<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 1999
REGISTRATION NO. 333-82715
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
QUALCOMM INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3663 95-3685934
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
5775 MOREHOUSE DRIVE
SAN DIEGO, CA 92121-1714
(858) 587-1121
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
IRWIN MARK JACOBS
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
QUALCOMM INCORPORATED
5775 MOREHOUSE DRIVE
SAN DIEGO, CA 92121-1714
(858) 587-1121
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
FREDERICK T. MUTO, ESQ. SCOTT N. WOLFE, ESQ.
THOMAS A. COLL, ESQ. DAVID A. HAHN, ESQ.
COOLEY GODWARD LLP LATHAM & WATKINS
4365 EXECUTIVE DRIVE, SUITE 1100 701 B STREET, SUITE 2100
SAN DIEGO, CA 92121 SAN DIEGO, CA 92101-8197
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as possible after this Registration Statement becomes 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, 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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<S> <C> <C> <C> <C>
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PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE PRICE(2) FEE
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Common Stock, $.0001 par value per
share(3)......................... 2,300,000 $147.9375 $340,256,250 $94,592
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</TABLE>
(1) The Registrant previously paid a registration fee of $179,912 on July 13,
1999 to register 4,600,000 shares of Common Stock.
(2) Estimated in accordance with Rule 457(c) solely for the purpose of
calculating the amount of the registration fee based on the average of the
high and low prices of the Registrant's Common Stock as reported on the
NASDAQ National Market on July 14, 1999.
(3) Includes associated rights to purchase shares of Series A Junior
Participating Preferred Stock of QUALCOMM Incorporated.
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 THAT 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.
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<PAGE> 2
The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JULY 21, 1999
PROSPECTUS
6,000,000 SHARES
QUALCOMM INCORPORATED
COMMON STOCK
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QUALCOMM's common stock is traded on The Nasdaq National Market under the
symbol "QCOM." On July 20, 1999, the last reported sale price for the common
stock on The Nasdaq National Market was $162.9375 per share.
INVESTING IN THE COMMON STOCK INVOLVES RISK. "RISK FACTORS" BEGIN ON PAGE
6.
The underwriters have agreed to purchase from QUALCOMM the common stock
offered by this prospectus for a purchase price of $ per share,
resulting in aggregate proceeds of $ to QUALCOMM (before deducting
expenses payable by QUALCOMM, estimated to be approximately $600,000). We have
granted the underwriters a 30-day option to purchase up to an additional 900,000
shares of common stock, solely to cover over-allotments. If the underwriters
exercise this option in full, the total proceeds to QUALCOMM will be
$ , before deducting expenses.
The underwriters propose to offer the common stock offered by this
prospectus from time to time for sale in one or more transactions (which may
involve block transactions) on The Nasdaq National Market, in the
over-the-counter market or otherwise, at market prices prevailing at the time of
sale, at prices related to prevailing market prices or at negotiated prices,
subject to prior sale when, as and if delivered to and accepted by the
underwriters.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF
THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The underwriters expect to deliver the shares on or about July , 1999.
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Joint Book-Running Managers
LEHMAN BROTHERS GOLDMAN, SACHS & CO.
, 1999
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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PAGE
----
<S> <C>
Where You Can Find More Information......................... 1
Disclosure Regarding Forward-Looking Statements............. 2
The Company................................................. 4
The Offering................................................ 5
Use of Proceeds............................................. 5
Risk Factors................................................ 6
Underwriting................................................ 20
Legal Matters............................................... 21
Experts..................................................... 21
</TABLE>
Unless the context requires otherwise, references in this prospectus to
"we," "us," "our" and "QUALCOMM" refer to QUALCOMM Incorporated and its
wholly-owned subsidiaries.
i
<PAGE> 4
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). You
can inspect and copy these reports, proxy statements and other information at
the public reference facilities of the Commission, in Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549; 7 World Trade Center, Suite 1300, New
York, New York 10048; and Suite 1400, Citicorp Center, 500 W. Madison Street,
Chicago, Illinois 60661-2511. You can also obtain copies of these materials from
the public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. The
Commission also maintains a web site that contains reports, proxy and
information statements and
other information regarding registrants that file electronically with the
Commission (http://www.sec.gov).
We have filed a registration statement and related exhibits with the
Commission under the Securities Act of 1933, as amended (the "Securities Act").
The registration statement contains additional information about us and our
common stock. You may inspect the registration statement and exhibits without
charge at the office of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and you may obtain copies from the Commission at prescribed rates.
The Commission allows us to "incorporate by reference" the information we
file with it, which means that we can disclose important information to you by
referring to those documents. The information incorporated by reference is an
important part of this prospectus, and information that we file later with the
Commission will automatically update and supersede this information. We
incorporate by reference the following documents we filed with the Commission
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"):
- Annual Report on Form 10-K for the year ended September 30, 1998
(including information specifically incorporated by reference into our
Form 10-K from the Proxy Statement for our 1999 Annual Meeting of
Stockholders);
- Quarterly Reports on Form 10-Q for the quarters ended December 27, 1998
and March 28, 1999;
- Current Reports on Form 8-K dated May 24, 1999 and July 19, 1999;
- Description of our common stock contained in our registration statement
on Form 8-A filed with the Commission on September 12, 1991; and
- All documents filed by us with the Commission pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act before the offering of the common
stock offered hereby is completed (other than those portions of such
documents described in paragraphs (i), (k), and (l) of Item 402 of
Regulation S-K promulgated by the Commission).
1
<PAGE> 5
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Investor Relations
QUALCOMM Incorporated
5775 Morehouse Drive
San Diego, California 92121-1714
Telephone: (858) 658-4813
You should only rely on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or any sale of common stock.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the documents that we incorporate by reference,
contains forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Any statements about our
expectations, beliefs, plans, objectives, assumptions or future events or
performance are not historical facts and may be forward-looking. These
statements are often, but not always, made through the use of words or phrases
such as "anticipate," "estimate," "plans," "projects," "continuing," "ongoing,"
"expects," "management believes," "the Company believes," "the Company intends,"
"we believe," "we intend" and similar words or phrases. Accordingly, these
statements involve estimates, assumptions and uncertainties which could cause
actual results to differ materially from those expressed in them. Any
forward-looking statements are qualified in their entirety by reference to the
factors discussed throughout this prospectus. Among the key factors that could
cause actual results to differ materially from the forward-looking statements:
- risks that the rate of growth in the CDMA subscriber population will
decrease;
- developments in current or future litigation;
- timely product development;
- our ability to successfully manufacture significant quantities of CDMA or
other equipment on a timely and profitable basis;
- risks relating to customer receivables and performance guarantees;
- risks associated with timing and receipt of license fees and royalties;
- strategic opportunities or acquisitions that we pursue;
- changes in economic conditions of the various markets we serve;
- risks associated with our international business activities;
- issues arising from addressing year 2000 information technology issues;
and
- the availability and terms of financing.
