11,666
in 1998, 10,920 in 1999 and 10,920 in
2000 2,333 2,184 2,184
Capital in excess of par value of common
stock................................... 49,896 46,695 46,695
Retained earnings........................ 35,734 34,561 35,527
Accumulated other comprehensive loss....... (946) (996) (996)
-------- -------- ---------
Total stockholders' equity............. 87,017 82,444 83,410
-------- -------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................ $145,088 $181,601 $177 ,797
======== ======== =========
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS
(amounts in thousands, except earnings per share)

<TABLE>
<CAPTION>
Fiscal years ended Quarters ended
------------------------------------ ---------------------
September 28, September 27, October January 3, January 2,
1997 1998 3, 1999 1999 2000
------------- ------------- -------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net sales............... $163,234 $164,710 $185,081 $39,417 $54,588
Cost of sales........... 117,274 117,425 144,211 28,556 41,020
-------- -------- -------- ------- -------
Gross profit.......... 45,960 47,285 40,870 10,861 13,568
-------- -------- -------- ------- -------
Operating expenses:
Selling............... 9,226 10,939 14,010 3,131 4,244
General and
administrative....... 12,833 13,839 14,424 2,984 4,182
Amortization of
goodwill and
intangible assets.... 221 516 1,395 285 394
Research and
development.......... 1,161 1,532 4,002 348 2,345
Acquired in-process
research and
development.......... -- -- 1,950 -- --
-------- -------- -------- ------- -------
Total operating
expenses........... 23,441 26,826 35,781 6,748 11,165
-------- -------- -------- ------- -------
Income from
operations......... 22,519 20,459 5,089 4,113 2,403
-------- -------- -------- ------- -------
Other income (expenses):
Interest expense...... (3,684) (2,148) (3,112) (552) (1,048)
Other................. (329) (50) (36) 116 87
-------- -------- -------- ------- -------
Total other
expenses........... (4,013) (2,198) (3,148) (436) (961)
-------- -------- -------- ------- -------
Income before income
taxes.................. 18,506 18,261 1,941 3,677 1,442
Provision for income
taxes.................. 7,455 6,939 442 1,397 476
-------- -------- -------- ------- -------
Net income.............. $ 11,051 $ 11,322 $ 1,499 $ 2,280 $ 966
======== ======== ======== ======= =======
Basic earnings per
share.................. $ 1.30 $ 1.05 $ 0.13 $ 0.20 $ 0.09
======== ======== ======== ======= =======
Diluted earnings per
share.................. $ 1.03 $ 0.98 $ 0.13 $ 0.20 $ 0.09
======== ======== ======== ======= =======
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(amounts in thousands)

<TABLE>
<CAPTION>
Common Stock
--------------------------------
Capital in
excess of par Accumulated
value Retained other compre-
Shares Amount of common stock earnings hensive loss Total
------ ------- --------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 29,
1996................... 7,908 $ 1,582 $ 14,895 $ 13,691 $ (760) $ 29,408
Exercise of employee
stock options........ 228 45 442 -- -- 487
Treasury stock
repurchased and
canceled............. (15) (3) (187) -- -- (190)
Conversion of debt.... 615 123 1,047 -- -- 1,170
Comprehensive income.. -- -- -- 11,051 (17) 11,034
------ ------- -------- -------- ------ --------
Balance at September 28,
1997................... 8,736 1,747 16,197 24,742 (777) 41,909
Exercise of employee
stock options........ 191 38 519 -- -- 557
Treasury stock
repurchased and
canceled............. (114) (22) (488) (330) -- (840)
Conversion of debt.... 2,853 570 33,668 -- -- 34,238
Comprehensive income.. -- -- -- 11,322 (169) 11,153
------ ------- -------- -------- ------ --------
Balance at September 27,
1998................... 11,666 2,333 49,896 35,734 (946) 87,017
Exercise of employee
stock options........ 14 3 49 -- -- 52
Treasury stock
repurchased and
canceled............. (760) (152) (3,250) (2,672) -- (6,074)
Comprehensive income.. -- -- -- 1,499 (50) 1,449
------ ------- -------- -------- ------ --------
Balance at October 3,
1999................... 10,920 2,184 46,695 34,561 (996) 82,444
Comprehensive income.. -- -- -- 966 -- 966
------ ------- -------- -------- ------ --------
Balance at January 2,
2000 (unaudited)....... 10,920 $ 2,184 $ 46,695 $ 35,527 $ (996) $ 83,410
====== ======= ======== ======== ====== ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)

<TABLE>
<CAPTION>
Fiscal years ended Quarters ended
-------------------------------------- ---------------------
September 28, September 27, October 3, January 3, January 2,
1997 1998 1999 1999 2000
------------- ------------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities
Net income.............. $ 11,051 $ 11,322 $ 1,499 $ 2,280 $ 966
Adjustments to reconcile
net income to net cash
provided by operating
activities
Depreciation and
amortization......... 4,257 5,281 8,818 1,749 2,887
Allowance for doubtful
accounts............. 506 (182) (611) (437) 153
Provision for excess
and obsolete
inventories.......... -- -- 5,951 -- --
Loss on disposition
and retirement of
assets............... 9 93 -- -- --
Acquired in-process
research and
development.......... -- -- 1,950 -- --
Deferred income
taxes................ (712) (212) (2,095) -- --
Change in assets and
liabilities, net
of acquisitions and
disposition:
Accounts receivable.. (215) 72 179 2,209 1,938
Inventories.......... (1,719) (3,656) (2,069) (1,612) 1,295
Other current
assets.............. (3,098) 2,662 381 (336) 354
Other assets......... 786 1,301 -- (1,695) --
Accounts payable..... 2,853 (3,210) 1,017 (1,243) (692)
Accrued liabilities.. 820 (915) (194) (881) 75
Income taxes
payable............. 1,049 13 1,304 1,284 188
-------- -------- -------- ------- -------
Net cash provided by
operating
activities.......... 15,587 12,569 16,130 1,318 7,164
-------- -------- -------- ------- -------
Cash flows from
investing activities
Purchases of property
and equipment.......... (6,052) (5,905) (7,932) (1,029) (2,255)
Proceeds from
disposition and sale of
assets................. -- 5,029 -- -- --
Other assets............ -- -- (2,837) -- (229)
Payments for
acquisitions, net of
cash acquired.......... (5,201) (13,740) (29,570) -- --
Investment in an
unconsolidated
affiliate.............. -- (1,000) -- -- (251)
-------- -------- -------- ------- -------
Net cash used in
investing
activities.......... (11,253) (15,616) (40,339) (1,029) (2,735)
-------- -------- -------- ------- -------
Cash flows from
financing activities
Increase (decrease) in
notes payable to
banks and others....... 81 (66) 12,373 1,335 (2,995)
Proceeds from long-term
debt................... -- 10,000 30,800 -- --
Payments of long-term
debt................... (2,571) (3,848) (14,003) (1,068) (1,310)
Increase (decrease) in
other long-term
liabilities............ (38) 38 (35) (26) (36)
Repurchases of common
stock.................. (190) -- (6,914) (2,785) --
Exercise of employee
stock options.......... 487 557 52 16 --
-------- -------- -------- ------- -------
Net cash provided by
(used in) financing
activities............. (2,231) 6,681 22,273 (2,528) (4,341)
-------- -------- -------- ------- -------
Effect of exchange rate
changes on cash........ (17) (169) (50) (7) --
-------- -------- -------- ------- -------
Net increase (decrease)
in cash and cash
equivalents............ 2,086 3,465 (1,986) (2,246) 88
Cash and cash
equivalents at
beginning of year...... 4,059 6,145 9,610 9,610 7,624
-------- -------- -------- ------- -------
Cash and cash
equivalents at end of
year................... $ 6,145 $ 9,610 $ 7,624 $ 7,364 $ 7,712
======== ======== ======== ======= =======
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Microsemi Corporation is a leading designer, manufacturer and marketer of
analog, mixed-signal and discrete semiconductors serving the mobile
connectivity, telecommunications, computers/peripherals, military and
aerospace, satellites/space, and medical markets.

Fiscal Year

The Company reports results of operations on the basis of fifty-two and
fifty-three week periods. The Company's 1999 fiscal year ended on October 3,
1999 and consisted of fifty-three weeks. Fiscal years 1998 and 1997 consisted
of fifty-two weeks.

Principles of Consolidation

The consolidated financial statements include the accounts of Microsemi
Corporation and its wholly-owned subsidiaries. All significant intercompany
transactions have been eliminated.

Use of Estimates

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

Interim Financial Statements (unaudited)

The consolidated financial statements for the three months ended January 3,
1999 and January 2, 2000 are unaudited and should be read in conjunction with
the Company's annual financial statements for the fiscal year ended October 3,
1999. Such interim financial statements have been prepared in conformity with
the rules and regulations of the Securities and Exchange Commission. Certain
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations pertaining to interim financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation have been included.
The results of operations of any interim period are not necessarily indicative
of the results of operations for the full year.

Fair Value of Financial Instruments

The carrying values of cash equivalents, accounts receivable, accrued
liabilities and notes payable approximate their fair values because of the
short maturity of these instruments. The carrying value of the Company's long-
term debt approximates fair value based upon the current rate offered to the
Company for obligations of the same remaining maturities.

Concentration of Credit Risk and Foreign Sales

The Company is potentially subject to concentrations of credit risk
consisting principally of trade receivables. Concentrations of credit risk
exist because the Company relies on a significant portion of customers whose
principal sales are to the U.S. Government. In addition, sales to foreign
customers represented

F-7
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

approximately 22%, 23% and 35% of net sales for fiscal years 1997, 1998 and
1999, respectively. These sales were principally to customers in Europe and
Asia. The Company maintains reserves for potential credit losses and such
losses have been within management's expectations.

Investments

The Company's investments in certain unconsolidated affiliates are stated at
the lower of cost or estimated net realizable value.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined by
the first-in, first-out method, except for cost of inventories at the
Scottsdale, Arizona subsidiary, which cost is determined using the last-in,
first-out method (see Note 2).

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed on the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized over the shorter of the lease terms or the estimated
useful lives. Maintenance and repairs are charged to expense as incurred and
the costs of additions and betterments that increase the useful lives of the
assets are capitalized.

Intangible Assets

Intangible assets, arising principally from differences between the cost of
acquired companies and the underlying values at dates of acquisition
(goodwill), are amortized on a straight-line basis over periods not exceeding
ten years.

Impairment of Long-Lived Assets

In accordance with the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS 121"), the Company reviews long-
lived assets, including property and equipment, for impairment whenever events
or changes in business circumstances indicate that the carrying amount of the
assets may not be fully recoverable. Under SFAS 121, an impairment loss is
recognized when estimated undiscounted future cash flows expected to result
from the use of the asset and its eventual disposition are less than its
carrying amount. Impairment, if any, is determined as the amount by which the
carrying value of an asset exceeds its fair value.

Revenue Recognition

Revenue is recognized at the time of product shipment. The Company, under
specific conditions, permits its customers to return or exchange products. A
provision for estimated sales returns is recorded concurrently with the
recognition of revenue, based on historical experience.

Research and Development

The Company expenses the cost of research and development as incurred.
Research and development expenses principally comprise payroll and related
costs and the cost of prototypes.

Stock-Based Compensation

The Company accounts for its stock based compensation plans under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees",
and related interpretations. The disclosures required under Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-based
Compensation" ("SFAS 123"), have been included in Note 8.

F-8
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Income Taxes

Deferred tax assets and liabilities are recorded for the expected future tax
consequences of events that have been recognized in the Company's financial
statements or tax returns. In estimating future tax consequences, all expected
future events, including enactment of changes in tax laws or rates are
considered. A valuation allowance is provided for deferred tax assets when it
is more likely than not that such assets will not be realized through future
operations.

Preferred Stock

The Company's certificate of incorporation authorizes the board of directors
to issue up to 1,000,000 shares of Preferred Stock and to designate the rights
and terms of any such issuances. The Company has not issued any Preferred
Stock.

Earnings Per Share

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share". This Statement establishes standards for computing
and requires the presentation of basic and diluted earnings per share ("EPS").
The company adopted this statement in the first quarter of fiscal year 1998 and
has restated the EPS for the prior year periods presented, as required.

Basic earnings per share have been computed based upon the weighted average
number of common shares outstanding during the respective periods. Diluted
earnings per share have been computed, when the result is dilutive, using the
treasury stock method for stock options outstanding during the respective
periods and based upon the assumption that the convertible subordinated
debentures had been converted into common stock as of the beginning of the
respective periods, with a corresponding increase in net income to reflect a
reduction in related interest expense, net of applicable taxes.

Earnings per share were calculated as follows:

F-9
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

There were approximately 442,000 and 631,000 options in fiscal years 1998
and 1999, respectively, that were not included in the computation of diluted
earnings per share because the exercise price was greater than the average
market price of the common stock, thereby resulting in an antidilutive effect.

Comprehensive Income

Effective in the first quarter of fiscal 1999, the Company adopted Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 establishes standards for reporting and displaying of
comprehensive income and its components in the Company's consolidated financial
statements. Comprehensive income is defined in SFAS 130 as the change in equity
(net assets) of a business enterprise during the period from transactions and
other events and circumstances from all non-owner sources. Accumulated other
comprehensive loss in the accompanying Statements of Stockholders' Equity
consists of the change in the cumulative translation adjustment. Total
comprehensive income for fiscal years 1997, 1998 and 1999 was $11,034,000,
$11,153,000 and $1,449,000 respectively.

Segments

In fiscal year 1999, the Company adopted Statement of Financial Accounting
Standards No. 131 ("SFAS 131"), "Disclosure about Segments of an Enterprise and
Related Information". SFAS 131 superseded SFAS 14, "Financial Reporting for
Segments of a Business Enterprise", replacing the "industry segment" approach
with the "management" approach. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments. SFAS
131 also requires disclosures about products and services, geographic areas,
and major customers. The adoption of SFAS 131 did not affect results of
operations or consolidated financial position, but did affect the disclosure of
segment information (see note 11).

Recently Issued Accounting Standard

In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which will become effective for the Company in fiscal year 2001. SFAS
133 establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for hedging activities. SFAS 133
is not expected to materially affect the Company's financial position or
results of operations.

Reclassifications

Certain reclassifications have been made to the fiscal year 1997 and 1998
balances to conform with the fiscal year 1999 presentation.

2. INVENTORIES

Inventories are summarized as follows (in thousands):

<TABLE>
<CAPTION>
September 28, September 27, October 3, January 2,
1997 1998 1999 2000
------------- ------------- ---------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Raw materials................ $15,954 $14,759 $14,002 $12,378
Work in process.............. 23,774 18,282 22,244 21,171
Finished goods............... 13,520 21,392 20,679 22,081
------- ------- ------- -------
$53,248 $54,433 $56,925 $55,630
======= ======= ======= =======
</TABLE>

F-10
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Inventories in the amount of $9,013,000 at Microsemi Scottsdale at October
3, 1999 are stated at cost under the last-in, first-out ("LIFO") method. Had
the first-in, first-out method been used, total inventories would have been
approximately $27,000 higher at September 28, 1997, $615,000 lower at September
27, 1998 and $19,000 higher at October 3, 1999. The LIFO valuation method had
the effect of increasing gross profit by $23,000 in fiscal year 1997,
decreasing gross profit by $642,000 in fiscal year 1998 and increasing gross
profit by $634,000 in fiscal year 1999.

3. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

<TABLE>
<CAPTION>
September 27, October 3, January 2,
Asset Life 1998 1999 2000
------------- ------------- ---------- -----------
(unaudited)
(amounts in 000's)
<S> <C> <C> <C> <C>
Buildings................... 20-40 years $17,896 $27,605 $28,830
Property and equipment...... 3-10 years 48,160 63,304 61,943
Furniture and fixtures...... 5-10 years 1,044 1,299 1,358
Leasehold improvements...... Life of lease 2,713 2,078 2,150
------- ------- -------
69,813 94,286 94,281
Accumulated depreciation.... (42,113) (47,732) (49,482)
Land........................ 5,004 5,419 5,419
Construction in progress.... 2,850 2,973 4,492
------- ------- -------
$35,554 $54,946 $54,710
======= ======= =======
</TABLE>

Depreciation expense was, $4,036,000 $4,765,000 and $7,423,000 in fiscal
years 1997, 1998 and 1999, respectively. Depreciation expense for the quarter
ended January 2, 2000 was $2,493,000 (unaudited).

At October 3, 1999, land and buildings located at the Santa Ana, California
manufacturing and headquarters facility were pledged to the City of Santa Ana
under the provisions of a loan agreement with the Santa Ana Industrial
Development Authority. The land and building of the Microsemi Colorado
subsidiary were pledged to the City of Broomfield, Colorado under the
provisions of a loan agreement with the Colorado Industrial Development
Authority. The land and buildings in Watertown, Massachusetts and in Ennis,
Ireland are pledged to Unitrode Corporation under the provisions of the related
acquisition agreement. The building and land in Riviera Beach, Florida are
pledged to the former owner under the provisions of the related acquisition
agreement.

4. GOODWILL AND OTHER INTANGIBLE ASSETS, NET AND OTHER ASSETS

<TABLE>
<CAPTION>
September 27, October 3, January 2,
1998 1999 2000
------------- ---------- -----------
(unaudited)
(amounts in 000's)
<S> <C> <C> <C>
Goodwill and other intangible assets,
net..................................... $9,729 $12,218 $11,920
====== ======= =======
</TABLE>

Accumulated amortization for goodwill and other intangible assets amounted
to $1,869,000, $2,484,000, and $2,834,000 (unaudited) as of September 27, 1998,
October 3, 1999 and January 2, 2000, respectively. Amortization expense for
fiscal years 1997, 1998 and 1999 was $36,000, $393,000 and $1,231,000,
respectively. Amortization expense for the quarter ended January 2, 2000 was
$350,000 (unaudited).

F-11
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Other assets consisted of the following:

<TABLE>
<CAPTION>
September 27, October 3, January 2,
1998 1999 2000
------------- ---------- -----------
(unaudited)
(amounts in 000's)
<S> <C> <C> <C>
Investments in
unconsolidated
affiliates............. $ 1,878 $2,126 $2,227
Deferred financing
expenses, net.......... 375 693 631
Cash surrender value of
life insurance......... 443 467 496
Notes receivable........ 2,320 2,229 2,095
Property held for sale.. -- 2,075 2,182
Others.................. 284 251 592
------- ------ ------
$ 5,300 $7,841 $8,223
======= ====== ======
</TABLE>

Accumulated amortization for deferred financing expenses amounted to
$883,000, $1,047,000 and $1,091,000 (unaudited) as of September 27, 1998,
October 3, 1999 and January 2, 2000, respectively. Amortization expense for
fiscal years 1997, 1998 and 1999 was $185,000, $123,000 and $164,000,
respectively. Amortization expense for the quarter ended January 2, 2000 was
$44,000 (unaudited).

5. ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

<TABLE>
<CAPTION>
September 27, October 3, January 2,
1998 1999 2000
------------- ---------- -----------
(unaudited)
(amounts in 000's)
<S> <C> <C> <C>
Accrued payroll, profit sharing, benefits
and related taxes....................... $ 8,018 $ 8,331 $ 8,627
Accrued interest......................... 2,314 2,387 2,251
Other accrued expenses................... 4,069 6,574 6,489
-------- ------- -------
$ 14,401 $17,292 $17,367
======== ======= =======
</TABLE>

F-12
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6. INCOME TAXES

Pretax income from continuing operations was taxed under the following
jurisdictions:

<TABLE>
<CAPTION>
Fiscal year
----------------------
1997 1998 1999
------- ------- ------
(amounts in 000's)
<S> <C> <C> <C>
Domestic................................................. $15,929 $14,010 $ 547
Foreign.................................................. 2,577 4,251 1,394
------- ------- ------
Total.................................................... $18,506 $18,261 $1,941
======= ======= ======
</TABLE>

The provision for income taxes consisted of the following components:

<TABLE>
<CAPTION>
Fiscal year
-----------------------
1997 1998 1999
------- ------ -------
(amounts in 000's)
<S> <C> <C> <C>
Current
Federal.............................................. $ 6,525 $4,320 $ 1,986
State................................................ 1,332 918 301
Foreign.............................................. 310 490 250
Deferred............................................... (712) 1,211 (2,095)
------- ------ -------
$ 7,455 $6,939 $ 442
======= ====== =======
</TABLE>

The tax effected deferred tax assets (liabilities) comprise the following:

<TABLE>
<CAPTION>
September 27, October 3,
1998 1999
------------- ----------
(amounts in 000's)
<S> <C> <C>
Tax effects arising from:
Accounts receivable.................................. $ 1,384 $ 720
Inventories.......................................... 418 4,946
Other assets......................................... 1,434 1,506
Fixed asset bases.................................... 1,007 931
Accrued employee benefit expenses.................... 2,417 1,371
Accrued other expenses............................... 2,140 1,393
Amortization of intangible assets.................... -- 690
------- -------
Gross deferred tax assets............................ 8,800 11,557
------- -------
Inventory bases...................................... (753) (1,491)
Depreciation......................................... (1,998) (1,922)
------- -------
Gross deferred tax liabilities....................... (2,751) (3,413)
------- -------
Net deferred tax asset............................... $ 6,049 $ 8,144
======= =======
</TABLE>

F-13
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following is a reconciliation of income tax computed at the federal
statutory rate to the Company's actual tax expense:

<TABLE>
<CAPTION>
Fiscal year
---------------------
1997 1998 1999
------- ------ ----
(amounts in 000's)
<S> <C> <C> <C>
Tax computed at statutory rate........................... $ 6,477 $6,392 $660
State taxes, net of federal benefit...................... 850 916 62
Foreign income taxed at different rates.................. 339 (997) (224)
Non-deductible goodwill amortization..................... -- 115 335
Non-deductible interest.................................. -- 310 --
Foreign Sales Corporation benefit........................ -- -- (211)
Tax credits.............................................. -- -- (174)
Other differences, net................................... (211) 203 (6)
------- ------ ----
$ 7,455 $6,939 $442
======= ====== ====
</TABLE>

No provision has been made for future U.S. income taxes on the undistributed
earnings of foreign operations since they have been, for the most part,
indefinitely reinvested in these operations. Determination of the amount of
unrecognized deferred tax liability for temporary differences related to the
undistributed earnings of the Company's foreign operations is not practicable.
At the end of fiscal year 1999, the undistributed earnings aggregated
approximately $19,725,000.

7. DEBT

Long-term debt consisted of:

<TABLE>
<CAPTION>
September 27, October 3, January 2,
1998 1999 2000
------------- ---------- -----------
(unaudited)
(amounts in 000's)
<S> <C> <C> <C>
Industrial Development Bond, bearing
interest at 7.875%, due May 2000;
secured by first deed of trust.......... $ 2,305 $ 2,075 $ 2,075
Industrial Development Bond, bearing
interest at 6.75%, due February 2005;
secured by first deed of trust.......... 4,300 4,200 4,200
Note payable, bearing interest at 5.93%,
payable monthly through July 2002....... 2,070 1,530 1,395
Notes payable (PPC Acquisition), bearing
interest at 7%, payable monthly through
September 2009.......................... 2,092 1,794 1,743
Notes payable to a bank, bearing interest
at the bank's prime rate payable in
monthly installments through July 2003.. 9,667 -- --
Notes payable to a bank, bearing interest
at variable rates, (8.09% at January 2,
2000), payable in quarterly installments
through March 2003...................... -- 28,000 27,000
Notes payable, bearing interest at ranges
of 5% to 9.75%, due between October 1999
and September 2014...................... 2,572 2,204 2,080
------- ------- -------
23,006 39,803 38,493
Less current portion..................... (4,339) (8,422) (8,888)
------- ------- -------
$18,667 $31,381 $29,605
======= ======= =======
</TABLE>

F-14
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Long-term debt maturities at October 3, 1999, including the current portion,
during the next five years are as follows (amounts in 000's):

<TABLE>
<CAPTION>
Fiscal year ending on or about September 30
-------------------------------------------
<S> <C>
2000.......................................... $ 8,422
2001.......................................... 8,224
2002.......................................... 11,070
2003.......................................... 6,202
2004.......................................... 212
Thereafter.................................... 5,673
--------
$ 39,803
========
</TABLE>

A $4,150,000 Industrial Revenue Bond was issued in November 1975 through the
City of Broomfield, Colorado and carries an interest rate of 7.875% per annum.
The balance of $2,075,000 is due in May 2000.

A $6,500,000 Industrial Development Revenue Bond was originally issued in
April 1985, through the City of Santa Ana, California for the construction of
improvements and new facilities at the Company's Santa Ana plant. Of this loan,
$4,200,000 remained outstanding at October 3, 1999. It was remarketed in 1995
and carries an average interest rate of 6.75% per annum. The terms of the bond
require principal payments of $100,000 annually from 2000 to 2004 and
$3,700,000 in 2005. A $4,466,000 letter of credit is carried by a bank to
guarantee the repayment of this bond. There are no compensating balance
requirements. An annual commitment fee of 2% is charged on this letter of
credit. In addition, the agreement contains covenants regarding net worth and
working capital. The Company was in compliance with the aforementioned
covenants at October 3, 1999.

In June 1997, the Company entered into a $2,700,000 equipment loan
agreement, providing for monthly principal payments through July 2002 of
$45,000 plus interest at 5.93% per annum. $1,530,000 of this loan remained
outstanding at October 3, 1999. This loan is secured by the related equipment.

In September 1997, the Company issued and assumed notes payable of
$2,370,000 related to the PPC acquisition. These notes are payable to the
former owners, bear an interest rate of 7%, and are due in monthly installments
of principal and interest over various periods through September 2009.
$1,794,000 of these notes remained outstanding at October 3, 1999. One of these
notes is secured by the related acquired building.

In June 1998, the Company finalized an amendment to its then-existing bank
credit facility, which added a $10,000,000 term loan. $9,667,000 of this loan
was outstanding at September 27, 1998, used by Microsemi to finance a portion
of the BKC acquisition. This term loan was paid in full when the Company
obtained new credit arrangements with its banks in April 1999.

In April 1999, the Company obtained a new credit agreement with its banks,
which included a term loan of $30,000,000 and a revolving line of credit of
$30,000,000 to finance the acquisition of LinFinity Microelectronics, Inc.
("LinFinity"), a subsidiary of Symmetricom, Inc., and to pay off the existing
term loan and the revolving line of credit.

As to the new $30,000,000 term loan, $28,000,000 of this loan remained
outstanding at October 3, 1999 and is secured by substantially all of the
assets of the Company. It bears interest at the bank's prime rate plus .75% to
1.5% per annum or, at the Company's option, at the Eurodollar rate plus 1.75%
to 2.5% per annum. The interest rate is determined by the ratio of total funded
debt to Earnings before Interest Expense (net of interest income), Income
Taxes, Depreciation and Amortization ("EBITDA"). It requires monthly interest

F-15
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

payments and quarterly principal payments of $1,000,000 from June 1999 to March
2000, $1,500,000 from June 2000 to March 2001, $2,000,000 from June 2001 to
March 2002 and $3,000,000 from June 2002 to March 2003. The terms of the term
loan contain covenants regarding net worth and working capital and restricting
payment of cash dividends or share repurchases. The Company was in compliance
with these covenants at October 3, 1999.

Concurrent with the new term loan, the Company obtained a new $30,000,000
revolving line of credit, which expires in March 2003. This line of credit
replaced its then-existing $15,000,000 credit line. The new line of credit is
secured by substantially all of the assets of the Company. It bears interest at
the bank's prime rate plus .75% to 1.5% per annum or, at the Company's option,
at the Eurodollar rate plus 1.75% to 2.5% per annum. The interest rate is
determined by the ratio of total funded debt to EBITDA. The terms of the
revolving line of credit contain covenants regarding net worth and working
capital and restricting payment of cash dividends or share repurchases. The
Company was in compliance with these covenants at October 3, 1999. At October
3, 1999, the interest rate applicable to the line of credit was 7.94%, and
$18,500,000 was outstanding. At October 3, 1999, $7,100,000 was available under
the line of credit.

Other debts consist of various loans bearing interest at ranges from 5% to
9.75% and require periodic principal payments through September 2014. At
October 3, 1999, totals of $2,204,000 remained outstanding for these loans.

The Company occupies a building in Santa Ana, California, which is under a
long-term capital lease obligation that is included in other long-term
liabilities at October 3, 1999. Future annual payments due under this capital
lease obligation are as follows (amounts in 000's):

<TABLE>
<CAPTION>
<S> <C>
2000.......................................... $ 279
2001.......................................... 279
2002.......................................... 279
2003.......................................... 279
2004.......................................... 279
Thereafter.................................... 6,870
-------
Total minimum lease payments.................. 8,265
Less imputed interest......................... (5,100)
-------
Present value of capitalized lease
obligation................................... $ 3,165
=======
</TABLE>

The building under this capital lease obligation is reflected in property
and equipment, net.

8. STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS

Stock Options

Under the terms of an incentive stock option plan adopted in fiscal year
1982 and amended in fiscal year 1985, nontransferable options to purchase
common stock may be granted to certain key employees. The Company reserved
750,000 shares for issuance under the terms of the plan. The options may be
exercised within ten years from the date they are granted, subject to early
termination upon death or cessation of employment, and are exercisable in
installments determined by the Board of Directors. For certain significant
shareholders, the exercise period is limited to five years and the exercise
price is higher.

In December 1986, the Board of Directors adopted another incentive stock
option plan (the "1987 Plan") which reserved an additional 750,000 shares of
common stock for issuance. The 1987 Plan was approved by the shareholders in
February 1987 and is for the purpose of securing for the Company and its
shareholders the

F-16
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

benefits arising from stock ownership by selected officers, directors and other
key executives and management employees. The plan provides for the grant by the
Company of stock options, stock appreciation rights, shares of common stock or
cash. As of October 3, 1999, the Company only granted options under the 1987
Plan. The options may be exercised within ten years from the date they are
granted, subject to early termination upon death or cessation of employment,
and are exercisable in installments determined by the Board of Directors. For
certain significant shareholders, the exercise period is limited to five years
and the exercise price is higher.

At their annual meeting on February 25, 1994, the shareholders approved
several amendments to the 1987 Plan which 1) extend its termination date to
December 15, 2000; 2) increase initially from 750,000 to 850,000 the number of
shares available for grants; 3) increase on the first day of each fiscal year,
the number of shares available for grant in increments of 2% of the Company's
issued and outstanding shares of common stock; 4) set a limit on the number of
options or shares which may be granted to any one individual in any year;
5) eliminate limitations on the Board of Directors' designating one or more
committees of any size or composition to administer the 1987 Plan; and 6)
provide for automatic grants of stock options to non-employee directors.

Activity and price information regarding the plans are as follows:

<TABLE>
<CAPTION>
Stock Options
-------------------
Weighted
Average
Price
per
Shares Share
--------- --------
<S> <C> <C>
Outstanding September 29, 1996.............................. 740,515 $ 4.48
=========
Granted................................................... 191,300 $11.45
Exercised................................................. (227,551) $ 1.97
---------
Outstanding September 28, 1997.............................. 704,264 $ 7.12
=========
Granted................................................... 189,500 $15.84
Exercised................................................. (191,669) 4.31
Expired or canceled....................................... (64,705) $10.05
---------
Outstanding September 27, 1998.............................. 637,390 $10.44
=========
Granted................................................... 416,000 $10.06
Exercised................................................. (13,688) 3.76
Expired or canceled....................................... (66,075) $10.81
---------
Outstanding October 3, 1999................................. 973,627 $10.35
=========
Granted................................................... 319,000 $ 6.80
Expired or canceled....................................... (34,600) $13.43
---------
Outstanding January 2, 2000 (unaudited)..................... 1,258,027 $ 9.37
=========
</TABLE>

Stock options exercisable were 308,164, 263,590, 453,240 and 463,052
(unaudited) at September 28, 1997, September 27, 1998, October 3, 1999 and
January 2, 2000, respectively, at weighted average exercise prices of $4.34,
$7.24, $10.40 and $9.31 (unaudited), respectively. Remaining shares available
for grant at September 28, 1997, September 27, 1998, October 3, 1999 and
January 2, 2000 under the plans were 262,000, 308,000, 203,000 and 345,000
(unaudited), respectively. All options were granted at the fair market value of
the Company's shares of common stock on the date of grant.

F-17
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following table (unaudited) summarizes information about stock options
outstanding and exercisable at January 2, 2000, as required by SFAS 123:

<TABLE>
<CAPTION>
Options
Options Outstanding Exercisable
--------------------- -------------------
Weighted Average Weighted
--------------------- Average
Range of Exercise Remaining Exercise
Exercise Prices Shares Price Life Shares Price
---------------- --------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
$ 1.00 -- $ 3.88 39,725 $ 2.51 2.1 years 39,725 $ 2.51
$ 4.44 -- $ 5.00 115,499 $ 4.78 4.7 years 115,499 $ 4.78
$ 6.75 -- $ 8.13 505,300 $ 7.09 9.8 years 12,000 $ 7.31
$ 9.81 -- $ 9.88 104,153 $ 9.87 6.0 years 104,153 $ 9.87
$11.25 -- $12.38 335,200 $11.92 8.0 years 128,150 $11.61
$13.13 -- $17.25 158,150 $15.99 7.9 years 63,525 $16.61
--------- -------
1,258,027 463,052
========= =======
</TABLE>

The Company accounts for its option plans under APB Opinion No. 25. Had
compensation expense for the Company's option plans been determined based upon
an estimate of the fair value at the grant date consistent with the
requirements of SFAS 123, the Company's net income and earnings per share would
have been reduced to the pro forma amounts in the following table. The SFAS 123
method of accounting was not applied to options granted prior to fiscal 1996.

<TABLE>
<CAPTION>
September 28, September 27, October 3,
1997 1998 1999
------------- ------------- ----------
(amounts in 000's)
<S> <C> <C> <C>
Net income
As reported...................... $11,051 $11,322 $1,499
Pro forma........................ $10,577 $10,404 $ 553
Basic earnings per share
As reported...................... $ 1.30 $ 1.05 $ .13
Pro forma........................ $ 1.25 $ .97 $ .05
Diluted earnings per share
As reported...................... $ 1.03 $ .98 $ .13
Pro forma........................ $ .98 $ .90 $ .05
</TABLE>

The fair value of each stock option grant was estimated pursuant to SFAS 123
on the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions:

<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Risk free interest rates....................... 5.98% 5.55% 4.94%
Expected dividend yield........................ None None None
Expected lives................................. 5 years 5 years 5 years
Expected volatility............................ 66.6% 76.4% 67.0%
</TABLE>

The weighted average grant date fair values of options granted during fiscal
years 1997, 1998 and 1999 were $11.45, $15.84 and $10.06, respectively.

F-18
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Employee Benefit Plans

The Microsemi Corporation Profit Sharing Plan, adopted by the Board of
Directors in fiscal year 1984, covers substantially all full-time employees who
meet certain minimum employment requirements and provides for current bonuses
based upon the Company's earnings. Annual contributions to the plan are
determined by the Board of Directors. Total charges to income were $3,070,000,
$2,509,000 and $1,745,000 in fiscal years 1997, 1998 and 1999, respectively.

401(k) Plan

The Company sponsors a 401(k) Savings Plan whereby participating employees
may elect to contribute up to 15% of their eligible wages. The Company is
committed to match 50% of employee contributions, not exceeding 3% of the
employee's wages. The Company contributed $899,000, $1,005,000 and $1,148,000
to this plan during fiscal years 1997, 1998 and 1999, respectively.

Supplemental Retirement Plan

In fiscal year 1994, the Company adopted a supplemental retirement plan
which provides certain long-term employees with retirement benefits based upon
a certain percentage of the employees' salaries. Included in other long-term
liabilities at September 27, 1998 and October 3, 1999 was $1,400,000 and
$1,327,000, respectively, related to the Company's estimated liability under
the plan.

9. COMMITMENTS AND CONTINGENCIES

The Company occupies premises under operating lease agreements expiring
through 2029. Aggregate future minimum rental payments under these leases are
(amounts in 000's):

<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
2000.......................................... $ 1,564
2001.......................................... 1,152
2002.......................................... 1,046
2003.......................................... 846
2004.......................................... 813
Thereafter.................................... 9,403
--------
$ 14,824
========
</TABLE>

Rental expense charged to income was $661,000 in fiscal year 1997, $411,000
in fiscal year 1998, and $182,000 in fiscal year 1999. The aforementioned
amounts are net of sublease income amounting to $272,000, $557,000 and $514,000
in fiscal years 1997, 1998 and 1999, respectively.