2
<PAGE> 6
Because the risk factors referred to above, as well as the risk factors
beginning on page 6 of this prospectus, could cause actual results or outcomes
to differ materially from those expressed in any forward-looking statements made
by us or on behalf of the Company, you should not place undue reliance on any
such forward-looking statements. Further, any forward-looking statement speaks
only as of the date on which it is made, and we undertake no obligation to
update any forward-looking statement or statements to reflect events or
circumstances after the date on which such statement is made or to reflect the
occurrence of unanticipated events. New factors emerge from time to time, and it
is not possible for us to predict which will arise. In addition, we cannot
assess the impact of each factor on our business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements.
3
<PAGE> 7
THE COMPANY
We are a leading provider of digital wireless communications products,
technologies and services. We design, develop, manufacture and market wireless
communications and subscriber products and design, develop and market ASIC chips
based on our CDMA technology. We also license and receive royalty payments on
our CDMA technology from major domestic and international telecommunications
equipment suppliers. In addition, we design, manufacture, distribute and operate
products and services for our OmniTRACS system. We also have contracts with
Globalstar to design, develop and manufacture subscriber products and ground
communications systems, and to provide contract development services.
From time to time we consider strategic transactions and alternatives with
the goal of maximizing stockholder value. For example, in September 1998 we
completed the spin off of Leap Wireless International, and in May 1999 we
completed the sale of our infrastructure products division to Ericsson. We will
continue to evaluate additional potential strategic transactions and
alternatives which we believe may enhance stockholder value. These additional
potential transactions may include a variety of different structures, including
spin offs, strategic partnerships, joint ventures, restructurings, divestitures
and business combinations.
Standard & Poor's, a division of The McGraw Hill Companies, Inc., or S&P,
has announced that, effective as of July 21, 1999, it plans to include the
common stock in the Standard & Poor's Corporation 500 Composite Stock Price
Index, or the S&P 500 Index, which is composed of 500 common stocks that S&P
selects. Shares offered by this prospectus will be offered primarily to index
funds whose portfolios are primarily based on stocks included in the S&P 500
Index.
We have entered into an agreement with Sprint PCS for the purchase of up to
$400 million of our CDMA digital PCS phones. Under the agreement, Sprint PCS
will purchase our new Internet-capable Thin Phone and pdQ(TM) smartphone for
distribution throughout Sprint's nationwide CDMA digital PCS network. Shipments
to Sprint PCS of our Thin Phone, incorporating the Phone.com(TM) UP Browser(TM)
Internet microbrowser, are scheduled to begin later this Summer.
Our principal executive offices are located at 5775 Morehouse Drive, San
Diego, California 92121-1714, and our telephone number is (858) 587-1121. Our
website is located at http://www.qualcomm.com. Information contained on our
website is not part of this prospectus.
4
<PAGE> 8
THE OFFERING
Common stock offered by
QUALCOMM................... 6,000,000 shares(1)
Common stock to be
outstanding after the
offering................... 158,820,865 shares(2)
Use of proceeds.............. Working capital and general corporate purposes.
See "Use of Proceeds."
Nasdaq National Market
symbol..................... QCOM
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(1) Assumes the underwriters' over-allotment option to purchase 900,000 shares
is not exercised. See "Underwriting."
(2) Based upon shares outstanding as of July 19, 1999 (assuming no exercise of
options after July 19, 1999). Excludes 46,193,231 shares of common stock
reserved for issuance pursuant to QUALCOMM's employee benefit plans and
18,727,706 shares issuable upon conversion of certain convertible preferred
securities of QUALCOMM Financial Trust I, a Delaware statutory business
trust.
USE OF PROCEEDS
The net proceeds we will receive from the sale of 6,000,000 shares of
common stock after deducting offering expenses payable by us will be
approximately $ million (or $ million if the underwriters' over-allotment
option is exercised in full).
We intend to use the proceeds of this offering primarily for working
capital and general corporate purposes. Pending such uses, we expect to invest
the net proceeds in short-term, interest-bearing, investment grade securities.
5
<PAGE> 9
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the following information about these risks, as well as the other information
contained or incorporated by reference in this prospectus, before you decide to
buy any of our common stock.
Except for historical information, the information contained in this
prospectus and in our SEC reports are "forward looking" statements about our
expected future business and performance. Our actual operating results and
financial performance may prove to be very different from what we might have
predicted as of the date of this prospectus. The risks described below address
some of the factors that may affect our future operating results and financial
performance.
OUR OPERATING RESULTS ARE DIFFICULT TO FORECAST AND MAY BE ADVERSELY AFFECTED BY
MANY FACTORS.
Although we have experienced an increase in both revenues and profitability
over the last several years, we have experienced and may continue to experience
quarterly variability in operating results. As a result, we cannot assure you
that we will be able to sustain profitability on a quarterly or annual basis in
the future. Our future results will depend in part on the following factors:
- the continued successful implementation of CDMA technology and products;
- our ability to successfully manufacture, market and/or sell
commercial-scale quantities of CDMA subscriber products, ASICs and other
products on a timely and profitable basis both domestically and in
international markets;
- the timing of introduction of products or product enhancements by us or
our competitors;
- the timing and magnitude of CDMA licensing fees and royalties;
- currency and economic fluctuations in foreign markets and other factors
affecting our international sales;
- bad debt provisions and/or our inability to recognize revenues associated
with our vendor financing programs;
- our recognition of start-up operating losses, impairment charges and/or
the inability to recognize revenues and earnings associated with our
investments in emerging wireless telecommunications operating companies;
- our ability to meet any applicable performance guarantees;
- the continued success of OmniTRACS; and
- the continuation of the Globalstar development and production contracts.
IF WE ARE UNABLE TO MANAGE GROWTH IN OUR BUSINESS, OUR BUSINESS WILL SUFFER.
We have experienced and continue to experience rapid domestic and
international growth that has placed, and is expected to continue to place
significant demands on our managerial, operational and financial resources. In
order to manage this growth, we have
6
<PAGE> 10
continued to improve and expand our management, operational and financial
systems and controls, including quality control and delivery and service
capabilities, and will need to continue to do so. We will also need to continue
to expand, train and manage our employee base. In particular, we must carefully
manage production and inventory levels to meet product demand, new product
introductions and product transitions. We cannot assure you that we will be able
to timely and effectively meet such demand and maintain the quality standards
required by our existing and potential customers.
In addition, inaccuracies in our demand forecasts could quickly result in
either insufficient or excessive inventories and disproportionate overhead
expenses. Our international expansion plans will require us to establish, manage
and control operations in countries where we have limited or no operating
experience. Our experience in the expansion of production facilities and
capacity is also limited. In order to accommodate planned growth, we expect that
our operating expenses will continue to increase. We cannot assure you that our
revenues will grow faster than our expenses. We must also continue to hire and
retain qualified technical, engineering and other personnel in the face of
strong demand from our competitors and others for such individuals. If we
ineffectively manage our growth or are unsuccessful in recruiting and retaining
personnel, this could have a material adverse effect on our business, results of
operations, liquidity and financial position.
DELAYS OR DEFECTS IN THE MANUFACTURE OF OUR CDMA PRODUCTS WOULD ADVERSELY AFFECT
OUR BUSINESS.