In Broomfield, Colorado, the owner of a property located adjacent to a
manufacturing facility owned by a subsidiary of the Company had filed suit
against the subsidiary and other parties, claiming that contaminants migrated
to his property, thereby diminishing its value. In August 1995, the subsidiary,
together with former owners of the manufacturing facility, agreed to settle the
claim and to indemnify the owner of the adjacent property for remediation
costs. Although TCE and other contaminants previously used at the facility are
present in soil and groundwater on the subsidiary's property, the Company
vigorously contests any assertion that the subsidiary is the cause of the
contamination. In November 1998, the Company signed an agreement with three
former owners of this facility whereby the former owners 1) reimbursed the
Company for $530,000 of past costs, 2) will assume responsibility for 90% of
all future clean-up costs, and 3) indemnify and protect the

F-19
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Company against any and all third-party claims relating to the contamination of
the facility. State and local agencies in Colorado are reviewing current data
and considering study and cleanup options, and it is not yet possible to
predict costs for remediation. In the opinion of management, the final outcome
of the Broomfield, Colorado environmental matter will not have a material
adverse effect on the Company's financial position or results of operations.

The Company is involved in various pending litigation arising out of the
normal conduct of its business, including those relating to commercial
transactions, contracts, and environmental matters. In the opinion of
management, the final outcome of these matters will not have a material adverse
effect on the Company's financial position or results of operations.

10. ACQUISITIONS AND DISPOSITION

In December 1997, the Company sold General Microcircuits, Inc., a wholly
owned subsidiary in Mooresville, North Carolina, for $5,000,000 in cash and a
$2,000,000 note receivable. Microsemi did not realize any material gain or loss
from this transaction.

In May 1998, the Company acquired BKC Semiconductors, Incorporated ("BKC"),
located in Lawrence, Massachusetts, for approximately $13,740,000 in cash plus
existing indebtedness of BKC of approximately $3,359,000. Microsemi financed
this acquisition with cash on hand and advances under its existing credit
facilities, as amended. BKC was a publicly held company which manufactured
discrete semiconductors. The acquisition was accounted for under the purchase
method. The allocation of the purchase price to the assets and liabilities of
BKC was based upon the Company's estimates of the relative values of the assets
acquired and liabilities assumed. The Company recorded $9,839,000 of goodwill
related to this acquisition. The Company's consolidated results of operations
for the fiscal year ended September 27, 1998 include the operations of BKC
since the date of acquisition. The results of operations of BKC prior to the
date of acquisition were not material.

In April 1999, Microsemi acquired all of the outstanding capital stock of
LinFinity Microelectronics, Inc. ("LinFinity"), a subsidiary of Symmetricom,
located in Garden Grove, California. LinFinity manufactures analog and mixed
signal integrated circuits ("ICs"), as well as systems-engineered modules for
use primarily in power management and communication applications in commercial,
industrial, defense and space markets. The purchase price was $24,125,000,
which was funded with cash and bank borrowings. The Company also paid
approximately $385,000 for expenses related to this acquisition. The
acquisition was accounted for under the purchase method. The Company's
consolidated results of operations include those of LinFinity since the date of
acquisition.

The costs of the acquisition were allocated to the assets acquired and
liabilities assumed based on their estimated fair values to the extent of the
aggregate purchase price. Portions of the purchase price were allocated to
certain intangible assets such as completed technology, customer lists,
assembled workforce, and in-process research and development ("R & D"). There
was no goodwill resulting from this acquisition. The allocation of the purchase
price to these intangible assets was based on an independent valuation report.
The amount of the purchase price allocated to in-process R & D was determined
by estimating the stage of completion of each in-process R & D project at the
date of acquisition, estimating cash flows resulting from the future release of
products employing these technologies, and discounting the net cash flows back
to their present values. At the date of acquisition, technological feasibility
of the in-process R & D projects had not been reached and the technology had no
alternative future uses. Accordingly, the Company expensed the portion of the
purchase price allocated to in-process R & D of $1,950,000, in accordance with
generally accepted accounting principles, in the year ended October 3, 1999.

F-20
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The in-process R & D comprises a number of individual technological
development efforts, focusing on the discovery of new, technologically advanced
knowledge and more complete solutions to customers' needs, the conceptual
formulation and design of possible alternatives, as well as the testing of
process and product cost improvements. Specifically, these technologies
included efforts regarding BiCMOS process based products, Backlight Inverters,
and Audio products.

The weighted average stage of completion for all projects, in the aggregate,
was approximately 82% as of the acquisition date. As of that date, the
estimated remaining costs to bring the projects under development to
technological feasibility are over $437,000. Cash flows from sales of products
incorporating those technologies were estimated to commence in the year 2000.
Revenues forecasted in each period were reduced by related expenses, capital
expenditures, and the cost of working capital. The discount rate applied to the
net cash flows was 29%, which reflected the level of risk associated with the
particular technologies and the current return on investment requirements of
the market.

As discussed above, a portion of the LinFinity purchase price was allocated
to completed technology, customer lists, and assembled workforce. The total
allocation approximated $2,610,000 for these other intangible assets.

The following unaudited pro forma results have been prepared for comparative
purposes only and include certain pro forma adjustments. Such pro forma amounts
are not necessarily indicative of what actual consolidated results of
operations might have been if the LinFinity acquisition had been effective at
the beginning of fiscal year 1998.

<TABLE>
<CAPTION>
Year ended Year ended
September 27, October 3,
1998 1999
------------- ----------
(amounts in 000's)
<S> <C> <C>
Revenues............................................... $211,980 $211,584
Cost of sales.......................................... 158,245 162,939
-------- --------
Gross profit........................................... 53,735 48,645
Operating expenses..................................... 43,223 43,100
-------- --------
Income from operations................................. 10,512 5,545
Other expense.......................................... 2,322 3,158
-------- --------
Income before income taxes............................. 8,190 2,387
Provision for income taxes............................. 3,720 544
-------- --------
Net income............................................. $ 4,470 $ 1,843
======== ========
Earnings per share:
Basic................................................ $ 0.42 $ 0.17
======== ========
Diluted.............................................. $ 0.37 $ 0.16
======== ========
</TABLE>

In June 1999, Microsemi Microwave Products, Inc. ("MMP"), a subsidiary of
the Company, acquired, from L-3 Communications Corporation, certain assets of
Narda Microwave East/Semiconductor Operation ("Narda") located in Lowell,
Massachusetts. The total cost of this acquisition was approximately $5,060,000.
The assets acquired are used in the manufacture of semiconductor components
including varactor diodes, pin diodes, chip capacitors and Schottky devices
used in telecommunications, wireless, satellite and industrial test/measurement
applications. The results of operations of Narda prior to June 1999 were not
material to the Company's consolidated results of operations, accordingly, pro
forma information is not presented.

F-21
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

11. SEGMENT INFORMATION

In 1999, the Company adopted SFAS 131. The Company's reportable operating
segments are based on geographic location, and the measure of segment profit is
income from operations. The accounting policies of the segments are the same as
those described in the summary of significant accounting policies.

The Company operates predominantly in a single industry segment as a
manufacturer of discrete semiconductors. Geographic areas in which the Company
operates include the United States, Ireland, Hong Kong, and India.
Intergeographic sales primarily represent intercompany sales which are
accounted for based on established sales prices between the related companies
and are eliminated in consolidation.

Financial information by geographic segments is as follows:

<TABLE>
<CAPTION>
Fiscal years ended Quarter
------------------------------------ ended
September 28, September 27, October January 2,
1997 1998 3, 1999 2000
------------- ------------- -------- -----------
(unaudited)
(amounts in 000's)
<S> <C> <C> <C> <C>
Net sales
United States
Sales to unaffiliated
customers................. $147,094 $145,242 $159,695 $ 49,311
Intergeographic sales...... 10,587 14,484 23,463 4,361
Europe
Sales to unaffiliated
customers.................. 13,885 15,350 17,084 4,443
Intergeographic sales...... 19,039 7,121 3,823 748
Asia
Sales to unaffiliated
customers.................. 2,255 4,118 8,302 834
Intergeographic sales...... 8,732 6,548 4,381 964
Eliminations of
intergeographic sales...... (38,358) (28,153) (31,667) (6,073)
-------- -------- -------- --------
$163,234 $164,710 $185,081 $ 54,588
======== ======== ======== ========
Income from operations:
United States.............. $ 20,327 $ 17,210 $ 4,378 $ 2,255
Europe..................... 1,983 1,621 476 148
Asia....................... 209 1,628 235 --
-------- -------- -------- --------
Total.................... $ 22,519 $ 20,459 $ 5,089 $ 2,403
======== ======== ======== ========
Identifiable assets:
United States.............. $123,293 $131,663 $166,429 $162,983
Europe..................... 5,148 5,982 8,019 8,129
Asia....................... 6,753 7,443 7,153 6,685
-------- -------- -------- --------
Total.................... $135,194 $145,088 $181,601 $177,797
======== ======== ======== ========
Capital expenditures:
United States.............. $ 5,517 $ 5,302 $ 7,712 $ 2,216
Europe..................... 164 224 160 21
Asia....................... 371 379 60 18
-------- -------- -------- --------
Total.................... $ 6,052 $ 5,905 $ 7,932 $ 2,255
======== ======== ======== ========
Depreciation and
amortization:
United States.............. $ 3,637 $ 4,314 $ 8,334 $ 2,028
Europe..................... 272 618 169 46
Asia....................... 348 349 315 72
-------- -------- -------- --------
Total.................... $ 4,257 $ 5,281 $ 8,818 $ 2,146
======== ======== ======== ========
</TABLE>

F-22
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

12. STATEMENT OF CASH FLOWS

For purposes of the Consolidated Statements of Cash Flows, the Company
considers all short-term, highly liquid investments with maturities of three
months or less at date of acquisition to be cash equivalents.

<TABLE>
<CAPTION>
Fiscal years ended Quarter ended
-------------------------------------- -------------
September 28, September 27, October 3, January 2,
1997 1998 1999 2000
------------- ------------- ---------- -------------
(unaudited)
<S> <C> <C> <C> <C>
Cash paid during the
period for:
Interest................ $ 3,446 $ 1,858 $ 3,324 $1,272
======= ======== ======= ======
Income taxes............ $ 6,707 $ 7,619 $ 1,840 $ 92
======= ======== ======= ======
Non-cash financing and
investing activities:
Conversion of
subordinated debt into
614,807 and 2,852,829
shares of common stock
in fiscal years 1997
and 1998,
respectively........... $ 1,170 $ 33,986 $ -- $ --
======= ======== ======= ======
Fixed assets purchased
through issuance of
long term debt:........ $ 3,821 $ -- $ 3,165 $ --
======= ======== ======= ======
Stock options:
Exercises............... $ 487 $ 899 $ -- $ --
Stock surrendered in
lieu of cash........... (190) (342) -- --
------- -------- ------- ------
Net cash received....... $ 297 $ 557 $ -- $ --
======= ======== ======= ======
Businesses acquired in
purchase transactions
(Note 10):
Fair values of assets
acquired............... $ 8,789 $ 7,260 $31,547 $ --
Goodwill and other
intangible assets...... -- 9,839 5,523 --
Less debt issued and
liabilities assumed.... (3,588) (3,359) (7,500) --
------- -------- ------- ------
Cash paid for
acquisition............ $ 5,201 $ 13,740 $29,570 $ --
======= ======== ======= ======
</TABLE>

F-23
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

13. UNAUDITED SELECTED QUARTERLY FINANCIAL DATA

Selected quarterly financial data are as follows:

<TABLE>
<CAPTION>
Quarters ended
-----------------------------------------------
January 3, April July 4, October January 2,
1999 4, 1999 1999 3, 1999 2000
---------- ------- ------- ------- ----------
(amounts in 000's, except earnings per share)
<S> <C> <C> <C> <C> <C>
Net sales..................... $39,417 $39,491 $48,758 $57,415 $54,558
Gross profit.................. $10,861 $10,345 $11,968 $ 7,696 $13,568
Net income (loss)............. $ 2,280 $ 1,994 $ (670) $(2,105) $ 966
Basic earnings (loss) per
share........................ $ 0.20 $ 0.18 $ (0.06) $ (0.19) $ 0.09
Diluted earnings (loss) per
share........................ $ 0.20 $ 0.18 $ (0.06) $ (0.19) $ 0.09
</TABLE>

For the quarter ended October 3, 1999, the Company recorded a $5,951,000
charge to cost of sales. The charge was made because of reductions in estimates
of utilization and realizable value of certain inventories resulting from
recent changes in market conditions and customer requirements.

<TABLE>
<CAPTION>
Quarters ended
--------------------------------------------
June
December 28, March 29, 28, September 27,
1997 1998 1998 1998
------------ --------- ------- -------------
(amounts in 000's, except earnings per
share)
<S> <C> <C> <C> <C>
Net sales......................... $44,052 $41,194 $39,291 $40,173
Gross profit...................... $12,355 $12,018 $11,315 $11,597
Net income........................ $ 3,092 $ 3,416 $ 2,347 $ 2,467
Basic earnings per share.......... $ 0.35 $ 0.33 $ 0.20 $ 0.21
Diluted earnings per share........ $ 0.28 $ 0.29 $ 0.20 $ 0.21
</TABLE>

F-24
<PAGE>

[Graphic: Chest x-ray picture MEDTRONIC GUIDANT ST JUDE MEDICAL
of a human with GE MEDICAL
heart pacer] medical

[Graphic: Notebook computer] COMPAQ DELL SEAGATE
GIGABYTE
computers/peripherals

[Graphic: Person, wearing a MAGNETEK DELCO MERCURYMARINE
safety suit, welding] LUCENT
industrial/commercial

[Graphic: Man looking at ALCATEL ERICSSON NOKIA NORTEL
PBX monitor] telecommunications

[Graphic: View of cockpit LOCKHEED MARTIN BOEING
instruments at night] HONEYWELL RAYTHEON
military/aerospace

[Graphic: Handheld phone] MOTOROLA SAMSUNG MITSUBISHI
PALM
mobile connectivity

[Graphic: Astronaut on space LOCKHEED MARTIN TECSTAR BOSCH
walk in earth orbit] space/satellites

<PAGE>

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

2,220,000 Shares

[LOGO OF MICROSEMI APPEARS HERE]

Common Stock

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

PROSPECTUS

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

A.G. Edwards & Sons, Inc.

CIBC World Markets

Needham & Company, Inc.

May , 2000

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.

The following sets forth the costs and expenses, all of which shall be borne
by the registrant, in connection with the offering of the shares of Common
Stock pursuant to this Registration Statement:

<TABLE>
<S> <C>
Securities and Exchange Commission Fees....................... $ 22,000 *
"Blue Sky" Fees............................................... $ 10,000 *
Nasdaq National Market Fees................................... $ 17,500 *
Accounting Fees and Expenses.................................. $ 50,000 *
Legal Fees and Expenses....................................... $ 150,000 *
Printing Fees................................................. $ 100,000 *
Miscellaneous Expenses........................................ $ 150,500 *
-----------
Total..................................................... $ 500,000 *
</TABLE>
- --------
* Estimated

Item 15. Indemnification of Directors and Officers.

(a) Section 145 of the Delaware General Corporation Law makes provision for
the indemnification of officers and directors in terms sufficiently broad to
include indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Section 145 of the Delaware General
Corporation Law permits indemnification by a corporation of its officers and
directors against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by them in
connection with actions or proceedings against them if they acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reason to believe their conduct was unlawful. Section 145
provides that no indemnification may be made, however, without court approval,
in respect of any claim as to which the officer or director is adjudged to be
liable to the corporation. Such indemnification provisions of Delaware law are
expressly not exclusive of any other rights which the officers or directors may
have under the corporation's by-laws or agreements, pursuant to the vote of
stockholders or disinterested directors or otherwise.

(b) The Restated Certificate of Incorporation of the registrant provides
that the registrant will, to the maximum extent permitted by law, indemnify
each of its officers and directors against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with any proceeding arising by reason of the fact any such person is or was a
director or officer of the registrant.

(c) The registrant has agreed to indemnify the Selling Stockholders and any
brokers or other persons deemed to be their underwriters, and any persons
deemed to control the Selling Stockholders or such underwriters within the
meaning of Section 15 of the Securities Act, from liabilities arising in
connection with this Registration Statement, excluding liabilities based upon
false or misleading information included in this Registration Statement
provided in writing to the registrant by the Selling Stockholders specifically
for inclusion herein.

II-1
<PAGE>

Item 16. Exhibits and Financial Statement Schedule.

(a) Exhibits.

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.

5.1 Opinion of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation.

23.1 Consent of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation
(included in Exhibit 5.1).

23.2 Consent of PricewaterhouseCoopers LLP.

24.1 Power of Attorney.
</TABLE>

(b) Financial Statement Schedule.

Schedule II--Valuation and Qualifying Accounts.

Item 17. Undertakings.

(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was
declared effective.

(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.

II-2
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Ana, State of California, on the 14th day of
April, 2000.

MICROSEMI CORPORATION
(Registrant)

/s/ David R. Sonksen
By: _________________________________
David R. Sonksen
Vice President--Finance,
Chief Financial Officer, Secretary and Treasurer

II-3
<PAGE>

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Philip Frey, Jr. Chairman of the Board, April 9, 2000
____________________________________ President and Chief
Philip Frey, Jr. Executive Officer
(Principal Executive
Officer)

/s/ David R. Sonksen Vice President--Finance, April 9, 2000
____________________________________ Chief Financial Officer,
David R. Sonksen Secretary and Treasurer
(Principal Financial
Officer and Principal
Accounting Officer)

/s/ Brad Davidson Director April 10, 2000
____________________________________
Brad Davidson

/s/ Robert B. Phinizy Director April 10, 2000
____________________________________
Robert B. Phinizy

/s/ Joseph M. Scheer Director April 12, 2000
____________________________________
Joseph M. Scheer

/s/ Martin H. Jurick Director April 12, 2000
____________________________________
Martin H. Jurick

/s/ H.K. Desai Director April 12, 2000
____________________________________
H.K. Desai
</TABLE>

* By David R. Sonksen as Attorney in Fact

II-4
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Stockholders
of Microsemi Corporation

Our audits of the consolidated financial statements of Microsemi Corporation
referred to in our report dated November 22, 1999, appearing in the
registration statement on Form S-3 of Microsemi Corporation also included an
audit of the financial statement schedule listed in Item 16 of this Form S-3.
In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

Costa Mesa, California
November 22, 1999

S-1
<PAGE>

MICROSEMI CORPORATION AND SUBSIDIARIES

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(amounts in thousands)

<TABLE>
<CAPTION>
Column C Column E Column F
Column B Charged Column D Deductions- Balance
Balance at to costs Charged recoveries at end
beginning and to other and write- of
Column A Classification of period expenses accounts offs period
----------------------- ---------- -------- -------- ----------- --------

January 2, 2000 (unaudited)
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts and reserve for
returns .................. $ 3,805 $ 153 $ -- $ -- $ 3,958
======= ====== ======= ====== =======
Reserve for investments in
and advances to
unconsolidated
affiliates................ $ 1,297 $ -- $ -- $ -- $ 1,297
======= ====== ======= ====== =======
<CAPTION>
October 3, 1999
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts and reserve for
returns................... $ 2,457 $ (230) $ 1,960 $ (382) $ 3,805
======= ====== ======= ====== =======
Reserve for investments in
and advances to
unconsolidated
affiliates................ $ 1,297 $ -- $ -- $ -- $ 1,297
======= ====== ======= ====== =======

<CAPTION>
September 27, 1998
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts and reserve for
returns................... $ 2,665 $ -- $ -- $ (208) $ 2,457
======= ====== ======= ====== =======
Reserve for investments in
and advances to
unconsolidated
affiliates................ $ 1,297 $ -- $ -- $ -- $ 1,297
======= ====== ======= ====== =======

<CAPTION>
September 28, 1997
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts and reserve for
returns................... $ 2,159 $ 506 $ -- $ -- $ 2,665
======= ====== ======= ====== =======
Reserve for investments in
and advances to
unconsolidated
affiliates................ $ 537 $ 760 $ -- $ -- $ 1,297
======= ====== ======= ====== =======
</TABLE>

S-2
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.

5.1 Opinion of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation.

23.1 Consent of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation
(included in Exhibit 5.1).

23.2 Consent of PricewaterhouseCoopers LLP.

24.1 Power of Attorney.
</TABLE>

<PAGE>

EXHIBIT 1.1

2,200,000 Shares*
Common Stock
($.20 Par Value)

UNDERWRITING AGREEMENT
----------------------

May ___, 2000
A.G. Edwards & Sons, Inc.
CIBC World Markets Corp.
Needham & Company, Inc.
As Representatives of the Several Underwriters
c/o A.G. Edwards & Sons, Inc.
One North Jefferson Avenue
St. Louis, Missouri 63103

The undersigned, Microsemi Corporation, a Delaware corporation (the
"Company"), and the stockholders of the Company named in Schedule I hereto
----------
(collectively, the "Selling Securityholders"), hereby address you as the
representatives (the "Representatives") of each of the persons, firms and
corporations listed on Schedule II hereto (collectively, the "Underwriters") and
-----------
hereby confirm their agreement with the several Underwriters as follows:

1. Description of Shares. The Company proposes to issue and sell to the
---------------------
Underwriters 2,000,000 shares of its Common Stock, par value $.20 per share (the
"Company Shares") and the Selling Securityholders propose to sell an aggregate
of 220,000 shares of Common Stock of the Company (the "Selling Securityholder
Shares") as set forth on Schedule II hereto (such 2,220,000 shares of Common
-----------
Stock are herein collectively referred to as the "Firm Shares"). Solely for the
purpose of covering over-allotments in the sale of the Firm Shares, the Company
further proposes to grant to the Underwriters the right to purchase up to an
additional 333,000 shares of Common Stock (the "Option Shares"), as provided in
Section 3 of this Agreement. The Firm Shares and the Option Shares are herein
sometimes referred to as the "Shares" and are more fully described in the
Prospectus hereinafter defined.

2. Purchase, Sale and Delivery of Firm Shares. On the basis of the
------------------------------------------
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to issue and sell
2,000,000 of the Firm Shares to the Underwriters and each Selling Securityholder
agrees to sell to the several Underwriters the number of Firm Shares set forth
in Schedule II opposite the name of each Selling Securityholder, and each such
Underwriter agrees, severally and not jointly, to purchase from the Company and
the Selling Securityholders at a purchase price of $______ per share, the number
of Firm Shares set forth opposite the name of such Underwriter in Schedule II
hereto and any additional number of Option Shares which such Underwriter may
become obligated to purchase pursuant to Section 3 hereof.

The Company and the Custodian (as defined in Section 5(a)) will deliver
definitive certificates for the Firm Shares at the office of A.G. Edwards &
Sons, Inc., 77 Water Street, New

__________________________
* excludes Option Shares

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<PAGE>

York, New York ("Edwards' Office"), or such other place as you and the Company
may mutually agree upon, for the accounts of the Underwriters against payment to
the Company and the Selling Securityholders of the purchase price for the Firm
Shares sold to the several Underwriters by wire transfer of immediately
available funds payable to the order of the Company for the Firm Shares
purchased from the Company and to the Custodian, for the account of the Selling
Securityholders, for the Firm Shares purchased from the Selling Securityholders,
and the documents to be delivered on the Closing Date or any Option Closing Date
on behalf of the parties hereto pursuant to Section 7 of this Agreement shall be
delivered to the offices of O'Melveny & Myers LLP, 610 Newport Center Drive,
Suite 1700, Newport Beach, California 92660, or at such other place as may be
agreed upon between you and the Company (the "Place of Closing"), at 10:00 a.m.,
New York time, on May __, 2000, or at such other time and date thereafter as you
and the Company may agree, such time and date of payment and delivery being
herein called the "Closing Date."

The certificates for the Firm Shares so to be delivered will be made
available to you for inspection at Edwards' Office (or such other place as you
and the Company may mutually agree upon) at least one full business day prior to
the Closing Date and will be in such names and denominations as you may request
at least forty-eight hours prior to the Closing Date.

It is understood that an Underwriter, individually, may (but shall not be
obligated to) make payment on behalf of the other Underwriters whose funds shall
not have been received prior to the Closing Date for Shares to be purchased by
such Underwriter. Any such payment by an Underwriter shall not relieve the other
Underwriters of any of their obligations hereunder.

It is understood that the Underwriters propose to offer the Shares to the
public upon the terms and conditions set forth in the Registration Statement
hereinafter defined.

3. Purchase, Sale and Delivery of the Option Shares. The Company hereby
------------------------------------------------
grants options to the Underwriters to purchase from the Company on a pro rata
basis up to 333,000 Option Shares, on the same terms and conditions as the Firm
Shares; provided, however, that such options may be exercised only for the
purpose of covering any over-allotments which may be made by them in the sale of
the Firm Shares. No Option Shares shall be sold or delivered unless the Firm
Shares previously have been, or simultaneously are, sold and delivered.

The options are exercisable on behalf of the several Underwriters by you,
as Representatives, at any time, and from time to time, before the expiration of
30 days from the date of the Prospectus (or, if such 30th day shall be a
Saturday or Sunday or a holiday, on the next day thereafter when The Nasdaq
Stock Market is open for trading), for the purchase of all or part of the Option
Shares covered thereby, by notice given by you to the Company in the manner
provided in Section 13 hereof, setting forth the number of Option Shares as to
which the Underwriters are exercising the options, and the date of delivery of
said Option Shares, which date shall not be more than five business days after
such notice unless otherwise agreed to by the parties. You may terminate the
options at any time, as to any unexercised portion thereof, by giving written
notice to the Company to such effect.

You, as Representatives, shall make such allocation of the Option Shares
among the Underwriters as may be required to eliminate purchases of fractional
Shares.

-2-
<PAGE>

Delivery of the Option Shares with respect to which the options shall have
been exercised shall be made to or upon your order at Edwards' Office (or at
such other place as you and the Company may mutually agree upon), against
payment by you of the per-share purchase price to the Company by wire transfer
of immediately available funds. Such payment and delivery shall be made at 10:00
a.m., New York time, on the date designated in the notice given by you as above
provided for (which may be the same as the Closing Date), unless some other date
and time are agreed upon, which date and time of payment and delivery are called
the "Option Closing Date." The certificates for the Option Shares so to be
delivered will be made available to you for inspection at Edwards' Office at
least one full business day prior to the Option Closing Date and will be in such
names and denominations as you may request at least forty-eight hours prior to
the Option Closing Date. On the Option Closing Date, the Company shall provide
the Underwriters such representations, warranties, agreements, opinions,
letters, certificates and covenants with respect to the Option Shares as are
required to be delivered on the Closing Date with respect to the Firm Shares.

4. Representations, Warranties and Agreements of the Company. The Company
---------------------------------------------------------
represents and warrants to and agrees with each Underwriter that, and for the
benefit of the Underwriters only:

(a) A registration statement (Registration No.333-_____) on Form S-3
with respect to the Shares, including a preliminary prospectus, and such
amendments to such registration statement as may have been required to the date
of this Agreement, has been carefully prepared by the Company pursuant to and in
conformity with the requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the rules and regulations thereunder (the "1933 Act Rules and
Regulations") of the Securities and Exchange Commission (the "SEC"), and has
been filed with the SEC under the 1933 Act. Copies of such registration
statement, including any amendments thereto, each related preliminary prospectus
(meeting the requirements of Rule 430 or 430A of the 1933 Act Rules and
Regulations) contained therein, and the exhibits, financial statements and
schedules thereto have heretofore been delivered by the Company to you. If such
registration statement has not become effective under the 1933 Act, a further
amendment to such registration statement, including a form of final prospectus,
necessary to permit such registration statement to become effective will be
filed promptly by the Company with the SEC. If such registration statement has
become effective under the 1933 Act, a final prospectus containing information
permitted to be omitted at the time of effectiveness by Rule 430A of the 1933
Act Rules and Regulations will be filed promptly by the Company with the SEC in
accordance with Rule 424(b) of the 1933 Act Rules and Regulations. The term
"Registration Statement" as used herein means the registration statement as
amended at the time it becomes effective under the 1933 Act (the "Effective
Date"), including financial statements and all exhibits and, if applicable, the
information deemed to be included by Rule 430A of the 1933 Act Rules and
Regulations. If it is contemplated, at the time this Agreement is executed, that
a post-effective amendment to such registration statement will be filed and must
be declared effective before the offering of Shares may commence, the term
"Registration Statement" as used herein means the registration statement as
amended by said post-effective amendment. If an abbreviated registration
statement is prepared and filed with the SEC in accordance with Rule 462(b)
under the 1933 Act (an "Abbreviated Registration Statement"), the term
"Registration Statement" as used in this Agreement includes the Abbreviated
Registration Statement. The term "Prospectus" as used herein means (i) the
prospectus as first filed with the SEC pursuant to Rule

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<PAGE>

424(b) of the 1933 Act Rules and Regulations, or (ii) if no such filing is
required, the form of final prospectus included in the Registration Statement at
the Effective Date or (iii) if a Term Sheet or Abbreviated Term Sheet (as such
terms are defined in Rule 434(b) and 434(c), respectively, of the 1933 Act Rules
and Regulations) is filed with the SEC pursuant to Rule 424(b)(7) of the 1933
Act Rules and Regulations, the Term Sheet or Abbreviated Term Sheet and the last
Preliminary Prospectus filed with the SEC prior to the time the Registration
Statement became effective, taken together. The term "Preliminary Prospectus" as
used herein shall mean a preliminary prospectus as contemplated by Rule 430 or
430A of the 1933 Act Rules and Regulations included at any time in the
Registration Statement. For purposes of this Agreement, the words "amend,"
"amendment," "amended," "supplement" or "supplemented" with respect to the
Registration Statement or the Prospectus shall mean amendments or supplements to
the Registration Statement or the Prospectus, as the case may be.

(b) The documents incorporated by reference in the Registration
Statement, the Prospectus or any amendment or supplement thereto, when they
became or become effective under the 1933 Act or were or are filed with the SEC
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), as the
case may be, conformed or will conform in all material respects with the
requirements of the 1933 Act or the 1934 Act, as applicable, and the rules and
regulations of the SEC thereunder.

(c) Neither the SEC nor any state or other jurisdiction or other
regulatory body has issued, and neither is, to the knowledge of the Company,
threatening to issue, any stop order under the 1933 Act or other order
suspending the effectiveness of the Registration Statement (as amended or
supplemented) or preventing or suspending the use of any Preliminary Prospectus
or the Prospectus or suspending the qualification or registration of the Shares
for offering or sale in any jurisdiction nor instituted or, to the knowledge of
the Company, threatened to institute proceedings for any such purpose. Each
Preliminary Prospectus at its date of issue, the Registration Statement and the
Prospectus and any amendments or supplements thereto contain or will contain, as
the case may be, all statements which are required to be stated therein by, and
in all material respects conform or will conform, as the case may be, to the
requirements of, the 1933 Act and the 1933 Act Rules and Regulations. Neither
the Registration Statement nor any amendment thereto, as of the applicable
effective date, contains or will contain, as the case may be, any untrue
statement of a material fact or omits or will omit to state any material fact
required to be stated therein or necessary to make the statements therein, not
misleading, and neither any Preliminary Prospectus, the Prospectus nor any
supplement thereto contains or will contain, as the case may be, any untrue
statement of a material fact or omits or will omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representation or warranty as to
information contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company relating to the
Underwriters by or on behalf of the Underwriters expressly for use in the
preparation thereof (as provided in Section 14 hereof). There is no contract or
document required to be described in the Registration Statement or Prospectus or
to be filed as an exhibit to the Registration Statement which is not described
in the Prospectus or filed as a part of the Registration Statement.

-4-
<PAGE>

(d) This Agreement has been duly authorized, executed and delivered by
the Company and constitutes a valid and legally binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and by general principles of equity (the
"Exceptions").

(e) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with full
power and authority (corporate and other) to own, lease and operate its
properties and conduct its businesses as described in the Prospectus and to
execute and deliver, and perform its obligations under this Agreement. The
Company is duly qualified to do business as a foreign corporation in good
standing in California and in each state or other jurisdiction in which its
ownership or leasing of property or conduct of business legally requires such
qualification, except where the failure to be so qualified, individually or in
the aggregate, would not have a Material Adverse Effect. Each of the Company's
subsidiaries has been duly organized and is validly existing in good standing
under the laws of its respective state of organization, with full power and
authority to own, lease and operate its properties and conduct its business in
such state. Each subsidiary is duly qualified to do business as a foreign
corporation in good standing in each state or other jurisdiction in which its
ownership or leasing of property or conduct of business legally requires such
qualification, except where the failure to be so qualified, individually or in
the aggregate, would not have a Material Adverse Effect. The term "Material
Adverse Effect" as used herein means any material adverse effect on the
condition (financial or other), net worth, business, affairs, management,
prospects, results of operations or cash flow of the Company and its
subsidiaries, taken as a whole.

(f) Neither the Company nor any of its subsidiaries has sustained since
the date of the latest audited financial statements included in the Prospectus
any material loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth in the Prospectus. Since the respective dates as of which information is
given in the Prospectus, other than as set forth in or contemplated by the
Prospectus: (A) there has not been any material change in the capital stock,
short-term debt or long-term debt of the Company or any of its subsidiaries or
any material adverse change, or any development involving a prospective material
adverse change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries taken as a whole, (B) the Company has not purchased any of its
outstanding capital stock, nor declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock, and (C) none of the Company or
its subsidiaries have incurred any material liability or obligation, direct or
contingent, or entered into any material transaction not in the ordinary course
of business.

(g) The issuance and sale of the Shares and the execution, delivery and
performance by the Company of this Agreement, and the consummation of the
transactions herein contemplated, will not (A) conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any properties or assets of the Company or any of its

-5-
<PAGE>

subsidiaries under, any indenture, mortgage, deed of trust, loan agreement,
partnership agreement, joint venture agreement or other agreement or instrument
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the properties or
assets of the Company or any of its subsidiaries is subject, except to such
extent as, individually or in the aggregate, does not have a Material Adverse
Effect, (B) result in any violation of the provisions of the Company's
Certificate of Incorporation (the "Charter") or bylaws, or other governing
documents of the Company or its subsidiaries or (C) result in a violation of any
statute, rule, regulation or other law, or any order or judgment, of any court
or governmental agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their properties. No consent, approval,
authorization, order, registration or qualification of or with any such court or
governmental agency or body is required for the execution, delivery and
performance of this Agreement, the issuance and sale of the Shares or the
consummation of the transactions contemplated hereby, except such as have been,
or will be prior to the Closing Date, obtained under the 1933 Act or as may be
required by the National Association of Securities Dealers, Inc. (the "NASD")
and such consents, approvals, authorizations, registrations or qualifications as
may be required under state securities or blue sky laws in connection with the
purchase and distribution of the Shares by the Underwriters.

(h)

(i) The Company has duly and validly authorized capital stock as set
forth in the Prospectus. All outstanding shares of Common Stock of the Company
and the Shares conform, or when issued will conform, to the description thereof
in the Prospectus and have been, or, when issued and paid for in the manner
described herein will be, duly authorized, validly issued, fully paid and
non-assessable. The issuance of the Shares to be purchased from the Company
hereunder will be consummated in compliance with all applicable laws (including,
without limitation, federal and state securities laws), is not subject to
preemptive or other similar rights, or any restriction upon the voting or
transfer thereof pursuant to applicable law (including the Delaware General
Corporation Law (the "DGCL")) or the Company's Charter, bylaws or governing
documents or any agreement to which the Company or any of its subsidiaries is a
party or by which any of them may be bound. All corporate action required to be
taken by the Company for the authorization, issuance and sale of the Shares has
been duly and validly taken. Prior to the Effective Date the Shares to be sold
by the Selling Securityholders and to be issued and sold by the Company will be
authorized for listing by the Nasdaq National Market upon official notice of
issuance.

(ii) Except as disclosed in the Prospectus, there are no outstanding
subscriptions, rights, warrants, options, calls, convertible securities,
commitments of sale or rights related to or entitling any person to purchase or
otherwise to acquire any shares of, or any security convertible into or
exchangeable or exercisable for, the capital stock of, or other ownership
interest in, the Company or any subsidiary.

(iii) All of the outstanding shares of capital stock of the Company's
subsidiaries have been duly authorized and validly issued, are fully paid and
non-assessable and are owned by the Company (except for nominee director
qualifying shares held by individuals with respect to foreign subsidiaries) free
and clear of any mortgage, pledge, lien, encumbrance, charge or adverse claim
(except for the Company's pledge of subsidiary shares under its credit
agreement with Canadian Imperial Bank) and are not the subject of any agreement
or understanding with any person and were not issued in violation of any
preemptive or similar rights. There are no outstanding

-6-
<PAGE>

subscriptions, rights, warrants, options, calls, convertible securities,
commitments of sale or instruments related to or entitling any person to
purchase or otherwise acquire any shares of, or any security convertible into or
exchangeable or exercisable for, the capital stock of, or other ownership
interest in, any of the Company's subsidiaries.