The manufacture of wireless communications products is a complex and
precise process involving specialized manufacturing and testing equipment and
processes. Demand for, and our revenues from, CDMA wireless communications
subscriber products increased substantially during fiscal 1998. Our
manufacturing capacity is a critical element in meeting this demand. We cannot
assure you that we will be able to effectively meet customer demand in a timely
manner. Factors that could materially and adversely affect our ability to meet
production demand include defects or impurities in the components or materials
used, delays in the delivery of such components or materials, or equipment
failures or other difficulties. We experienced component shortages in our fiscal
quarter ended June 27, 1999. We expect those shortages will continue during the
remainder of this fiscal year, which could adversely affect our operating
results. We may experience component failures or defects which could require
significant product recalls, reworks and/or repairs which are not covered by
warranty reserves and which could consume a substantial portion of our
manufacturing capacity.
In addition, we cannot assure you that our foreign manufacturing facilities
will be commercially successful given that we will be required to establish,
manage and control operations in countries where we have limited or no operating
experience. Additionally, our business, results of operations, liquidity and
financial position could be materially and adversely affected if we are unable
to manufacture CDMA subscriber products at commercially acceptable costs and
achieve acceptable yields. We also will be impacted negatively if we expand our
manufacturing capacity but are unable to secure sufficient orders for our CDMA
products.
We primarily manufacture our CDMA subscriber products through QPE, a
majority-owned joint venture between us and a subsidiary of Sony Electronics,
Inc. The risks associated with the commercial manufacture of our subscriber
products that we describe in
7
<PAGE> 11
this document also apply to the manufacture of subscriber products by QPE. Our
business, results of operations, liquidity and financial position could be
materially and adversely affected to the extent that QPE experiences any of the
complications, delays or interruptions that we have described in this document.
OUR MARKETS ARE HIGHLY COMPETITIVE.
There is increasing competition in the wireless telecommunications industry
in the United States and throughout the world. We cannot assure you that we will
be able to successfully compete or that our competitors will not develop new
technologies and products that are more commercially effective than our own.
Many of our competitors have financial, technical, marketing, sales, and
distribution resources greater than ours. In addition, many of these companies
are licensees of our technology and have established market positions, trade
names, trademarks, patents, copyrights, intellectual property rights and
substantial technological capabilities.
Although the implementation of advanced telecommunications services is in
its early stages in many developing countries, we believe competition is
intensifying as businesses and foreign governments realize the market potential
of telecommunications services. Many of our customers currently face competition
from existing telecommunication providers. A number of large American and
European companies and large international telecommunications companies are
actively engaged in programs to develop and commercialize telecommunications
services in both developing and developed countries. In many cases, we also
compete against the landline carriers, including government-owned telephone
companies. In some cases, our competition is from government-controlled or
government-supported entities that are, or may in the future be, privatized or
otherwise become more efficient and competitive. In addition, throughout the
world we may face competition with new technologies and services introduced in
the future. Although we intend to employ relatively new technologies, there will
be a continuing competitive threat from even newer technologies that may render
the technologies employed by us obsolete. We also expect that the price we
charge for our products and services in certain regions will decline as
competition intensifies in those markets.
We also compete in the manufacture of CDMA subscriber products and in the
development, design and sale of ASICs. We are facing increasing competition as
more of our licensees introduce CDMA products. Many of our licensees have longer
operating histories and a greater market presence than ours. Our competitors may
devote a significantly greater amount of their financial, technical, marketing
and other resources to aggressively market competitive communications systems
and products or develop and adopt competitive digital cellular technologies.
Likewise, those efforts may materially adversely affect our business, results of
operations, liquidity and financial position. Moreover, certain equipment
providers may offer more competitive pricing and/or financing terms than we do
as a means of gaining access to the wireless markets.
Existing competitors of OmniTRACS are aggressively pricing their products
and services and could continue to do so in the future. In addition, these
competitors are offering new value-added products and services similar in many
cases to those we developed or are developing. Emergence of new competitors,
particularly those offering low cost terrestrial-based products and current as
well as future low-Earth-orbiting satellite-based systems, may impact margins
and intensify competition in new markets.
8
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WE MAY ENGAGE IN STRATEGIC TRANSACTIONS WHICH COULD ADVERSELY AFFECT OUR
BUSINESS.
From time to time we consider strategic transactions and alternatives with
the goal of maximizing stockholder value. For example, in September 1998 we
completed the spin off of Leap Wireless International, and in May 1999 we
completed the sale of our infrastructure products division to Ericsson. We will
continue to evaluate additional potential strategic transactions and
alternatives which we believe may enhance stockholder value. These additional
potential transactions may include a variety of different structures, including
spin offs, strategic partnerships, joint ventures, restructurings, divestitures
and business combinations. We cannot assure you that any such transactions will
in fact enhance stockholder value or will not adversely affect our business or
the trading price of our stock.
OUR INTERNATIONAL BUSINESS ACTIVITIES SUBJECT US TO RISKS THAT COULD ADVERSELY
AFFECT OUR BUSINESS.
A significant part of our strategy involves our current and planned
activities in a number of developing nations. We intend to continue to pursue
growth opportunities in international markets. In many international markets,
barriers to entry are created by long-standing relationships between our
potential customers and their equipment providers and protective regulations,
including local content and service requirements. In addition, our pursuit of
such international growth opportunities may require significant investments for
an extended period before we realize returns, if any, on our investments. Our
projects and investments could be adversely affected by:
- reversals or delays in the opening of foreign markets to new competitors;
- unexpected changes in regulatory requirements;
- export controls, tariffs and other barriers;
- exchange controls;
- currency fluctuations;
- investment policies;
- nationalization, expropriation and limitations on repatriation of cash;
- social and political risks;
- taxation; and
- other factors, depending on the country in which such opportunity arises.
Our revenues from international customers as a percentage of total revenues
were approximately as follows in each of the fiscal years presented:
<TABLE>
<CAPTION>
% OF
TOTAL
FISCAL YEAR REVENUES
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<S> <C>
1995......................... 20%
1996......................... 36%
1997......................... 30%
1998......................... 34%
</TABLE>
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In addition to the general risks associated with our international sales
and operations, we will also be subject to risks specific to the individual
countries in which we do business.
OUR RESULTS OF OPERATIONS MAY BE HARMED BY FOREIGN CURRENCY FLUCTUATIONS.
We are exposed to risk from fluctuations in foreign currency and interest
rates, which could impact our results of operations and financial condition. Our
financing of products and services is generally denominated in U.S. dollars and
any significant change in the value of the U.S. dollar against the national
currency where we are lending could result in the increase of costs to the
debtors and could restrict the debtors from fulfilling their contractual
obligations. Any devaluation in the local currency relative to the currencies in
which such liabilities are payable could have a material adverse effect on our
business. In some developing countries, including Chile, Mexico, Brazil, and
Russia, significant currency devaluation relative to the U.S. dollar have
occurred and may occur again in the future. In such circumstances, we may
experience economic loss with respect to the collectability of our receivables
and the recoverability of inventories and investments.
We attempt to hedge transactions with non-U.S. customers. However, the
decline in value of the Asia/Pacific currencies, or declines in currency values
in other regions, may, if not reversed, adversely affect our future product
sales. This is because our products may become more expensive to purchase for
local customers doing business in the countries of the affected currencies. We
have been adversely affected by the Asian economic downturn in fiscal 1998 with
regard to ASICs sales, CDMA royalties and the cancellation of a CDMA handset
supply agreement in South Korea. In addition, certain of our customers in these
foreign countries have encountered or may in the future encounter financial
difficulties resulting from such foreign currency fluctuations. These financial
difficulties could restrict our customers' ability to fulfill their contractual
obligations to us.
A DECREASE IN THE DEMAND FOR CDMA SUBSCRIBER AND ASICS PRODUCTS COULD ADVERSELY
AFFECT OUR BUSINESS.
We are a major supplier of CDMA subscriber and ASICs products for wireless
and satellite service providers. In order to generate revenues and profits from
sales of subscriber and ASICs products, we must continue to make substantial
investments and technological innovations, which are subject to a number of
risks and uncertainties. Other digital wireless technologies, particularly GSM,
to date have been more widely adopted than CDMA and we cannot assure you that
wireless service providers will select CDMA for their networks. Further, there
are numerous companies that supply CDMA subscriber and ASICs products. Many of
these companies have substantially greater resources, much longer manufacturing
histories and more established reputations than we do.
Sales of subscriber products internationally are subject to the various
risks associated with doing business outside of the United States. As a result,
subject to the success of international wireless operators, our ability to
generate substantial revenues and profits from international sales of CDMA
subscriber products is uncertain.
Many wireless operators to which we may consider selling are start-up
entities attempting to provide service to markets where current penetration of
wireless service is low and acceptance is uncertain. In addition, these start-up
entities are subject to all the risks inherent in the operation of a new
business, including the ability to obtain adequate financing, manage growth,
attract and retain qualified personnel and secure appropriate third-party
manufacturing and marketing support.
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THE LOSS OF ONE OR MORE SIGNIFICANT CUSTOMERS COULD HARM OUR REVENUES.
A significant portion of our CDMA subscriber and ASICs product sales is,
and is expected to continue to be, concentrated with a limited number of
customers. As a result, our performance will depend on relatively large orders
from a limited number of customers. Our performance will also depend on our
ability to gain additional customers within existing and new wireless and
satellite markets. Our loss of any existing customer or our failure to gain
additional customers could have a material adverse effect on our business,
results of operations, liquidity and financial position.
Certain of our contracts provide for performance guarantees to protect
customers against late delivery of our products or a failure to perform. These
performance guarantees generally provide for monetary payments or contract
offsets that accrue at a daily rate based on percentages of the contract value
to the extent the products are not delivered by scheduled delivery dates or the
systems fail to meet specified performance criteria by such dates. We are
dependent in part on the performance of our suppliers and strategic partners to
provide products that are the subject of the guarantees. Thus, our ability to
deliver such products in a timely manner may be outside of our control. If we
are unable to meet our performance obligations, the performance guarantees could
amount to a significant portion of the contract value and would have a material
adverse effect on product margins and our business, results of operations,
liquidity and financial position.
OUR INDUSTRIES ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGE, AND WE MUST KEEP PACE
WITH THE CHANGES TO SUCCESSFULLY COMPETE.
The market for our products is characterized by many factors, including:
- rapid technological advances and evolving industry standards;
- changes in customer requirements;
- frequent new products and enhancements; and
- evolving methods of building and operating communications systems.
The introduction of products embodying new technologies and the emergence
of new industry standards could render our existing products, and products
currently under development, obsolete and unmarketable. In particular, we have
limited experience in high-volume manufacturing techniques and rapid product
cycles inherent in the subscriber products business.
Our future success will depend on our ability to continue to develop and
introduce new products and product enhancements on a timely basis. Our future
success will also depend on our ability to keep pace with technological
developments, satisfy varying customer requirements and achieve market
acceptance. If we fail to anticipate or respond adequately to technological
developments or customer requirements, or experience any significant delays in
product development, introduction or shipment of our products in commercial
quantities, our competitive position could be damaged. This could have a
material adverse effect on our business, results of operations, liquidity and
financial position. In addition, new technological innovations generally require
a substantial investment before they are commercially viable.
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<PAGE> 15
IF OUR INDUSTRY DOES NOT ADOPT A SINGLE CDMA STANDARD THAT IS COMPATIBLE WITH
TODAY'S CDMAONE NETWORKS, OUR BUSINESS MAY SUFFER.
Industry participants and the International Telecommunications Union
("ITU") are currently considering a variety of standards which may be utilized
in third generation wireless networks. We are advocating the standardization of
a single, converged CDMA-based third generation standard that accommodates
equally the dominant network standards in use today. We cannot assure you that
we will be successful in promoting the adoption of a single CDMA standard or
that such a standard, if adopted, will be compatible with today's cdmaOne
networks. We strongly believe that our CDMA patent portfolio is applicable to
other CDMA systems that have been proposed as third generation standards. We
have informed standards bodies and the ITU that we hold essential intellectual
property rights for several other third generation proposals based on CDMA.
Further, we intend to vigorously enforce and protect our intellectual property
position against any infringement. However, we cannot assure you that our CDMA
patents will be determined to be applicable to any proposed standard or that we
will be able to redesign our products on a cost-effective and timely basis to
incorporate next generation wireless technology. If the wireless industry adopts
next generation standards which are incompatible with cdmaOne or is determined
not to rely on our intellectual property, this could have a material adverse
effect on our business, results of operations, liquidity and financial position.
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE, AND SUCH ADDITIONAL FINANCING MAY
NOT BE AVAILABLE.
The design, development, manufacture and marketing of digital wireless
communication products and services are highly capital intensive. In addition,
wireless and satellite systems operators increasingly have required suppliers
like us to arrange or provide long-term financing or provide equity to them as a
condition to obtaining or bidding on projects. In particular we have substantial
funding requirements to Leap Wireless. In May 1999, we closed the sale of our
terrestrial CDMA wireless infrastructure business. The agreement settled our
litigation with Ericsson and provides for cross licensing of intellectual
property rights for all CDMA technologies. Pursuant to the agreement with
Ericsson, we will extend up to $400 million in financing for possible future
sales by Ericsson of cdmaOne or cdma2000 infrastructure equipment and related
services to specific customers in certain geographic areas, including Brazil,
Chile, Russia and Mexico or in other areas selected by Ericsson. These
commitments are subject to the customers meeting certain conditions established
in the financing arrangements and, in most cases, to Ericsson also financing a
portion of these cdmaOne or cdma2000 sales. To the extent that vendor financing
is not repaid to us, it could have a material adverse effect on our business,
results of operations, liquidity and financial position.
We believe we will be required to raise additional funds from a combination
of sources including potential debt or equity issuances. We cannot assure you
that additional financing will be available on reasonable terms or at all. In
addition, our credit facility places restrictions on our ability to incur
additional indebtedness which could adversely affect our ability to raise
additional capital through debt financing.