(i) Each of the Company and its subsidiaries is in possession of and is
operating in compliance with all franchises, grants, authorizations, licenses,
certificates, permits, easements, consents, orders and approvals ("Permits")
from all state, federal, foreign and other regulatory authorities, and has
satisfied the requirements imposed by regulatory bodies, administrative agencies
or other governmental bodies, agencies or officials, that are required for the
Company and its subsidiaries lawfully to own, lease and operate their properties
and conduct their businesses as described in the Prospectus, and, each of the
Company and its subsidiaries is conducting its business in compliance with all
of the laws, rules and regulations of each jurisdiction in which it conducts its
business, in each case with such exceptions, individually or in the aggregate,
as would not have a Material Adverse Effect. Each of the Company and its
subsidiaries has filed all notices, reports, documents or other information
("Notices") required to be filed under applicable laws, rules and regulations,
in each case, with such exceptions, individually or in the aggregate, as would
not have a Material Adverse Effect. Except as otherwise specifically described
in the Prospectus, neither the Company nor any of its subsidiaries has received
any notification from any court or governmental body, authority or agency,
relating to the revocation or modification of any such Permit or, to the effect
that any additional authorization, approval, order, consent, license,
certificate, permit, registration or qualification ("Approvals") from such
regulatory authority is needed to be obtained by any of them, in any case where
it could be reasonably expected that obtaining such Approvals or the failure to
obtain such Approvals, individually or in the aggregate, would have a Material
Adverse Effect.

(j) The Company and its subsidiaries have filed all necessary federal,
state, local and foreign income and franchise tax returns and have paid all
taxes required to be paid and any other assessment, fine or penalty levied
against them, to the extent that any of the foregoing is due and payable,
except, in all cases, for any such tax, assessment, fine or penalty that is
being contested in good faith (and except in any case in which the failure to so
file or pay would not have a Material Adverse Effect). All such tax returns are
complete and correct in all material respects. All tax liabilities are
adequately provided for on the books of the Company and its subsidiaries except
to such extent as would not have a Material Adverse Effect. The Company and its
subsidiaries have made all necessary payroll tax payments and deposits on a
timely basis. The Company and its subsidiaries have no knowledge of any tax
proceeding or action pending or threatened against the Company or its
subsidiaries which, individually or in the aggregate, might have a Material
Adverse Effect.

(k) Except as described in the Prospectus, the Company and its
subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and trade names
necessary to conduct the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice of infringement of or
conflict with asserted

-7-
<PAGE>

rights of others with respect to any of the foregoing which, individually or in
the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect.

(l) The Company and each of its subsidiaries has good and marketable
title to all properties and assets (collectively, the "Properties"), as
described in the Prospectus, owned by them, free and clear of all liens,
charges, encumbrances or restrictions, except such as are described in the
Prospectus or are not material in relation to the business of the Company and
its subsidiaries taken as a whole, and the Company and each of its subsidiaries
have valid, subsisting and enforceable leases for the properties described in
the Prospectus as leased by them, with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such properties by
the Company or any of its subsidiaries.

(m) Except as disclosed in the Prospectus: (i) each Property, including,
without limitation, the Environment (as defined below) associated with such
Property, is free of any Hazardous Substance (as defined below) in violation of
any Environmental Law (as defined below) applicable to such Property, except for
Hazardous Substances that would not result in a Material Adverse Effect; (ii)
none of the Company or any subsidiary or, to the knowledge of the Company and
its subsidiaries, any prior owner of any of the Properties has caused or
suffered to occur any Release (as defined below) of any Hazardous Substance into
the Environment on, in, under or from any Property other than such Releases
which, singly or in the aggregate, do not require significant remediation, and
no condition exists on, in, under or, to the knowledge of the Company and its
subsidiaries, adjacent to any Property that could result in the incurrence of
material liabilities or any material violations of any Environmental Law
applicable to such Property, give rise to the imposition of any material Lien
(as defined below) under any Environmental Law, or cause or constitute a
material health, safety or environmental hazard to any property, person or
entity; (iii) except as disclosed to the Representatives, none of the Company or
any subsidiary has received any written notice of a claim under or pursuant to
any Environmental Law applicable to a Property or under common law pertaining to
Hazardous Substances on or originating from any Property; (iv) except as
disclosed to the Representatives, none of the Company or any subsidiary has
received any notice from any Governmental Authority (as defined below) claiming
any violation of any Environmental Law applicable to a Property that is uncured
or unremediated as of the date hereof; (v) no Property is included or, to the
knowledge of the Company and its subsidiaries, proposed for inclusion on the
National Priorities List issued pursuant to CERCLA (as defined below) by the
United States Environmental Protection Agency (the "EPA") or on the
Comprehensive Environmental Response, Compensation, and Liability Information
System database maintained by the EPA, and has not otherwise been identified by
the EPA as a potential CERCLA removal, remedial or response site or included or,
to the knowledge of the Company and its subsidiaries, proposed for inclusion on,
any similar list of potentially contaminated sites pursuant to any other
applicable Environmental Law nor has the Company or any subsidiary received any
written notice from the EPA or any other Governmental Authority proposing the
inclusion of any Property on such list; and (vi) there are no underground
storage tanks located on or in any Property which have not been disclosed to the
Representatives.

As used herein: "Hazardous Substance" shall include, without limitation,
any hazardous substance, hazardous waste, toxic or dangerous substance,
pollutant, solid waste or similarly designated materials, including, without
limitation, oil, petroleum or any petroleum-derived substance or waste, asbestos
or asbestos-containing materials, PCBs, pesticides, explosives,

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<PAGE>

radioactive materials, dioxins, urea formaldehyde insulation or any constituent
of any such substance, pollutant or waste, including any such substance,
pollutant or waste identified or regulated under any Environmental Law
(including, without limitation, materials listed in the United States Department
of Transportation Optional Hazardous Material Table, 49 C.F.R. Section 172.101,
as heretofore amended, or in the EPA's List of Hazardous Substances and
Reportable Quantities, 40 C.F.R. Part 302, as heretofore amended); "Environment"
shall mean any surface water, drinking water, ground water, land surface,
subsurface, strata, river sediment, buildings, structures, and ambient,
workplace and indoor air; "Environmental Law" shall mean the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. Section 9601 et seq.) ("CERCLA"), the Resource Conservation and Recovery
Act of 1976, as amended (42 U.S.C. Section 6901, et seq.), the Clean Air Act, as
amended (42 U.S.C. Section 7401, et seq.), the Clean Water Act, as amended (33
U.S.C. Section 1251, et seq.), the Toxic Substances Control Act, as amended (15
U.S.C. Section 2601, et seq.), the Occupational Safety and Health Act of 1970,
as amended (29 U.S.C. Section 651, et seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Section 1801, et seq.), and all other
applicable federal, state and local laws, ordinances, regulations, rules,
orders, decisions and permits relating to the protection of the environment or
of human health from environmental effects; "Governmental Authority" shall mean
any federal, state or local governmental office, agency or authority having the
duty or authority to promulgate, implement or enforce any Environmental Law;
"Lien" shall mean, with respect to any Property, any mortgage, deed of trust,
pledge, security interest, lien, encumbrance, penalty, fine, charge, assessment,
judgment or other liability in, on or affecting such Property; and "Release"
shall mean any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, emanating or disposing of
any Hazardous Substance into the Environment, including, without limitation, the
abandonment or discarding of barrels, containers, tanks (including, without
limitation, underground storage tanks) or other receptacles containing or
previously containing any Hazardous Substance or any release, emission,
discharge or similar term, as those terms are defined or used in any
Environmental Law.

The Company and its subsidiaries (i) are in compliance with any and all
applicable federal, state and local laws and regulations relating to the
protection of occupational health and safety and all Environmental Laws, (ii)
have received all permits, licenses or other approvals required of them under
applicable federal and state occupational safety and health laws and regulations
and Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval, except in each case where such noncompliance, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not, singly or
in the aggregate, have a Material Adverse Effect.

There are no costs or liabilities associated with any Environmental Law
(including, without limitation, any capital or operating expenditures required
for cleanup, closure of properties or compliance with any Environmental Law or
any permit, license or approval, any related constraints on operating activities
and any potential liabilities to third parties) which would, singly or in the
aggregate, have a Material Adverse Effect.

(n) No labor disturbance exists with the employees of the Company or any
of its subsidiaries or is imminent which, individually or in the aggregate,
would have a Material

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<PAGE>

Adverse Effect. None of the employees of the Company or any of its subsidiaries
is represented by a union and, to the best knowledge of the Company and its
subsidiaries, no union organizing activities are taking place. The Company is
not aware of any existing, threatened or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers or contractors that
could result in a Material Adverse Effect. Neither the Company nor any of its
subsidiaries has violated any federal, state or local law or foreign law
relating to discrimination in hiring, promotion or pay of employees, nor any
applicable wage or hour laws, or the rules and regulations thereunder, or
analogous foreign laws and regulations, which might, individually or in the
aggregate, result in a Material Adverse Effect.

(o) The Company and its subsidiaries are in compliance in all material
respects with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company and its subsidiaries would have any liability; the Company and
its subsidiaries have not incurred and do not expect to incur liability under
(i) Title IV of ERISA with respect to termination of, or withdrawal from, any
"pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of
1986, as amended, including the regulations and published interpretations
thereunder (the "Code"); and each "pension plan" for which the Company or any of
its subsidiaries would have any liability that is intended to be qualified under
Section 401 (a) of the Code is so qualified in all material respects, and
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification. Each "pension plan" for which the Company, its
subsidiaries or any of their affiliates has any liability or with respect to
which the Company, its subsidiaries or any of their affiliates is a disqualified
person (as defined in the Code) or party-in-interest (as defined in ERISA) has
not been a party to any "prohibited transaction" (as defined in ERISA and the
Code), except for such noncompliance, reportable events, liabilities, or
failures to qualify that would not have a Material Adverse Effect.

(p) Except as disclosed in the Prospectus, the Company and each of its
subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are prudent and customary
in the businesses in which they are engaged, including, but not limited to,
directors' and officers' insurance, insurance covering real and personal
property owned or leased by the Company and its subsidiaries against theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect. Neither the Company
nor any of its subsidiaries has been refused any insurance coverage sought or
applied for, and the Company has no reason to believe that it and its
subsidiaries will not be able to renew their existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.

(q) Neither the Company nor any of its subsidiaries is, or with the
giving of notice or lapse of time or both would be, in default or violation with
respect to its Charter, bylaws, or other governing documents. Neither the
Company nor any of its subsidiaries is, or with the giving of notice or lapse of
time or both would be, in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to

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<PAGE>

which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the properties or assets
of the Company or any of its subsidiaries is subject, or in violation of any
statutes, laws, ordinances or governmental rules or regulations or any orders or
decrees to which it is subject, which default or violation, individually or in
the aggregate, would have a Material Adverse Effect. Neither the Company nor any
of its subsidiaries has, at any time during the past two years, (A) made any
unlawful contributions to any candidate for any political office, or failed
fully to disclose any contribution in violation of law, or (B) made any payment
to any state, federal or foreign government official, or other person charged
with similar public or quasi-public duty (other than payment required or
permitted by applicable law).

(r) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its subsidiaries
is a party or of which any property of the Company or any of its subsidiaries is
the subject that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material Adverse
Effect or which would materially and adversely affect the consummation of the
transactions contemplated hereby or which is required to be disclosed in the
Prospectus; to the best of the Company's knowledge, no such proceedings are
threatened or contemplated. Any statutes, regulations, contracts or other
documents that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement are
described or filed as required.

(s) The Company is not and, after giving effect to the offering and sale
of the Shares, will not be a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company," as such terms are defined in the Public Utility Holding Company Act of
1935, as amended (the "1935 Act").

(t) The Company is not and, after giving effect to the offering and sale
of the Shares, will not be an "investment company" or an entity "controlled" by
an "investment company," as such terms are defined in the Investment Company Act
of 1940, as amended (the "1940 Act").

(u) PricewaterhouseCoopers LLP, the accounting firm which has certified
the financial statements filed with and as a part of the Registration Statement,
is an independent public accounting firm within the meaning of the 1933 Act and
the 1933 Act Rules and Regulations. The Company and each of its subsidiaries
maintains a system of internal accounting controls sufficient to provide
reasonable assurance that: (1) transactions are executed in accordance with
management's general or specific authorizations; (2) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; (3) access to assets is permitted only in accordance with management's
general or specific authorization; and (4) the recorded accounts for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect thereto. The consolidated financial statements and
schedules of the Company, including the notes thereto, filed with and as a part
of the Registration Statement or Prospectus, are accurate in all material
respects and present fairly the financial condition of the Company and its
subsidiaries as of the respective dates thereof and the consolidated results of
operations and changes in financial position and consolidated statements of cash
flow for the

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<PAGE>

respective periods covered thereby, all in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved except as otherwise disclosed therein. All adjustments necessary for a
fair presentation of results for such periods have been made. The selected
financial data included in the Registration Statement and Prospectus present
fairly the information shown therein and have been compiled on a basis
consistent with that of the audited financial statements. Any operating or other
statistical data included in the Registration Statement and Prospectus comply in
all material respects with the 1933 Act and the 1933 Act Rules and Regulations
and present fairly the information shown therein.

(v) Except as described in the Prospectus, no holder of any security of
the Company has any right to require registration of shares of Common Stock or
any other security of the Company because of the filing of the Registration
Statement or the consummation of the transactions contemplated hereby and,
except as disclosed in the Prospectus, no person has the right to require
registration under the 1933 Act of any shares of Common Stock or other
securities of the Company. No person has the right, contractual or otherwise, to
cause the Company to permit such person to underwrite the sale of any of the
Shares or their shares of Common Stock. Except for this Agreement, there are no
contracts, agreements or understandings between the Company or any of its
subsidiaries and any person that would give rise to a valid claim against the
Company, its subsidiaries or any Underwriter for a brokerage commission,
finder's fee or like payment in connection with the issuance, purchase and sale
of the Shares.

(w) The Company has not distributed and, prior to the later to occur of
(i) the Closing Date or the Option Closing Date, if any, and (ii) completion of
the distribution of the Shares, will not distribute any offering material in
connection with the offering and sale of the Shares other than the Registration
Statement, the Preliminary Prospectus or the Prospectus.

(x) The Company has not taken and will not take, directly or indirectly,
any action designed to or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of the Company's Common Stock, and
the Company is not aware of any such action taken or to be taken by affiliates
(as defined in the 1933 Act Rules and Regulations) of the Company.

(y) No relationship, direct or indirect, exists between or among the
Company or its subsidiaries on the one hand, and the directors, officers,
stockholders (in the case of the Company), customers or suppliers of the Company
or its subsidiaries on the other hand, which is required under the 1933 Act
Rules and Regulations to be described in the Prospectus which is not so
described.

5. Representations, Warranties and Agreements of the Selling
---------------------------------------------------------
Securityholders. Each of the Selling Securityholders hereby, severally
---------------
and not jointly, represents and warrants as follows:

(a) Such Selling Securityholder has good and marketable title to all the
Shares of Common Stock to be sold by such Selling Securityholder hereunder, free
and clear of all liens,

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<PAGE>

encumbrances, equities, security interests and claims whatsoever, with full
right and authority to enter into this Agreement and to deliver the Shares
hereunder, subject, in the case of each Selling Securityholder, to the rights of
___________________, as Custodian (herein called the "Custodian"), and that upon
the delivery of and payment for the Selling Securityholder Shares hereunder, the
several Underwriters will receive good and marketable title thereto, free and
clear of all liens, encumbrances, equities, security interests and claims
whatsoever.

(b) Certificates in negotiable form for the Selling Securityholder
Shares have been placed in custody under a Custody Agreement and Irrevocable
Power of Attorney for delivery under this Agreement with the Custodian; such
Selling Securityholder specifically agrees that the shares of the Common Stock
represented by the certificates so held in custody for such Selling
Securityholder are subject to the interests of the several Underwriters and the
Company, that the arrangements made by such Selling Securityholder for such
custody, including the Power of Attorney provided for in such Custody Agreement,
are to that extent irrevocable, and that the obligations of such Selling
Securityholder shall not be terminated by any act of such Selling Securityholder
or by operation of law, whether by the death or incapacity of such Selling
Securityholder (or, in the case of a Selling Securityholder that is not an
individual, the dissolution or liquidation of such Selling Securityholder) or
the occurrence of any other event; if any such death, incapacity, dissolution,
liquidation or other such event should occur before the delivery of the Selling
Securityholder Shares hereunder, certificates for such shares of the Common
Stock shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such death, incapacity, dissolution,
liquidation or other event had not occurred, regardless of whether the Custodian
shall have received notice of such death, incapacity, dissolution, liquidation
or other event.

(c) Such Selling Securityholder has not taken and will not take,
directly or indirectly, any action designed to or which might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
Company's Common Stock.

(d) Such Selling Securityholder has executed and delivered to the
Representatives an agreement (in the form approved by the Representatives) of
such Selling Securityholder not to, among other things, sell or dispose of any
equity securities of the Company until 90 days after the Closing Date.

(e) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto, are made in reliance upon, and in conformity
with, written information furnished to the Company by such Selling
Securityholder specifically for use in the preparation thereof, each part of the
Registration Statement, when such part became or becomes effective, did not or
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and each Preliminary Prospectus, on the date of filing
thereof with the SEC, and the Prospectus and any amendment or supplement
thereto, on the date of filing thereof with the SEC and on the Closing Date, did
not or will not include an untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein not misleading.

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<PAGE>

(f) To the best knowledge of such Selling Securityholder, the
representations and warranties of the Company set forth in Section 4 hereof are
true and correct.

6. Additional Covenants of the Company. The Company covenants and agrees
-----------------------------------
with the several Underwriters that:

(a) The Company will timely transmit copies of the Prospectus, and any
amendments or supplements thereto, or a Term Sheet or Abbreviated Term Sheet, as
applicable, to the SEC for filing pursuant to Rule 424(b) of the 1933 Act Rules
and Regulations.

(b) The Company will deliver to each of the Representatives, and to
counsel for the Underwriters (i) four (4) copies of the Registration Statement
as originally filed, including copies of exhibits thereto (other than any
exhibits incorporated by reference therein), and of any amendments and
supplements to the Registration Statement and (ii) a copy of each consent and
certificate included or incorporated by reference in, or filed as an exhibit to,
the Registration Statement as so amended or supplemented. The Company will
deliver to the Underwriters through the Representatives as soon as practicable
after the date of this Agreement as many copies of the Prospectus as the
Representatives may reasonably request for the purposes contemplated by the 1933
Act; if the Registration Statement is not effective under the 1933 Act, the
Company will use its best efforts to cause the Registration Statement to become
effective as promptly as possible, and it will notify you, promptly after it
shall receive notice thereof, of the time when the Registration Statement has
become effective. The Company will promptly advise the Representatives of any
request of the SEC for amendment of the Registration Statement or for supplement
to the Prospectus or for any additional information, and of the issuance by the
SEC or any state or other jurisdiction or other regulatory body of any stop
order under the 1933 Act or other order suspending the effectiveness of the
Registration Statement (as amended or supplemented) or preventing or suspending
the use of any Preliminary Prospectus or the Prospectus or suspending the
qualification or registration of the Shares for offering or sale in any
jurisdiction, and of the institution or threat of any proceedings therefor, of
which the Company shall have received notice or otherwise have knowledge prior
to the completion of the distribution of the Shares; and the Company will use
its best efforts to prevent the issuance of any such stop order or other order
and, if issued, to secure the prompt removal thereof.