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<PAGE> 16
OUR BUSINESS MAY BE HARMED IF LEAP WIRELESS DOES NOT MEET ITS REPAYMENT
OBLIGATIONS UNDER ITS CREDIT FACILITY WITH US.
In connection with our recent spin-off and distribution to our stockholders
of Leap Wireless common stock, we made a substantial funding commitment to Leap
Wireless in the form of a $265.0 million secured credit facility. Amounts
borrowed under the credit facility will be due and payable approximately eight
years following September 23, 1998. We cannot assure you that Leap Wireless will
be able to meet its payment obligations to us. If Leap Wireless is unable to
meet its payment obligations to us, our business, results of operations,
liquidity and financial position may be materially adversely affected. Further,
Leap Wireless may identify additional investment requirements or opportunities
for which it needs funding and we may choose to participate in such funding.
THE INADEQUACY OF OUR INTELLECTUAL PROPERTY PROTECTIONS COULD ADVERSELY AFFECT
OUR BUSINESS.
We rely on a combination of patents, copyrights, trade secrets, trademarks
and proprietary information to maintain and enhance our competitive position. We
have been granted over 200 patents and have over 500 patent applications pending
in the U.S. The vast majority of such patents and patent applications relate to
our CDMA digital wireless technology and much of the remainder of such patents
and patent applications relate to our OmniTRACS products. We also actively
pursue patent protection in other countries of interest to us. We cannot assure
you that the pending patent applications will be granted or that our patents or
copyrights will provide adequate protection.
We have entered into license agreements with more than 60
telecommunications manufacturers, pursuant to which we have granted royalty
bearing licenses under certain of our CDMA patents to make and sell CDMA
products. Some of these license agreements allow our licensees to make and sell
CDMA products for third generation CDMA systems. We believe that our CDMA patent
portfolio provides broad coverage and is applicable to any commercially viable
CDMA wireless system, including modes of CDMA recommended for the proposed
single CDMA 3G standard. We have informed standards bodies, including the ITU,
TIA, ETSI and the Association of Radio Industries and Business, that we hold
essential patents for third generation CDMA systems that have been submitted to
such standards bodies. Further, we intend to vigorously enforce and protect our
intellectual property position against any infringement. However, despite our
extensive patent position and the license agreements we have entered into with
Ericsson and others which provide for royalties payable to us for certain
products employing such CDMA standards, there can be no assurance that our CDMA
patents will be determined to be applicable to any proposed standard. The
adoption of next generation CDMA standards, if any, which are determined not to
rely on our patents could have a material adverse effect on our business,
results of operations, liquidity and financial position.
We file applications for patent protection around the world with respect to
a substantial portion of our intellectual properties. A number of patents that
have been issued abroad are being challenged in opposition proceedings. On
December 10, 1998, the Opposition Board of the European Patent Office revoked
our first issued European Patent. We will appeal this decision to the European
Patent Appeals Board, and will vigorously defend our patents around the world.
In general, our license agreements require the payment of royalties by our
licensees which are the same regardless of whether our licensees use one or more
of our licensed patents. We believe that, with the hundreds of
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<PAGE> 17
patent applications that we have filed in Europe and elsewhere around the world,
we have and will maintain broad patent coverage for CDMA wireless applications
both in the U.S. and abroad. However, we cannot assure you that we will be
successful in our appeal or that there will not be other unfavorable outcomes to
opposition proceedings, which could adversely affect our ability to protect our
intellectual properties abroad.
Additionally, we cannot assure you that the confidentiality agreements upon
which we rely to protect our trade secrets and proprietary information will be
adequate. The cost of defending our intellectual property has been and may
continue to be significant.
THIRD-PARTY CLAIMS OF INFRINGEMENT OF THEIR INTELLECTUAL PROPERTY COULD
ADVERSELY AFFECT OUR BUSINESS.
From time to time, certain companies may assert exclusive patent, copyright
and other intellectual proprietary rights to technologies that are claimed to be
important to the industry or to us. In addition, from time to time third parties
provide us with copies of their patents relating to wireless products and
components and offer licenses to such technologies. We in turn evaluate such
patents and the advisability of obtaining such licenses. If any of our products
were found to infringe on protected technology, we could be required to redesign
such products, license such technology, and/or pay damages or other compensation
to the infringed party. If we are unable to license protected technology used in
our products or if we were required to redesign such products, we could be
prohibited from making and selling such products.
Ericsson, Motorola and InterDigital have each advised the TIA that they
hold patent rights in technology embodied in IS-95. Lucent and OKI Electric have
claimed patent rights in IS-96. In accordance with TIA guidelines, each company
has confirmed to the TIA that it is willing to grant licenses under its rights
on reasonable and nondiscriminatory terms. In connection with the settlement and
dismissal of our patent litigation with InterDigital, we received, among other
rights, a fully-paid, royalty free license to use and to sublicense the use of
those patents claimed by InterDigital to be essential to IS-95. In May 1999, we
closed the sale of our terrestrial CDMA wireless infrastructure business. The
agreement settled our litigation with Ericsson and provides for cross licensing
of intellectual property rights for all CDMA technologies, including
cdmaOne(TM), WCDMA and cdma2000(TM). We also received rights to sublicense
certain Ericsson patents, including patents asserted in the litigation, to our
Application Specific Integrated Circuits customers.
In addition, a number of third parties have claimed to own patents
essential to various proposed third generation CDMA standards and have committed
to license such patents on a reasonable and nondiscriminatory basis. If we and
other product manufacturers are required to obtain additional licenses and/or
pay royalties to one or more patent holders, this could have a material adverse
effect on the commercial implementation of our CDMA technology or our product
margins or profitability.
We are currently engaged in patent and other infringement litigation
relating to our technology and products. On June 29, 1999, GTE Wireless,
Incorporated filed an action in the United States District Court for the Eastern
District of Virginia asserting that sales of our wireless telephones infringe a
single patent allegedly owned by GTE. Although we cannot assure you that an
unfavorable outcome of the dispute would not adversely affect our results of
operations, liquidity or financial position, we believe the GTE action is
without merit and will vigorously defend the action.
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<PAGE> 18
On July 20, 1999, we filed a lawsuit against Motorola, Inc. seeking a
judicial determination that we have the right to terminate all licenses granted
to Motorola under a 1990 Patent License Agreement, while retaining all licenses
granted by Motorola to us under the same agreement. We filed our complaint in
the United States District Court for the Southern District of California where
other actions between us and Motorola have been pending for more than two years.
The complaint alleges that Motorola has committed breaches of our Patent License
Agreement with Motorola that include pursuing a lawsuit against us for
infringement of patents that are in fact licensed to us under the agreement and
a failure to grant certain sublicenses to us in accordance with the terms of the
agreement. Our new filing also seeks a ruling that upon termination of the
Patent License Agreement, the patents formerly licensed to Motorola would be
infringed by CDMA handsets, integrated circuits and network infrastructure
equipment made and sold by Motorola.
IF GLOBALSTAR AND THE GLOBALSTAR SYSTEM ARE NOT SUCCESSFUL, OUR BUSINESS MAY BE
HARMED.
We have entered into a number of development and manufacturing contracts
involving the Globalstar system. Our development agreement provides for the
design and development of the ground communications stations, known as gateways,
and user terminals of the Globalstar system. The Globalstar system is still
being deployed, and cannot begin commercial operations until at least 32
satellites are working in orbit, the necessary ground equipment and user
terminals are in place and service providers are licensed in the countries to be
served. Satellite launches are risky, without about 15% of attempts ending in
failure. Globalstar has already had one launch failure, and more failures may
occur within the course of its launch campaign. The cost of installing the
Globalstar system has been revised upward from the original estimates, and
further increases are possible. Until the system is fully deployed and tested,
it is not certain that it will perform as designed. Even if the system operates
as it should, there is no certainty that the anticipated market will develop.
Globalstar may need to raise substantial additional funds in order to
operate the system as planned. If the start of service is significantly delayed,
a larger proportion of Globalstar's debt service requirements will become due
before Globalstar has positive cash flow, which will increase the amount of
money Globalstar needs.
The value of our investment in and future business with Globalstar, as well
as our ability to collect outstanding receivables from Globalstar, depends on
the success of Globalstar and the Globalstar system. As of June 27, 1999, our
receivables from Globalstar were approximately $440 million. Globalstar is a
development stage company and has no operating history. From its inception,
Globalstar has incurred net losses and losses are expected to continue at least
until commercial operations of the Globalstar system commence. A substantial
shortfall in meeting Globalstar's capital needs could prevent completion of the
Globalstar system and could adversely affect our results of operations,
liquidity and financial position. In addition, Globalstar can terminate its
development agreement with us if Globalstar abandons its efforts to develop the
Globalstar system.
THE LOSS OF THIRD-PARTY SUPPLIERS COULD ADVERSELY AFFECT OUR BUSINESS.
The products and services we provide are complex and highly technical in
their nature. Accordingly, we rely on the ability of our suppliers to provide
critical parts and sub assemblies that meet our specifications, in a timely
manner. From time to time we have
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<PAGE> 19
experienced delays in obtaining services and quantities of specification
compliant radio frequency components, plastics, connectors and other parts to
meet demand for our products.
Several of the critical products and services used in our existing and
proposed products, including ASICs, flash memory chips, radio frequency
components and certain custom and semi-custom very large scale integrated
circuits, other sophisticated electronic parts and major subassemblies used in
the OmniTRACS system, are currently available only from single or limited
sources. Our reliance and the reliance of our licensees on sole or limited
source vendors involves risks. These risks include possible shortages of certain
key components, product performance shortfalls, and reduced control over
delivery schedules, manufacturing capability, quality and costs.
Our manufacturing activities may continue to expand internationally. In
certain cases we will be required to identify new local sources, due in part to
foreign regulations governing product content, to supply our international
manufacturing operations. The risks inherent in our ability to locate alternate
suppliers will be complicated by our inexperience in product manufacturing in
those countries. Business disruptions or financial difficulties of a sole or
limited source supplier of any particular component could materially and
adversely impact our operations by increasing the cost of goods sold or reducing
the availability of such components. While we believe that we could obtain
necessary components from other manufacturers, an unanticipated change in the
source of supply of these components could result in significant shipment delays
for our products. These delays could result in us being required to make
performance guarantee payments.
Certain components require an order lead time of six months or longer. To
meet forecasted production levels, we may be required to commit to certain long
lead time items prior to being awarded a production contract. If forecasted
orders are not received, we may be faced with large inventories of slow moving
or unusable parts. This could result in an adverse effect on our business,
results of operations, liquidity and financial position.
OUR BUSINESS DEPENDS ON THE AVAILABILITY OF SATELLITE AND OTHER FACILITIES FOR
OUR OMNITRACS SYSTEM.
Our OmniTRACS system currently operates in the U.S. market on leased
Ku-band satellite transponders. Our data satellite transponder and position
reporting satellite transponder lease runs through 2001. System enhancements
currently under initial deployment should allow for increased utilization of
transponder capacity. Based on results of the system enhancements, we believe
that the U.S. OmniTRACS operations may not require additional transponder
capacity in fiscal 1999. We believe that in the event additional transponder
capacity would be required in fiscal 1999 or in future years, additional
capacity will be available on acceptable terms. However, we cannot assure you
that we will be able to acquire additional transponder capacity on acceptable
terms on a timely basis. If we fail to maintain adequate satellite capacity this
would have a material adverse effect on our business, results of operations,
liquidity and financial position. Our Network Management Facility operations are
subject to the risk that a failure or natural disaster could interrupt the
OmniTRACS service and have a material adverse effect on OmniTRACS' results of
operations. We maintain a fully operational Network Management Facility in Las
Vegas, Nevada as a backup to our primary Network Management Facility in San
Diego, California.
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GOVERNMENT REGULATION MAY ADVERSELY AFFECT OUR BUSINESS.
Our products are subject to various Federal Communications Commission
regulations in the U.S. These regulations require that our products meet certain
radio frequency emission standards and not cause unallowable interference to
other services. We are also subject to government regulations and requirements
by local and international standards bodies outside the U.S., where we are less
prominent than local competitors and have less opportunity to participate in the
establishment of regulatory and standards policies. Changes in the regulation of
our activities, including changes in the allocation of available spectrum by the
U.S. Government and other governments, or exclusion of its technology by a
standards body, could have a material adverse effect on our business, results of
operations, liquidity and financial position. We are also subject to state and
federal health, safety and environmental regulations, as well as regulations
related to the handling of and access to classified information.
THE LOSS OF KEY TECHNICAL OR MANAGEMENT PERSONNEL COULD ADVERSELY AFFECT OUR
BUSINESS.
Our success depends in large part upon our ability to retain highly
qualified technical and management personnel. The loss of one or more of these
employees could have a material adverse effect on our business, results of
operations, liquidity and financial position. None of these individuals has an
employment contract with us. Our success also depends upon our ability to
continue to attract and retain highly qualified personnel in all disciplines. We
cannot assure you that we will be successful in hiring or retaining requisite
personnel.
PRODUCT LIABILITY CLAIMS COULD HARM OUR BUSINESS.
Testing, manufacturing, marketing and use of our products entail the risk
of product liability. While we currently have product liability insurance that
we believe is adequate to protect against product liability claims, you cannot
be sure that we will be able to continue to maintain such insurance at a
reasonable cost or in sufficient amounts to protect us against losses due to
product liability. Our inability to maintain insurance at an acceptable cost or
to otherwise protect against potential product liability could prevent or
inhibit the commercialization of our products. In addition, a product liability
claim or recall could have a material adverse effect on our business, results of
operations, liquidity and financial position.
News reports have asserted that power levels associated with hand-held
cellular telephones may pose certain health risks. We are not aware of any study
that has concluded that there are any significant health risks from using
hand-held cellular telephones. If it were determined that electromagnetic waves
carried through the antennas of cellular telephones create a significant health
risk, there could be a material adverse effect on our ability to market and sell
our wireless telephone products. In addition, there may also be certain safety
risks associated with the use of hand-held cellular phones while driving. This
could also have a material adverse effect on our ability to market and sell our
wireless telephones.