(c) The Company will not file any amendment or supplement to the
Registration Statement, the Prospectus (or any other prospectus relating to the
Shares filed pursuant to Rule 424(b) of the 1933 Act Rules and Regulations that
differs from the Prospectus as filed pursuant to such Rule 424(b)), of which the
Underwriters shall not previously have been advised and furnished with a copy or
to which the Underwriters shall have reasonably objected or which is not in
compliance with the 1933 Act Rules and Regulations; and the Company will
promptly notify you after it shall have received notice thereof of the time when
any amendment to the Registration Statement becomes effective or when any
supplement to the Prospectus has been filed.

(d) During the period when a prospectus relating to any of the Shares
is required to be delivered under the 1933 Act by any Underwriter or dealer, the
Company will comply, at its own expense, with all requirements imposed by the
1933 Act and the 1933 Act Rules and Regulations, as now and hereafter amended,
and by the rules and regulations of the

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<PAGE>

SEC thereunder, as from time to time in force, so far as necessary to permit the
continuance of sales of or dealing in the Shares during such period in
accordance with the provisions hereof and as contemplated by the Prospectus.

(e) If, during the period when a prospectus relating to any of the
Shares is required to be delivered under the 1933 Act by any Underwriter or
dealer, (i) any event relating to or affecting the Company or of which the
Company shall be advised in writing by the Representatives shall occur as a
result of which, in the opinion of the Company or the Representatives, the
Prospectus as then amended or supplemented would include any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading or (ii) it shall be necessary to amend or supplement the
Registration Statement or the Prospectus to comply with the 1933 Act, the 1933
Act Rules and Regulations, the 1934 Act or the rules and regulations of the SEC
thereunder, the Company will forthwith at its expense prepare and file with the
SEC, and furnish to the Representatives a reasonable number of copies of, such
amendment or supplement or other filing that will correct such statement or
omission or effect such compliance.

(f) During the period when a prospectus relating to any of the Shares
is required to be delivered under the 1933 Act by any Underwriter or dealer, the
Company will furnish such proper information as may be lawfully required and
otherwise cooperate in qualifying the Shares for offer and sale under the
securities or blue sky laws of such jurisdictions as the Representatives may
reasonably designate and will file and make in each year such statements or
reports as are or may be reasonably required by the laws of such jurisdictions;
provided, however, that the Company shall not be required to qualify as a
foreign corporation or shall be required to qualify as a dealer in securities or
to file a general consent to service of process under the laws of any
jurisdiction.

(g) In accordance with Section 11(a) of the 1933 Act and Rule 158 of
the 1933 Act Rules and Regulations, the Company will make generally available to
its security holders and to holders of the Shares, as soon as practicable, an
earnings statement (which need not be audited) in reasonable detail covering the
12 months beginning not later than the first day of the month next succeeding
the month in which occurred the effective date (within the meaning of Rule 158)
of the Registration Statement.

(h) During the period beginning from the date of this Agreement and
continuing to and including the date that is 90 days after the Closing Date, the
Company will not, without the prior written consent of the Representatives,
offer for sale, sell or enter into any agreement to sell, or otherwise dispose
of, any equity securities of the Company, except for (A) the Shares and (B)
shares issuable upon exercise of options currently outstanding under the
employee stock option plan.

(i) The Company will furnish to its security holders annual reports
containing financial statements audited by independent public accountants and
quarterly reports containing financial statements and financial information
which may be unaudited. The Company will, for a period of five years from the
Closing Date, deliver to the Underwriters at their principal executive offices a
reasonable number of copies of annual reports and copies of all other

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<PAGE>

documents, reports and information furnished by the Company to its documents,
reports and information furnished by the Company to its stockholders. The
Company will deliver to the Underwriters similar reports with respect to any
significant subsidiaries, as that term is defined in the 1933 Act Rules and
Regulations, which are not consolidated in the Company's financial statements.
Any report, document or other information required to be furnished under this
paragraph (h) shall be furnished as soon as practicable after such report,
document or information becomes available.

(j) The Company will apply the proceeds from the sale of the Shares
substantially as set forth in the description under "Use of Proceeds" in the
Prospectus, which description complies in all respects with the requirements of
Item 504 of Regulation S-K.

(k) The Company will promptly provide you with copies of all
correspondence to and from, and all documents issued to and by, the SEC in
connection with the registration of the Shares under the 1933 Act.

(l) Prior to the Closing Date (and, if applicable, the Option Closing
Date), the Company will furnish to you, as soon as they have been prepared,
copies of any unaudited interim consolidated financial statements of the Company
and its subsidiaries for any periods subsequent to the periods covered by the
financial statements appearing in the Registration Statement and the Prospectus.

(m) Prior to the Closing Date (and, if applicable, the Option Closing
Date), the Company shall not issue any press releases or other communications
directly or indirectly and will hold no press conferences with respect to the
Company or any of its subsidiaries, the financial condition, results of
operations, business, properties, assets or liabilities of the Company or any of
its subsidiaries, or the offering of the Shares, without your prior consent.

(n) The Company will use its best efforts to maintain the listing of
the Shares on the Nasdaq National Market.

(o) The Company will cause its directors and officers to furnish to
you, on or prior to the date of this Agreement, a letter or letters, in form and
substance satisfactory to counsel for the Underwriters, pursuant to which each
such person shall agree not to (except to the extent specifically authorized by
such person's respective lock-up agreement), and the Company and Selling
Securityholders will not, directly or indirectly, offer for sale, contract to
sell, sell, distribute, grant any option, right or warrant to purchase, pledge,
hypothecate or otherwise dispose of any shares of Common Stock, any securities
convertible into, or exercisable or exchangeable for, Common Stock or any other
rights to acquire such shares, for a period of 90 days from the Effective Date
without the prior written consent of A.G. Edwards & Sons, Inc.

(p) The Company and its subsidiaries will maintain and keep accurate
books and records reflecting their assets and maintain internal accounting
controls which provide reasonable assurance that (1) transactions are executed
in accordance with management's authorization, (2) transactions are recorded as
necessary to permit the preparation of the Company's consolidated financial
statements and to maintain accountability for the assets of the Company and its
subsidiaries, (3) access to the assets of the Company and its subsidiaries is

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<PAGE>

permitted only in accordance with management's authorization, and (4) the
recorded accounts of the assets of the Company and its subsidiaries are compared
with existing assets at reasonable intervals.

(q) If the Company elects to rely on Rule 462(b) under the 1933 Act,
the Company shall both file an Abbreviated Registration Statement with the SEC
in compliance with Rule 462(b) and pay the applicable fees in accordance with
Rule 111 of the 1933 Act by the earlier of (i) 9:00 p.m., New York time, on the
date of this Agreement, and (ii) the time that confirmations are given or sent,
as specified by Rule 462(b)(2).

7. Conditions of Underwriters' Obligations. The several obligations of the
---------------------------------------
Underwriters to purchase and pay for the Shares, as provided herein, shall be
subject to the accuracy, as of the date hereof and as of the Closing Date (and,
if applicable, the Option Closing Date), of the representations and warranties
of the Company and the Selling Securityholders contained herein, to the
performance by the Company and each Selling Securityholder of their respective
covenants and obligations hereunder, and to the following additional conditions:

(a) The Registration Statement and all post-effective amendments
thereto shall have become effective not later than 1:00 p.m., New York time, on
the date hereof, or, with your consent, at a later date and time, not later than
1:00 p.m., New York time, on the first business day following the date hereof,
or at such later date and time as may be approved by the Representatives; if the
Company has elected to rely on Rule 462(b) under the 1933 Act, the Abbreviated
Registration Statement shall have become effective not later than the earlier of
(x) 10:00 p.m. New York time, on the date hereof, or (y) at such later date and
time as may be approved by the Representatives. All filings required by Rule 424
and Rule 430A of the 1933 Act Rules and Regulations shall have been made. No
stop order suspending the effectiveness of the Registration Statement, as
amended from time to time, shall have been issued and no proceeding for that
purpose shall have been initiated or, to the knowledge of the Company or any
Underwriter, threatened or contemplated by the SEC, and any request of the SEC
for additional information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the reasonable
satisfaction of the Underwriters.

(b) No Underwriter shall have advised the Company on or prior to the
Closing Date (and, if applicable, the Option Closing Date), that the
Registration Statement or Prospectus or any amendment or supplement thereto
contains an untrue statement of fact which, in the opinion of counsel to the
Underwriters, is material, or omits to state a fact which, in the opinion of
such counsel, is material and is required to be stated therein or is necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.

(c) On the Closing Date (and, if applicable, the Option Closing
Date), you shall have received the opinion of Stradling Yocca Carlson & Rauth,
counsel for the Company and the Selling Securityholders, addressed to you and
dated the Closing Date (and, if applicable, the Option Closing Date), to the
effect that:

(i) The Registration Statement and all post-effective amendments
thereto and the Abbreviated Registration Statement, if any, have become
effective under the 1933 Act; any required filing of the Prospectus or any
supplement thereto pursuant to Rule

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<PAGE>

424(b) or otherwise has been made in the manner and within the time period
required thereby; and, to the knowledge of such counsel after due inquiry, no
stop or other order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the 1933 Act or under the securities laws of any
jurisdiction.

(ii) The Registration Statement and the Prospectus, and each
amendment or supplement thereto, as of their respective effective or issue date,
comply as to form and appear on their face to be appropriately responsive in all
material respects to the requirements of Form S-3 under the 1933 Act and the
applicable 1933 Act Rules and Regulations (except that such counsel need express
no opinion as to the financial statements or other financial data).

(iii) The documents incorporated by reference in the Registration
Statement or the Prospectus or any amendment or supplement thereto, when they
became effective under the 1933 Act or when they were filed with the SEC under
the 1934 Act or as later amended, as the case may be, in either case to the
extent amended, appeared on their face to comply as to form and to be
appropriately responsive in all material respects with the requirements of the
1933 Act or the 1934 Act, as applicable, and the rules and regulations of the
SEC thereunder (except that such counsel need express no opinion as to the
financial statements or other financial data).

(iv) The Company is a corporation duly incorporated and validly
existing and in good standing under and by virtue of the laws of the State of
Delaware, and has the corporate power to own its property and to conduct its
business substantially as described in the Prospectus under the caption
"Business" and to enter into and perform its obligations under the Underwriting
Agreement. The Company is duly qualified to transact business and is in good
standing in California. There are no other jurisdictions in which the conduct of
its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect.

(v) Each subsidiary of the Company has been duly organized, is
validly existing in good standing under the laws of its state of organization,
has the corporate power and authority to own its property and to conduct its
business. Each subsidiary is duly qualified to transact business and is in good
standing in all jurisdictions in which the conduct of their respective
businesses or their ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect. Except for nominee
director qualifying shares held by individuals with respect to foreign
subsidiaries and to such counsel's knowledge after review of the relevant stock
records, the Company owns of record, directly or indirectly through other
subsidiaries, all of the outstanding shares of capital stock or other securities
evidencing equity ownership of such subsidiaries, and all such securities have
been duly authorized and validly issued, are fully paid and non-assessable and,
to the knowledge of such counsel, are not the subject of any agreement or
understanding with any person (except for a pledge of such shares pursuant to
the Company's credit agreement with Canadian Imperial Bank), and were not
issued in violation of any preemptive or similar rights; and, to the knowledge
of such counsel, except as disclosed in the Prospectus, there are no outstanding
subscriptions, rights, warrants, options, calls, convertible securities,
commitments of sale, or instruments related to or entitling any person to
purchase or otherwise acquire any shares of, or any security convertible into or
exercisable or exchangeable for, any such shares of capital stock or other
ownership interest of any of such subsidiaries.

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<PAGE>

(vi) The authorized stock of the Company conforms in all
material respects as to legal matters to the description thereof contained in
the Prospectus under the caption "Description of Capital Stock."

(vii) The shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly issued, fully
paid and nonassessable, and are not subject to preemptive or other similar
rights arising by operation of the DGCL or under the Charter or bylaws of the
Company or any agreement or other instrument known to such counsel to which the
Company or any Selling Securityholder is a party or by which any of them is
bound.

(viii) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, against payment of the
agreed consideration, will be validly issued, fully paid and non-assessable, and
the issuance of such Shares will not be subject to any preemptive or similar
rights arising by operation of the DGCL or under the Charter or bylaws of the
Company or any agreement or other instrument known to such counsel.

(ix) This Agreement has been duly authorized, executed and
delivered by the Company.

(x) To the best of such counsel's knowledge, no consent,
approval, authorization, order of or qualification with any court or
governmental agency or authority of the State of California is required to be
obtained by the Company or any subsidiary in connection with the offering,
issuance or sale of the Shares under this Agreement except for such as have been
obtained or waived.

(xi) The information in the Prospectus under the caption
"Description of Capital Stock," to the extent that it constitutes matters of
law, summaries of legal matters, documents or proceedings, or legal conclusions,
has been reviewed by them and is substantially correct in all material respects.

(xii) The issuance and sale of the Shares and the execution,
delivery and performance by the Company of this Agreement, (A) will not conflict
with or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any properties or assets of the Company or any of its
subsidiaries under, any indenture, mortgage, deed of trust, loan agreement or
other material agreement or instrument known to such counsel after due inquiry
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the properties or
assets of the Company or any of its subsidiaries is subject, (B) will not result
in any violation of the provisions of the Charter, bylaws or other
organizational documents of the Company or any subsidiary, and (C) will not, to
such counsel's knowledge, result in any violation of any statute, rule,
regulation or other law under the Delaware General Corporation Law or any
current California or federal law, or any order or judgment known to such
counsel after due inquiry, of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties.

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<PAGE>

(xiii) No consent, approval, authorization, order, registration
or qualification of or with any court or any California or federal governmental
agency or body is required in connection with the execution, delivery and
performance of this Agreement, and the issuance and sale of the Shares, except
such as may be required under the 1933 Act or the 1933 Act Rules and Regulations
and have been obtained, or as may be required by the NASD or under state
securities or blue sky laws in connection with the purchase and distribution of
the Shares by the Underwriters. Each of the Company and its subsidiaries has
filed all Notices pursuant to, and has obtained all Approvals required to be
obtained under, and has otherwise complied with all requirements of, all
applicable laws and regulations in connection with the issuance and sale of the
Shares, in each case with such exceptions, individually or in the aggregate, as
would not affect the validity of the Shares, their issuance or the transactions
contemplated hereby or have a Material Adverse Effect; and no such Notices or
Approvals are required to be filed or obtained by the Company or any of its
subsidiaries in connection with the execution, delivery and performance of this
Agreement, the issuance and sale of the Shares or the transactions contemplated
hereby, in each case with such exceptions, individually or in the aggregate, as
would not affect the validity of the Shares, their issuance or the transactions
contemplated hereby or have a Material Adverse Effect.

(xiv) The statements in the Prospectus and in the Registration
Statement, in each case insofar as such statements constitute summaries of the
legal matters, documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents and
proceedings and fairly summarize the matters referred to therein.

(xv) To the knowledge of such counsel and other than as set
forth in the Prospectus, there are no legal or governmental proceedings pending
to which the Company or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is the subject that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect on the current
or future consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries taken as a whole; and, to the
knowledge of such counsel after due inquiry, no such proceedings are threatened
in writing by governmental authorities or by others.

(xvi) To the knowledge of such counsel, the Company and each of
its subsidiaries hold all licenses, certificates, permits and approvals from all
state, federal and other regulatory authorities, and have satisfied in all
material respects the requirements imposed by regulatory bodies, administrative
agencies or other governmental bodies, agencies or officials, that are required
for the Company and its subsidiaries lawfully to own, lease and operate its
properties and conduct its business as described in the Prospectus, except to
the extent such failure would not have a Material Adverse Effect.

(xvii) To the knowledge of such counsel, there are no contracts
or documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the Registration
Statement which are not described or filed as required.

(xviii) To such counsel's knowledge after due inquiry, the Company
is not and, after giving effect to the offering and sale of the Shares, will not
be a "holding company," or a "subsidiary company" o f a "holding

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<PAGE>

company," or an "affiliate" of a "holding company" or of a "subsidiary company,"
as such terms are defined in the 1935 Act.

(xix) To such counsel's knowledge after due inquiry, the Company
is not and, after giving effect to the offering and sale of the Shares, will not
be an "investment company" or an entity "controlled" by an "investment company,"
as such terms are defined in the 1940 Act.

(xx) To the knowledge of such counsel and except as disclosed
in the Prospectus, no holder of any security of the Company has any right to
require registration of shares of Common Stock or any other security of the
Company because of the filing of the Registration Statement or the consummation
of the transactions contemplated hereby and, except as disclosed in the
Prospectus, no person has the right to require registration under the 1933 Act
of any shares of Common Stock or other securities of the Company.

Such counsel shall confirm that during the preparation of the Registration
Statement and Prospectus, including in each case the documents incorporated by
reference therein, such counsel participated in conferences with the
Representatives and their counsel and with officers and representatives of the
Company and its independent accountants, at which conferences the contents of
the Registration Statement and the Prospectus were discussed, reviewed and
revised. On the basis of the information which was developed in the course
thereof, considered in light of such counsel's understanding of applicable law
and the experience gained by such counsel through their practice thereunder,
without such counsel assuming responsibility for the accuracy and completeness
of such statements except to the extent expressly provided above, such counsel
shall confirm that nothing came to their attention that would lead them to
believe that either the Registration Statement, as of the Effective Date, or the
Prospectus or any amendment or supplement thereto as of its respective issue
date and as of the Closing Date, or, if applicable, the Option Closing Date,
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading (other than the financial statements or other
financial data as to which such counsel need express no opinion).

In rendering the foregoing opinion, such counsel (1) may rely as to matters
involving laws of any jurisdictions other than the State of California, Delaware
General Corporation Law or the United States on an assumption that all other
laws are the same as the laws mentioned above, (2) may rely upon opinions
addressed to the Underwriters of other counsel satisfactory to them and
O'Melveny & Myers LLP, (3) may rely as to all matters of fact, upon certificates
and written statements of the executive officers of, and accountants for, the
Company and (4) may state that their belief is based upon the procedures set
forth in the opinion letter.