OUR BUSINESS MAY BE HARMED BY YEAR 2000 ISSUES.
We believe that our mission critical systems and our wireless communication
products will be Year 2000 compliant by September 1999. However, we cannot
guarantee that these
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<PAGE> 21
results will be achieved. Specific factors leading to this uncertainty include
failure to identify any problems associated with our wireless communication
products or all susceptible systems, non-compliance by third parties whose
systems and operations impact us, and other similar uncertainties. A worst case
scenario might include one or more of our products, internal systems, suppliers
or customers being non-compliant. An event such as this could result in a
material disruption to our operations. Specifically, we could experience
problems associated with producing and delivering our wireless communication
products or software application, computer network, manufacturing equipment and
telephone communication system failures. Supply chain and product non-compliance
could result in our failure to perform on contracts, delayed delivery of
products to customers and inadequate customer service. Customer non-compliance
could result in delayed payments for products and services and build up of
inventories. Should a worst case scenario occur, it could, depending on its
duration, have a material impact on our business, results of operations,
liquidity and financial position.
OUR STOCKHOLDER RIGHTS PLAN, CERTIFICATE OF INCORPORATION AND DELAWARE LAW COULD
ADVERSELY AFFECT THE PERFORMANCE OF OUR STOCK.
Our certificate of incorporation provides for cumulative voting in the
election of directors. In addition, our certificate of incorporation provides
for a classified board of directors and includes a provision that requires the
approval of holders of at least 66 2/3% of our voting stock as a condition to a
merger or certain other business transactions with, or proposed by, a holder of
15% or more of our voting stock. This approval is not required in cases where
certain of our directors approve the transaction or where certain minimum price
criteria and other procedural requirements are met. Our certificate of
incorporation also requires the approvals of holders of at least 66 2/3% of our
voting stock to amend or change the provisions mentioned relating to the
classified board, cumulative voting or the transaction approval. Finally, our
certificate of incorporation provides that any action required or permitted to
be taken by our stockholders must be effected at a duly called annual or special
meeting rather than by any consent in writing.
The classified board, transaction approval and other charter provisions may
discourage certain types of transactions involving an actual or potential change
in our control. These provisions may also discourage certain types of
transactions in which our stockholders might otherwise receive a premium for
their shares over then current market prices and may limit our stockholders'
ability to approve transactions that they may deem to be in their best
interests.
Further, we have distributed a dividend of one right for each outstanding
share of our common stock pursuant to the terms of our preferred share purchase
rights plan. In the event holders of our trust convertible preferred securities
convert those securities into shares of our common stock, each of those shares
will also be granted a right. These rights will cause substantial dilution to
the ownership of a person or group that attempts to acquire us on terms not
approved by our board of directors and may have the effect of deterring hostile
takeover attempts. In addition, our board of directors has the authority to fix
the rights and preferences of and issue shares of preferred stock. This right
may have the effect of delaying or preventing a change in our control without
action by our stockholders.
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OUR STOCK PRICE IS VOLATILE.
The stock market in general, and the stock prices of technology-based
companies in particular, have experienced extreme volatility that often has been
unrelated to the operating performance of any specific public companies. The
market price of our common stock has fluctuated in the past and is likely to
fluctuate in the future as well. Factors that may have significant impact on our
market price of our stock include:
- future announcements concerning us or our competitors, including the
selection of wireless technology by cellular, PCS and WLL service
providers and the timing of roll-out of those systems;
- receipt of substantial orders for subscriber and ASIC's products;
- quality deficiencies in services or products;
- results of technological innovations;
- new commercial products;
- changes in recommendations of securities analysts;
- government regulations; and
- proprietary rights or product or patent litigation.
Our future earnings and stock price may be subject to significant
volatility, particularly on a quarterly basis. Shortfalls in our revenues or
earnings in any given period relative to the levels expected by securities
analysts could immediately, significantly and adversely affect the trading price
of our common stock.
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UNDERWRITING
Under the terms and conditions stated in the underwriting agreement, which
is filed as an exhibit to the registration statement relating to this
prospectus, each of Lehman Brothers Inc. and Goldman, Sachs & Co. has severally
agreed to purchase from us 3,000,000 shares of common stock, respectively.
Standard & Poor's, a division of The McGraw Hill Companies, Inc., or S&P,
has announced that, effective as of July 21, 1999, it plans to include our
common stock in the Standard & Poor's Corporation 500 Composite Stock Price
Index, or the S&P 500 Index, which is composed of 500 common stocks that S&P
selects. Shares offered by this prospectus will be offered primarily to index
funds whose portfolios are primarily based on stocks included in the S&P 500
Index. These index funds may be required to purchase common stock as a result of
the inclusion of our common stock in the S&P 500 Index.
The underwriting agreement provides that the underwriters' obligations to
purchase shares of common stock depend on the satisfaction of the conditions
contained in the underwriting agreement, and that if any of the shares of common
stock are purchased by the underwriters under the underwriting agreement, then
all of the shares of common stock which the underwriters have agreed to purchase
under the underwriting agreement must be purchased. The conditions contained in
the underwriting agreement include the requirement that the representations and
warranties made by us to the underwriters are true, that there is no material
change in the financial markets and that we deliver to the underwriters
customary closing documents.
The underwriters have advised us that they propose to offer the shares of
common stock offered by this prospectus from time to time for sale in one or
more transactions (which may involve block transactions) on The Nasdaq National
Market or otherwise, at market prices prevailing at the time of sale, at prices
related to prevailing market prices or at negotiated prices, subject to prior
sale when, as and if delivered to and accepted by the underwriters. The
distribution of the common stock offered by this prospectus also may be effected
from time to time in special offerings, exchange distributions or secondary
distributions pursuant to and in accordance with the rules of The Nasdaq
National Market, in the over-the-counter market, in negotiated transactions,
through the writing of options on the shares of common stock (whether such
options are listed on an options exchange or otherwise), or in a combination of
such methods at prevailing market prices, at prices related to prevailing market
prices or at negotiated prices. The underwriters may effect such transactions by
selling shares of common stock to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters or the purchasers of the shares of common stock for whom they
may act as agents or to whom they may sell as principal.
In connection with the sale of the shares of common stock, the underwriters
will receive compensation in the form of commissions or discounts and may
receive compensation from purchasers of the shares of common stock for whom they
may act as agent or to whom they may sell as principal in the form of
commissions or discounts, in each case in amounts which will not exceed those
customary in the types of transactions involved. The underwriters and dealers
that participate in the distribution of the shares of common stock may be deemed
to be "underwriters" within the meaning of that term under the Securities Act of
1933, as amended, and any discounts received by them from us and any
compensation received by them on resale of the shares of common stock by
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<PAGE> 24
them may be deemed to be underwriting discounts and commissions under the
Securities Act.