(d) You shall have received the opinion of the counsel for each of
the Selling Securityholders, dated the Closing Date, to the effect that:

(i) This Agreement has been duly authorized, executed and
delivered by such Selling Securityholder, the Custodian has been duly and
validly authorized to carry out all transactions contemplated herein and therein
on behalf of such Selling Securityholder, and the performance of this Agreement
by such Selling Securityholder and the consummation by such Selling
Securityholder of the transactions herein and therein contemplated and will not
result in a

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<PAGE>

breach or violation of such terms and provisions of, or constitute a default
under, any statute, any agreement or instrument known to such counsel to which
such Selling Securityholder is a party or by which it is bound or to which any
of the property of such Selling Securityholder is subject, the charter or bylaws
of such Selling Securityholder, or any order, rule or regulation known to such
counsel of any court or governmental agency or body having jurisdiction over
such Selling Securityholder or any of its properties; and no consent, approval,
authorization or order of, or filing with, any court or governmental agency or
body is required for the consummation of the transactions contemplated by this
Agreement in connection with the sale of the Shares to be sold by such Selling
Securityholder hereunder, except such as have been obtained under the 1933 Act
and such as may be required under state securities laws in connection with the
purchase and distribution of such Shares by the Underwriters; and

(ii) Upon payment for and delivery of the Selling
Securityholder Shares, and assuming the several Underwriters are acquiring the
Selling Securityholder Shares in good faith without notice or any adverse claim,
the several Underwriters will be the owners of the Selling Securityholder
Shares, free and clear of any adverse claim.

In rendering the opinion in (ii) above, such counsel may rely upon a
certificate of the Selling Securityholders as to matters of fact respecting
ownership of and any security interests, other encumbrances or adverse claims on
the Shares sold by such Selling Securityholder, provided that such counsel shall
state that they believe that both you and they are justified in relying upon
such certificates.

(e) You shall have received on the Closing Date (and, if applicable,
the Option Closing Date), from O'Melveny & Myers LLP, counsel to the
Underwriters, such opinion or opinions, dated the Closing Date (and, if
applicable, the Option Closing Date) with respect to such matters as you may
reasonably require; and the Company shall have furnished to such counsel such
documents as they reasonably request for the purposes of enabling them to review
or pass on the matters referred to in this Section 7 and in order to evidence
the accuracy, completeness and satisfaction of the representations, warranties
and conditions herein contained.

(f) You shall have received at or prior to the Closing Date from
O'Melveny & Myers LLP a memorandum or memoranda, in form and substance
satisfactory to you, with respect to the qualification for offering and sale by
the Underwriters of the Shares under state securities or Blue Sky laws of such
jurisdictions as the Underwriters may have designated to the Company.

(g) On the business day immediately preceding the date of this
Agreement and on the Closing Date (and, if applicable, the Option Closing Date),
you shall have received from PricewaterhouseCoopers LLP, a letter or letters,
dated the date of this Agreement and the Closing Date (and, if applicable, the
Option Closing Date), respectively, in form and substance satisfactory to you,
confirming that they are independent public accountants with respect to the
Company within the meaning of the 1933 Act and the published Rules and
Regulations, and stating to the effect set forth in Schedule III hereto.

(h) Except as contemplated in the Prospectus, (i) neither the Company
nor any of its subsidiaries shall have sustained since the date of the latest
audited financial statements

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<PAGE>

included in the Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree; and (ii)
subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, neither the Company nor any of its
subsidiaries shall have incurred any liability or obligation, direct or
contingent, or entered into any transactions, and there shall not have been any
change in the capital stock or short-term or long-term debt of the Company and
its subsidiaries or any change, or any development involving or which might
reasonably be expected to involve a prospective change in the condition
(financial or other), net worth, business, affairs, management, prospects,
results of operations or cash flow of the Company or its subsidiaries, the
effect of which, in any such case described in clause (i) or (ii), is in your
judgment so material or adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares being delivered
on such Closing Date (and, if applicable, the Option Closing Date) on the terms
and in the manner contemplated in the Prospectus.

(i) There shall not have occurred any of the following: (i) a
suspension or material limitation in trading in securities generally on the New
York Stock Exchange or the American Stock Exchange or The Nasdaq National Market
or the establishing on such exchanges or market by the SEC or by such exchanges
or markets of minimum or maximum prices which are not in force and effect on the
date hereof; (ii) a suspension or material limitation in trading in the
Company's securities on The Nasdaq National Market or the establishing on such
exchange by the SEC or by such exchange of minimum or maximum prices which are
not in force and effect on the date hereof; (iii) a general moratorium on
commercial banking activities declared by either federal or any state
authorities; (iv) the outbreak or escalation of hostilities involving the United
States or the declaration by the United States of a national emergency or war,
which in your judgment makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares in the manner contemplated in the
Prospectus; or (v) any calamity or crisis, change in national, international or
world affairs, act of God, change in the international or domestic markets, or
change in the existing financial, political or economic conditions in the United
States or elsewhere, which in your judgment makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the Shares in
the manner contemplated in the Prospectus.

(j) You shall have received certificates, dated the Closing Date
(and, if applicable, the Option Closing Date) and signed by the President and
the Chief Financial Officer of the Company, in their capacities as such, stating
that:

(i) the condition set forth in Section 7(a) has been fully
satisfied;

(ii) they have carefully examined the Registration Statement and
the Prospectus as amended or supplemented and nothing has come to their
attention that would lead them to believe that either the Registration Statement
or the Prospectus, or any amendment or supplement thereto as of their respective
effective, issue or filing dates, contained, and the Prospectus as amended or
supplemented, at such Closing Date, contains any untrue statement of a material
fact, or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading;

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<PAGE>

(iii) since the Effective Date, there has occurred no event
required to be set forth in an amendment or supplement to the Registration
Statement or the Prospectus which has not been so set forth;

(iv) all representations and warranties made herein by the
Company are true and correct at such Closing Date, with the same effect as if
made on and as of such Closing Date, and all agreements herein to be performed
or complied with by the Company on or prior to such Closing Date have been duly
performed and complied with by the Company;

(v) neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements included in
the Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree;

(vi) except as disclosed in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, neither the Company nor any of its subsidiaries has incurred
any liabilities or obligations, direct or contingent, other than in the ordinary
course of business, or entered into any transactions not in the ordinary course
of business, which in either case are material to the Company or such
subsidiary; and there has not been any change in the capital stock or material
increase in the short-term debt or long-term debt of the Company or any of its
subsidiaries or any material adverse change or any development involving or
which may reasonably be expected to involve a prospective material adverse
change, in the condition (financial or other), net worth, business, affairs,
management, prospects, results of operations or cash flow of the Company and its
subsidiaries taken as a whole; and there has been no dividend or distribution of
any kind, paid or made by the Company on any class of its capital stock;

(vii) there has not been any change or decrease specified in
paragraph ______ of the letter or letters delivered to the Underwriters referred
to in Section 7(g) above, except those changes and decreases that are disclosed
therein; and

(viii) covering such other matters as you may reasonably request.

(k) You shall have received from each Selling Securityholder a
certificate, dated the Closing Date, to the effect that:

(i) The representations and warranties of such Selling
Securityholder in this Agreement are true and correct, as if made at and as of
the Closing Date, and such Selling Securityholder has complied with all the
agreements and satisfied all the conditions to be performed or satisfied by such
Selling Securityholder at or prior to the Closing Date; and

(ii) Such Selling Securityholder, after a careful examination
of the Registration Statement, does not know of an untrue statement of a
material fact included in the Registration Statement or the omission from the
Registration Statement of any material fact required to be stated therein or
necessary to make the statements therein not misleading.

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<PAGE>

(l) Each Selling Securityholder shall have delivered to you on or
prior to the Closing Date a properly completed and executed United States
Treasury Department Form W-9 (or other applicable form or statement specified by
Treasury Department regulations).

(m) Neither the Company nor any Selling Securityholder shall have
failed, refused, or been unable, at or prior to the Closing Date (and, if
applicable, the Option Closing Date) to have performed any agreement on its part
to be performed or any of the conditions herein contained and required to be
performed or satisfied by it at or prior to such Closing Date.

(n) The Company and each Selling Securityholder shall have furnished
to you at the Closing Date (and, if applicable, the Option Closing Date) such
further information, opinions, certificates, letters and documents as you may
have reasonably requested.

(o) The Shares shall have been approved for trading on The Nasdaq
National Market upon official notice of issuance.

(p) You shall have received duly and validly executed letter
agreements referred to in Section 6(n) hereof.

All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to you and to O'Melveny & Myers LLP, counsel for the several
Underwriters. The Company will furnish you with such signed and conformed copies
of such opinions, certificates, letters and documents as you may request.

If any of the conditions specified above in this Section 7 shall not have
been satisfied at or prior to the Closing Date (and, if applicable, the Option
Closing Date) or waived by you in writing, this Agreement may be terminated by
you on notice to the Company and the Selling Securityholders.

8. Indemnification and Contribution.
--------------------------------

(a) The Company and the Selling Securityholders jointly and severally
agree to indemnify and hold harmless each Underwriter for and against any
losses, damages or liabilities, joint or several, to which such Underwriter may
become subject, under the 1933 Act or otherwise, insofar as such losses, damages
or liabilities (or actions or claims in respect thereof) arise out of or are
based upon (i) an untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, the Registration Statement, the
Prospectus or any other prospectus relating to the Shares, or any amendment or
supplement thereto, or in any blue sky application or other document executed by
the Company or based on any information furnished in writing by the Company,
filed in any state or other jurisdiction in order to qualify any or all of the
Shares under the securities laws thereof (the "Blue Sky Application"), or (ii)
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse each Underwriter for any legal or other expenses incurred by such
Underwriter in connection with investigating, preparing, pursuing or defending
against or appearing as a third party witness in connection with any such loss,
damage, liability or action or claim, including, without limitation, any
investigation or proceeding by any governmental agency or body, commenced or

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<PAGE>

threatened, including the reasonable fees and expenses of counsel to the
indemnified party, as such expenses are incurred (including such losses,
damages, liabilities or expenses to the extent of the aggregate amount paid in
settlement of any such action or claim, provided that (subject to Section 8(d)
hereof) any such settlement is effected with the written consent of the
Company); provided, however, that neither the Company nor any Selling
-------- -------
Securityholder shall be liable in any such case to the extent, but only to the
extent, that any such loss, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement, the Prospectus
or any other prospectus relating to the Shares, or any such amendment or
supplement, in reliance upon and in conformity with written information relating
to the Underwriter furnished to the Company by you or by any Underwriter through
you, expressly for use in the preparation thereof (as provided in Section 14
hereof); provided, further, that any Selling Securityholder (other than Philip
Frey, Jr.) shall only be responsible for any losses, damages or liabilities
pursuant to this Section 8(a) to the extent that such loss, damage or liability
arises out of or is based upon an untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement, the
Prospectus or any other prospectus relating to the Shares, or any such
supplement or amendment, with respect to information relating to the Selling
Securityholder or arising out of a breach by such Selling Securityholder of any
of the representations, warranties or agreements of such Selling Securityholder
set forth in Section 5 of this Agreement.

(b) Each Underwriter, severally and not jointly, will indemnify and
hold harmless the Company and the Selling Securityholders for and against any
losses, damages or liabilities to which the Company or the Selling
Securityholders may become subject, under the 1933 Act or otherwise, insofar as
such losses, damages or liabilities (or actions or claims in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus, the Registration
Statement, the Prospectus or any other prospectus relating to the Shares, or any
amendment or supplement thereto, or any Blue Sky Application, or arise out of
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in any Preliminary Prospectus, the Registration Statement, the Prospectus or any
other prospectus relating to the Shares, or any such amendment or supplement, or
any Blue Sky Application, in reliance upon and in conformity with written
information relating to the Underwriters furnished to the Company by you or by
any Underwriter through you, expressly for use in the preparation thereof (as
provided in Section 14 hereof), and will reimburse the Company and the Selling
Securityholders for any legal or other expenses incurred by the Company or the
Selling Securityholders in connection with investigating or defending any such
action or claim as such expenses are incurred (including such losses, damages,
liabilities or expenses to the extent of the aggregate amount paid in settlement
of any such action or claim, provided that (subject to Section 8(d) hereof) any
such settlement is effected with the written consent of the Underwriters).

(c) Promptly after receipt by an indemnified party under Section 8(a)
or 8(b) hereof of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against an indemnifying
party under Section 8(a) or 8(b) hereof, notify each such indemnifying party in
writing of the commencement thereof, but the failure so to notify such
indemnifying party shall not relieve such indemnifying party from any liability
except to the extent that it has been prejudiced in any material respect by such
failure or from any liability that it may have to any such indemnified party
otherwise than under Section 8(a) or 8(b) hereof. In case any such action shall
be brought against any such indemnified party and it shall notify each
indemnifying party of the commencement thereof, each such indemnifying party
shall be entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party under Section 8(a) or 8(b) hereof
similarly notified, to assume the

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<PAGE>

defense thereof, with counsel satisfactory to such indemnified party (who shall
not, except with the consent of such indemnified party, be counsel to such
indemnifying party), and, after notice from such indemnifying party to such
indemnified party of its election so to assume the defense thereof, such
indemnifying party shall not be liable to such indemnified party under Section
8(a) or 8(b) hereof for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation. The indemnified party shall have the right to employ its own
counsel in any such action, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (i) the employment of counsel by
such indemnified party at the expense of the indemnifying party has been
authorized by the indemnifying party, (ii) the indemnified party shall have been
advised by such counsel that there may be a conflict of interest between the
indemnifying party and the indemnified party in the conduct of the defense, or
certain aspects of the defense, of such action (in which case the indemnifying
party shall not have the right to direct the defense of such action with respect
to those matters or aspects of the defense on which a conflict exists or may
exist on behalf of the indemnified party) or (iii) the indemnifying party shall
not in fact have employed counsel reasonably satisfactory to such indemnified
party to assume the defense of such action, in any of which events such fees and
expenses to the extent applicable shall be borne, and shall be paid as incurred,
by the indemnifying party. If at any time such indemnified party shall have
requested such indemnifying party under Section 8(a) or 8(b) hereof to reimburse
such indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 8(a) or 8(b) hereof effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by such indemnifying
party of such request for reimbursement, (ii) such indemnifying party shall have
received notice of the terms of such settlement at least 30 days prior to such
settlement being entered into and (iii) such indemnifying party shall not have
reimbursed such indemnified party in accordance with such request for
reimbursement prior to the date of such settlement. No such indemnifying party
shall, without the written consent of such indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not such
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (A) includes an unconditional
release of such indemnified party from all liability arising out of such action
or claim and (B) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any such indemnified party.
In no event shall such indemnifying parties be liable for the fees and expenses
of more than one counsel, excluding any local counsel, for all such indemnified
parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances.

(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to indemnify or hold harmless an indemnified
party under Section 8(a) or 8(b) hereof in respect of any losses, damages or
liabilities (or actions or claims in respect thereof) referred to therein, then
each indemnifying party under Section 8(a) or 8(b) hereof shall contribute to
the amount paid or payable by such indemnified party as a result of such losses,
damages or liabilities (or actions or claims in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Securityholders, on the one hand, and the Underwriters,
on the other hand, from the offering of the Shares. If, however, the

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<PAGE>

allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under Section 8(c) hereof and such indemnifying party was prejudiced in a
material respect by such failure, then each such indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and the Selling Securityholders, on the one
hand, and the Underwriters, on the other hand, in connection with the statements
or omissions that resulted in such losses, damages or liabilities (or actions or
claims in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Securityholders, on the one hand, and the Underwriters, on the other hand, shall
be deemed to be in the same proportion as the total net proceeds from such
offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters. The
relative fault of the Company and the Selling Securityholders, on the one hand,
and the Underwriters, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Selling Securityholders, on the one
hand, or the Underwriters, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to above in this Section 8(d).
The amount paid or payable by such an indemnified party as a result of the
losses, damages or liabilities (or actions or claims in respect thereof)
referred to above in this Section 8(d) shall be deemed to include any legal or
other expenses incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8(d), no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11 (f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. The
obligations of the Underwriters in this Section 8(d) to contribute are several
in proportion to their respective underwriting obligations with respect to the
Shares and not joint.

(e) The obligations of the Company and the Selling Securityholders
under this Section 8 shall be in addition to any liability that the Company and
the Selling Securityholders may otherwise have and shall extend, upon the same
terms and conditions, to each officer, director, employee, agent or other
representative of the Company and to each person, if any, who controls any
Underwriter within the meaning of the 1933 Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability that the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each officer and director of the Company who signed the
Registration Statement and to each person, if any, who controls the Company
within the meaning of the 1933 Act.

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<PAGE>

(f) Any liability of the Selling Securityholders arising under this
Agreement, including the indemnity and reimbursement agreements contained in the
provisions of this Section 8 shall be limited to an amount equal to the net
proceeds received by the Selling Securityholders in connection with the Shares
sold by the Selling Securityholders to the Underwriters.

(g) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof, including, without limitation, the
provisions of this Section 8, and are fully informed regarding such provisions.
They further acknowledge that the provisions of this Section 8 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, and any
supplement or amendment thereof, as required by the 1933 Act.

9. Representations and Agreements to Survive Delivery. The respective
--------------------------------------------------
representations, warranties, agreements and statements of the Company, the
Selling Securityholders and the Underwriters, as set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement, shall
remain operative and in full force and effect regardless of any investigation
(or any statement as to the results thereof) made by or on behalf of any
Underwriter or any controlling person of any Underwriter, or the Company or any
of its officers, directors or any controlling persons, or the Selling
Securityholders and shall survive delivery of and payment for the Shares
hereunder.

10. Substitution of Underwriters.
----------------------------

(a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Shares on the
terms contained herein. If within 36 hours after such default by any Underwriter
you do not arrange for the purchase of such Shares, then the Company shall be
entitled to a further period of 36 hours within which to procure another party
or parties reasonably satisfactory to you to purchase such Shares on such terms.
In the event that, within the respective prescribed periods, you notify the
Company that you have so arranged for the purchase of such Shares, or the
Company notifies you that it has so arranged for the purchase of such Shares,
you or the Company shall have the right to postpone the Closing Date for a
period of not more than seven days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus, or in
any other documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any persons substituted under this Section 10 with like effect as
if such person had originally been a party to this Agreement with respect to
such Shares.

(b) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters made by you and the
Company as provided in subsection (a) above, the aggregate number of Shares
which remains unpurchased does not exceed one-eleventh of the total Shares to be
sold on the Closing Date, then the Company shall

-29-
<PAGE>

have the right to require each non-defaulting Underwriter to purchase the Shares
which such Underwriter agreed to purchase hereunder and, in addition, to require
each non-defaulting Underwriter to purchase its pro rata share (based on the
number of Shares which such Underwriter agreed to purchase hereunder) of the
Shares of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.

(c) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters made by you and the
Company as provided in subsection (a) above, the number of Shares which remains
unpurchased exceeds one-eleventh of the total Shares to be sold on the Closing
Date, or if the Company shall not exercise the right described in subsection (b)
above to require the non-defaulting Underwriters to purchase Shares of the
defaulting Underwriter or Underwriters, then this Agreement (or, with respect to
the Option Closing Date, the obligations of the Underwriters to purchase and of
the Company to sell the Option Shares) shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter or the Company except
for the expenses to be borne by the Company and the Underwriters as provided in
Section 12 hereof and the indemnity and contribution agreements in Section 8
hereof; but nothing herein shall relieve a defaulting Underwriter from liability
for its default.

11. Effective Date and Termination.
------------------------------

(a) This Agreement shall become effective at 1:00 p.m., New York
time, on the first business day following the effective date of the Registration
Statement, or at such earlier time after the effective date of the Registration
Statement as you in your discretion shall first release the Shares for offering
to the public; provided, however, that the provisions of Section 8 and 12 shall
at all times be effective. For the purposes of this Section 11(a), the Shares
shall be deemed to have been released to the public upon release by you of the
publication of a newspaper advertisement relating to the Shares or upon release
of telegrams, facsimile transmissions or letters offering the Shares for sale to
securities dealers, whichever shall first occur.

(b) This Agreement may be terminated by you at any time before it
becomes effective in accordance with Section 11(a) by notice to the Company and
the Selling Securityholders; provided, however, that the provisions of this
-------- -------
Section 11 and of Section 8 and Section 12 hereof shall at all times be
effective. In the event of any termination of this Agreement pursuant to Section
10 or this Section 11(b), the Company and the Selling Securityholders shall not
then be under any liability to any Underwriter except as provided in Section 8
or Section 12 hereof.

(c) This Agreement may be terminated by you at any time at or prior
to the Closing Date by notice to the Company and the Selling Securityholders if
any condition specified in Section 8 hereof shall not have been satisfied on or
prior to the Closing Date. Any such termination shall be without liability of
any party to any other party except as provided in Sections 8 and 12 hereof.

-30-
<PAGE>

(d) This Agreement also may be terminated by you by notice to the
Company and the Selling Securityholders as to any obligation of the Underwriters
to purchase the Option Shares, if any condition specified in Section 8 hereof
shall not have been satisfied at or prior to the Option Closing Date or as
provided in Section 10 of this Agreement.

If you terminate this Agreement as provided in Sections 11(b), 11(c)
or 11(d), you shall notify the Company and the Selling Securityholders by
telephone or telegram, confirmed by letter.

12. Costs and Expenses. The Company, whether or not the transactions
------------------
contemplated hereby are consummated or this Agreement is prevented from becoming
effective under Section 10 hereof or is terminated, agrees to bear and pay the
costs and expenses incident to the registration of the Shares and public
offering thereof, including, without limitation, (a) all expenses (including
stock transfer taxes) incurred in connection with the delivery to the several
Underwriters of the Shares, the filing fees of the SEC, the fees and expenses of
the Company's and the Selling Securityholders' counsel and accountants and the
fees and expenses of counsel for the Company and the Selling Securityholders,
(b) the preparation, printing, filing, delivery and shipping of the Registration
Statement, each Preliminary Prospectus, the Prospectus and any amendments or
supplements thereto (except as otherwise expressly provided in Section 6(d)
hereof) and, if applicable, the printing, delivery and shipping of this
Agreement and other underwriting documents, including the Agreement Among
Underwriters, the Selected Dealer Agreement, Underwriters' Questionnaires and
Powers of Attorney and Blue Sky Memoranda, and any instruments or documents
related to any of the foregoing, (c) the furnishing of copies of such documents
(except as otherwise expressly provided in Section 6(d) hereof) to the
Underwriters, (d) the registration or qualification of the Shares for offering
and sale under the securities laws of the various states and other
jurisdictions, including the fees and disbursements of counsel to the
Underwriters relating to such registration or qualification and in connection
with preparing any Blue Sky Memoranda or related analysis, (e) the filing fees
of the NASD, (f) all printing and engraving costs related to preparation of the
certificates for the Shares, including transfer agent and registrar fees, (g)
all fees and expenses relating to the listing of the Shares for trading on The
Nasdaq National Market, (h) all reasonable travel expenses, including air fare
and accommodation expenses, of representatives of the Company in connection with
the offering of the Shares, and (i) all of the other costs and expenses incident
to the performance by the Company of the registration and offering of the
Shares; provided, that the Underwriters will bear and pay the fees and expenses
of the Underwriters' counsel (except as provided in this Section 12), the
Underwriters' out-of-pocket expenses, and any advertising costs and expenses
incurred by the Underwriters incident to the public offering of the Shares.

If this Agreement is terminated by you in accordance with the provisions
Section 11(c), the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the fees and disbursements of counsel to the
Underwriters.

13. Notices. All notices or communications hereunder, except as herein
-------
otherwise specifically provided, shall be in writing and if sent to the
Underwriters shall be mailed, delivered, sent by facsimile transmission, or
telegraphed and confirmed c/o A.G. Edwards &

-31-
<PAGE>

Sons, Inc. at One North Jefferson Avenue, St. Louis, Missouri 63103, Attention:
Paul F. Pautler, Director, Corporate Finance, facsimile number (314) 955-4775,
with a copy to Doug Kelley, General Counsel, facsimile number (314) 955-5913; if
sent to the Company shall be mailed, delivered, sent by facsimile transmission,
or telegraphed and confirmed to the Company at 2830 South Fairview Street, Santa
Ana, California 92704, facsimile number (714) 966-5256; and if sent to the
Selling Securityholders shall be mailed, delivered, sent by facsimile
transmission, or telegraphed and confirmed in care of the Company at 2830 South
Fairview Street, Santa Ana, California 92704, facsimile number (714) 966-5256,
with in each case a copy to Nicholas J. Yocca, Stradling Yocca Carlson & Rauth,
660 Newport Center Drive, Suite 1600, Newport Beach, California 92660, facsimile
number (949) 725-4100. Notice to any Underwriter pursuant to Section 8 shall be
mailed, delivered, sent by facsimile transmission, or telegraphed and confirmed
to such Underwriter's address as it appears in the Underwriters' Questionnaire
furnished in connection with the offering of the Shares or as otherwise
furnished to the Company.

14. Information Furnished by Underwriters. The statements in the [first,
-------------------------------------
third, seventh and eighth] paragraphs under the caption "Underwriting" in the
Prospectus constitute the only information furnished by or on behalf of the
Underwriters through you as such information is referred to in Section 4(b) and
Section 8 hereof.

15. Parties. This Agreement shall inure to the benefit of and be binding
-------
upon the Underwriters, the Selling Securityholders, the Company, and, to the
extent provided in Sections 8 and 9, the officers and directors of the Company
and each person who controls the Company or any Underwriter and their respective
heirs, executors, administrators, successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person, corporation or other entity any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision herein contained;
this Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of the parties hereto and their
respective successors and assigns and said controlling persons and said officers
and directors, and for the benefit of no other person, corporation or other
entity. No purchaser of any of the Shares from any Underwriter shall be
construed a successor or assign by reason merely of such purchase.

In all dealings hereunder, you shall act on behalf of each of the several
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of the Underwriters, made or
given by you jointly or by A.G. Edwards & Sons, Inc. on behalf of you as the
representatives, as if the same shall have been made or given in writing by the
Underwriters.

16. Counterparts. This Agreement may be executed by any one or more of
------------
the parties hereto in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one and
the same instrument.

17. Pronouns. Whenever a pronoun of any gender or number is used herein,
--------
it shall, where appropriate, be deemed to include any other gender and number.

18. Time of Essence. Time shall be of the essence of this Agreement.
---------------

-32-
<PAGE>

19. Applicable Law. This Agreement shall be governed by, and construed in
--------------
accordance with, the laws of the State of Missouri, without giving effect to the
choice of law or conflict of laws principles thereof.

-33-
<PAGE>

If the foregoing is in accordance with your understanding, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Company, each of the Selling
Securityholders and the Underwriters.

Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Securityholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Securityholder pursuant to a validly
existing and binding Power-of-Attorney which authorizes such Attorney-in-Fact to
take such action.

Very truly yours,

MICROSEMI CORPORATION

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

Name:
--------------------------

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

SELLING SECURITYHOLDERS
Named in Schedule I

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

Name:
--------------------------
Title:
-------------------------

As Attorney-in-Fact acting on behalf of each
of the Selling Securityholders named in
Schedule I

Accepted in St. Louis,
Missouri as of the date first
above written, on behalf of
ourselves and each of the
several Underwriters named
in Schedule II hereto.

A.G. EDWARDS & SONS, INC.
CIBC World Markets Corp.
Needham & Company, Inc.
As Representatives of the Several
Underwriters named on Schedule II hereto
By: A.G. EDWARDS & SONS, INC.

By:
-------------------------
Title:
----------------------

-34-
<PAGE>

SCHEDULE I

<TABLE>
<CAPTION>
Name Number of Shares to be Sold
- ---- --------------------------------
<S> <C>
Philip Frey, Jr. 197,000
David R. Sonksen 10,000
Brad Davidson 5,000
Mortin H. Jurick 3,000
Robert B. Phinizy 5,000
</TABLE>

-1-
<PAGE>

SCHEDULE II

<TABLE>
<CAPTION>
Number of Selling
Number of Firm Shares Securityholder Shares
Underwriter to be Purchased to be Purchased
- ------------------------------ ------------------------------- ------------------------------
<S> <C> <C>

A.G. Edwards & Sons, Inc.

CIBC World Markets Corp.

Needham & Company, Inc.

Total
</TABLE>

-1-
<PAGE>

SCHEDULE III

Pursuant to Section 7(g) of the Underwriting Agreement,
PricewaterhouseCoopers LLP shall furnish letters to the Underwriters to the
effect that:

(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the 1933 Act and the
applicable Rules and Regulations thereunder.

(ii) In their opinion, the financial statements and any supplementary
financial information and schedules audited by them and included or incorporated
by reference in the Prospectus or the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the 1933
Act and the applicable Rules and Regulations with respect to registration
statements on Form S-3; and, if applicable, they have made a review in
accordance with standards established by the American Institute of Certified
Public Accountants of the unaudited consolidated interim financial statements,
selected financial data, and/or condensed financial statements, included or
incorporated by reference in the Prospectus or the Registration Statement,
derived from audited financial statements of the Company for the periods
specified in such letter, as indicated in their reports thereon, copies of which
have been furnished to the Representatives of the Underwriters (the
"Representatives").

(iii) On the basis of limited procedures, not constituting an audit in
accordance with generally accepted auditing standards, consisting of a reading
of the unaudited financial statements and other information referred to below,
performing the procedures specified by the AICPA for a review of interim
financial information as discussed in SAS No. 71, Interim Financial Information,
on the latest available interim financial statements of the Company and its
subsidiaries, included or incorporated by reference in the Prospectus or the
Registration Statement, reading of the minute books of the Company and its
subsidiaries since the date of the latest audited financial statements included
in the Prospectus, inquiries of officials of the Company and its subsidiaries
responsible for financial and accounting matters and such other inquiries and
procedures as may be specified in such letter, nothing came to their attention
that caused them to believe that:

(A) any material modifications should be made to the unaudited
consolidated balance sheets, consolidated income statements, and
consolidated statements of cash flows included or incorporated by
reference in the Prospectus for them to be in conformity with generally
accepted accounting principles, or such statements do not comply as to
form in all material respects with the applicable accounting
requirements of the 1933 Act and the related published Rules and
Regulations thereunder.

(B) any other unaudited income statement data and balance sheet
items identified in the letter and included in the Prospectus do not
agree with the corresponding items in the unaudited consolidated
financial statements from which such data and items were derived, and
any such unaudited data and items were not determined on a basis
substantially consistent

-1-
<PAGE>

with the basis for the corresponding amounts in the audited
consolidated financial statements included in the Prospectus.

(C) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock or any increase in the consolidated long-term debt of the
Company and its subsidiaries, or any decreases in consolidated working
capital, net current assets or net assets, or any changes in any other
items specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included in the Prospectus,
except in each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which are described
in such letter.

(D) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred to
in Clause (C) there were any decreases in consolidated net sales or
income from operations or the total or per share amounts of
consolidated net income or any changes in any other items specified by
the Representatives, in each case as compared with the comparable
period of the preceding year and with any other period of corresponding
length specified by the Representatives, except in each case for
changes, decreases or increases which the Prospectus discloses have
occurred or may occur or which are described in such letter.

(iv) In addition to the audit referred to in their report(s) included
in the Prospectus and the limited procedures, reading of minute books, inquiries
and other procedures referred to in paragraph (iii) above, they have carried out
certain specified procedures, not constituting an audit in accordance with
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representatives, which
are derived from the general accounting records of the Company and its
subsidiaries for the periods covered by their reports and any interim or other
periods since the latest period covered by their reports, which appear in the
Prospectus, or in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives, and have compared certain of such
amounts, percentages and financial information with the accounting records of
the Company and its subsidiaries and have found them to be in agreement.

-2-

<PAGE>

EXHIBIT 5.1

[LETTERHEAD OF STRADLING, YOCCA, CARLSON & RAUTH]

April 14, 2000

Microsemi Corporation
2830 South Fairview Street
Santa Ana, CA 92704

RE: Registration Statement on Form S-3: Registration No. 333-_____;
Microsemi Corporation Common Stock, par value $.20 per share

Ladies and Gentlemen:

At your request, we have examined the Registration Statement on Form S-3,
Registration No. 333-_____ (the "Registration Statement") being filed by
Microsemi Corporation, a Delaware corporation (the "Company") with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
to register up to 2,553,000 shares of the Company's Common Stock, par value of
$.20 per share (the "Common Stock"). Of such shares of Common Stock, 2,000,000,
or up to 2,333,000 including the exercise of the underwriters' over-allotment
option in full, are authorized and previously unissued shares that would be
issued and sold for the Company's account, and 220,000 of such shares of Common
Stock are presently outstanding and would be sold for the account of the Selling
Stockholders. Unless specifically defined herein or the context requires
otherwise, capitalized terms used herein shall have the meanings ascribed to
them in the Registration Statement.

In our capacity as your counsel in connection with this transaction, we have
examined the proceedings taken and are familiar with the proceedings proposed to
be taken by you in connection with the authorization, issuance and sale of the
Common Stock. In such examination, we have assumed the authenticity of all
documents submitted to us as originals, the conformity with originals of all
documents submitted to us as copies and the genuineness of all signatures. We
have also assumed the legal capacity of all natural persons and that, with
respect to all parties to agreements or instruments relevant hereto other than
the Company, such parties had the requisite power and authority to execute,
deliver and perform such agreements or instruments, that such agreements or
instruments have been duly authorized by all requisite action and have been
executed and delivered by such parties and that such agreements or instruments
are the valid, binding and enforceable obligations of such parties.

Based upon the foregoing and the compliance with applicable state securities
laws and the additional proceedings to be taken by the Company as referred to
above, we are of the opinion that:

1. The Common Stock to be sold by the Company has been duly authorized, and
when issued upon payment therefore, will be validly issued, fully paid and
nonassessable.

2. The Common Stock to be sold by the Selling Stockholders has been duly
authorized and is validly issued, fully paid and nonassessable.

Our opinions herein are limited to the effect on the subject transaction of
United States Federal law and the General Corporation Law of the State of
Delaware, including relevant provisions of the Delaware Constitution and
Delaware judicial decisions. We assume no responsibility regarding the
applicability thereto, or the effect thereon, of the laws of any other
jurisdiction.
<PAGE>

Microsemi Corporation
April 14, 2000
Page 2

We consent to your filing this opinion as an exhibit to the Registration
Statement and to the reference to our firm contained under the caption "Legal
Matters" in the prospectus which is a part of the Registration Statement.

Very truly yours,

/s/ Stradling Yocca Carlson & Rauth

STRADLING YOCCA CARLSON & RAUTH, P.C.

<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement on Form S-3 of
our reports dated November 22, 1999 relating to the consolidated financial
statements and financial statement schedule, which appear in this Registration
Statement. We also consent to the incorporation by reference of our report
dated November 22, 1999 related to the consolidated financial statements of
Microsemi Corporation which appears in the Company's Annual Report on Form 10-K
for the fiscal year ended October 3, 1999. We also consent to the references to
us under the headings "Selected Consolidated Financial Data" and "Experts" in
such Prospectus.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

Costa Mesa, California
April 13, 2000

<PAGE>

EXHIBIT 24.1

POWER OF ATTORNEY

Each of the undersigned officers and directors of Microsemi Corporation, does
hereby constitute and appoint Philip Frey, Jr. and David R. Sonksen, and either
of them separately, the undersigned's true and lawful attorney-in-fact and
agent, each with full power of substitution and delegation, for and in the
undersigned's name, place and stead, in any and all capacities, to sign the
Registration Statement with which this Power of Attorney is filed and any and
all amendments or supplements to said Registration Statement, before or after
the effectiveness of the Registration Statement, and to file the same, exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission and others, granting unto said attorneys-in-fact and agents,
and each of them separately, full power and authority to do and perform each and
every such act and thing as deemed by the attorney-in-fact or agent necessary or
proper to be done in and about the premises, as fully to all intents and
purposes as the undersigned might or could do if personally present, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents, or
his substitutes or delegates, may lawfully do or cause to be done by virtue
hereof.

Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/PHILIP FREY, JR. Chairman of the Board, President April 9, 2000
- --------------------- and Chief Executive Officer
Philip Frey, Jr. (Principal Executive Officer)

/S/DAVID R. SONKSEN Vice President--Finance, Chief April 9, 2000
- --------------------- Financial Officer, Secretary and
David R. Sonksen Treasurer (Principal Financial
Officer and Principal Accounting Officer

/S/BRAD DAVIDSON Director April 10, 2000
- ---------------------
Brad Davidson

/S/ROBERT B. PHINIZY Director April 10, 2000
- ---------------------
Robert B. Phinizy

/S/JOSEPH M. SCHEER Director April 12, 2000
- ---------------------
Joseph M. Scheer

/S/MARTIN H. JURICK Director April 12, 2000
- ---------------------
Martin H. Jurick

/S/ H.K. DESAI Director April 12, 2000
- ---------------------
H.K. Desai

</TABLE>