We have granted to the underwriters an option to purchase up to an
aggregate of 900,000 additional shares of common stock, at the same price per
share shown on the cover page of this prospectus, exercisable solely to cover
over-allotments, if any. The underwriters may exercise this option at any time
until 30 days after the date of the underwriting agreement. If this option is
exercised, each underwriter will be committed, so long as the conditions of the
underwriting agreement are satisfied, to purchase one-half of the additional
shares of common stock and we will be obligated, under the over-allotment
option, to sell the additional shares of common stock to the underwriters.
We estimate the offering expenses payable by us to be approximately
$600,000.
We have agreed to indemnify the underwriters against liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
the representations and warranties contained in the underwriting agreement, and
to contribute to payments underwriters may be required to make for these
liabilities.
In connection with the offering the underwriters may purchase and sell the
common stock in the open market. These transactions may include over-allotment
and purchases to cover short positions created by the underwriters in connection
with the offering. Short positions created by the underwriters involve the sale
by the underwriters of a greater number of securities than they are required to
purchase from QUALCOMM in the offering. These activities may maintain or
otherwise affect the market price of the common stock, which may be higher than
the price that might otherwise prevail in the open market, and these activities,
if commenced, may be discontinued at any time. These transactions may be
effected on The Nasdaq National Market, the over-the-counter market or
otherwise.
From time to time, Lehman Brothers Inc. or its affiliates have provided,
and may continue to provide, financial advisory services to us.
LEGAL MATTERS
The validity of the shares of common stock being sold in this offering and
other legal matters relating to the offering will be passed upon for us by
Cooley Godward LLP, San Diego, California. Certain legal matters relating to the
offering will be passed upon for the underwriters by Latham & Watkins, San
Diego, California.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K of QUALCOMM Incorporated for the
year ended September 30, 1998, have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
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LOGO
6,000,000 Shares
[QUALCOMM LOGO]
COMMON STOCK
---------------------------
PROSPECTUS
July , 1999
---------------------------
LEHMAN BROTHERS
GOLDMAN, SACHS & CO.
, 1999
<PAGE> 26
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Registrant in
connection with the sale of the Securities being registered. All the amounts
shown are estimates except for the SEC registration fee and the Nasdaq National
Market listing fee.
<TABLE>
<S> <C>
SEC Registration fee........................................ $274,504
NASD filing fee............................................. 30,500
Nasdaq National Market listing fee.......................... 17,500
Legal fees and expenses..................................... 100,000
Blue sky qualification fees and expenses.................... 5,000
Accounting fees and expenses................................ 100,000
Miscellaneous............................................... 72,496
--------
Total............................................. $600,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended.
The Registrant's Bylaws provide that the Registrant will indemnify its
directors and executive officers and may indemnify its other officers, employees
and other agents to the fullest extent permitted by Delaware law. The Registrant
believes that indemnification under its Bylaws covers at least negligence and
gross negligence by indemnified parties, and may require the Registrant to
advance litigation expenses in the case of stockholder derivative actions or
other actions, against and undertaking by the indemnified party to repay such
advances if it is ultimately determined that the indemnified party is not
entitled to indemnification.
In addition, the Registrant's Certificate of Incorporation provides that,
pursuant to Delaware law, its directors shall not be liable for monetary damages
for breach of the directors' fiduciary duty of care to the Registrant and its
stockholders. This provision in the Certificate of Incorporation does not
eliminate the duty of care, and in appropriate circumstances equitable remedies
such as injunctive or other forms of nonmonetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Registrant for
acts or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for actions leading to improper personal benefit to
the director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
The Registrant has entered into separate indemnification agreements with
its directors. These agreements may require the Registrant, among other things,
to indemnify the directors against certain liabilities that may arise by reason
of their status or service as directors (other than liabilities arising from
willful misconduct of a culpable nature), to advance their expenses incurred as
a result of any proceeding against them as to which
II-1
<PAGE> 27
they could be indemnified and to obtain directors' insurance if available on
reasonable terms.
The Registrant maintains insurance policies covering officers and directors
under which the insurers agree to pay, subject to certain exclusions, including
certain violations of securities laws, for any claim made against the directors
and officers of the Registrant for a wrongful act that they may become legally
obligated to pay or for which the Registrant is required to indemnify the
officers or directors. The policies have limits of up to $75,000,000 in the
aggregate, subject to retentions of up to $300,000 in the aggregate. The
Registrant believes that its Certificate of Incorporation and Bylaw provisions,
indemnification agreements and insurance policies are necessary to attract and
retain qualified persons as directors and officers.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Registrant as to which
indemnification is being sought nor is the Registrant aware of any threatened
litigation that may result in claims for indemnification by any director,
officer, employee or other agent.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of underwriting agreement.
4.1 Certificate of Trust of QUALCOMM Financial Trust I, filed
with the Delaware Secretary of State on February 7, 1997.(1)
4.2 Declaration of Trust of QUALCOMM Financial Trust I, dated as
of February 7, 1997, among QUALCOMM Incorporated, as
Sponsor, Wilmington Trust Company, as Delaware Trustee and
Property Trustee, and Irwin Mark Jacobs, Harvey P. White,
and Anthony Thornley, as Regular Trustees.(1)
4.3 Amended and Restated Declaration of Trust of QUALCOMM
Financial Trust I, dated as of February 35, 1997, among
QUALCOMM Incorporated, as Sponsor, Wilmington Trust Company,
as Delaware Trustee and Property Trustee, and Irwin Mark
Jacobs, Harvey P. White, and Anthony Thornley, as Regular
Trustees.(1)
4.4 Indenture for the 5 3/4% Convertible Subordinated Debt
Securities, dated as of February 25, 1997, among QUALCOMM
Incorporated and Wilmington Trust company, as Indenture
Trustee.(1)
4.5 Form of 5 3/4% Trust Convertible Preferred Securities
(Included in Annex 1 to Exhibit 4.3 above).(1)
4.6 Form of 5 3/4% Convertible Subordinated Debt Securities
(Included in Annex 1 to Exhibit 4.3 above).(1)
4.7 Preferred Securities Guarantee Agreement, dated as of
February 25, 1997, between QUALCOMM Incorporated, as
Guarantor, and Wilmington Trust Company, as Guarantee
Trustee.(1)
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
24.1 Power of Attorney.*
</TABLE>
- -------------------------
* Previously filed.
(1) Filed as an exhibit to the Registrant's Registration Statement on Form S-3
(No. 333-26069) or amendments thereto and incorporated herein by reference.
II-2
<PAGE> 28
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors and executive officers of the Registrant pursuant
to provisions described in Item 15 or otherwise, the Registrant has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities 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 or
executive officer of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director or executive officer 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 Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) 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 that is
incorporated by reference in this 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;
(2) (i) 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;
(ii) For purposes 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;
(3) To deliver or cause to be delivered with the prospectus, to each person
to whom the prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and furnished
pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial information
required to be presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such interim financial
information.
II-3
<PAGE> 29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized on July
21, 1999
QUALCOMM Incorporated
By: /s/ IRWIN MARK JACOBS
-----------------------------------
Irwin Mark Jacobs
Chief Executive Officer and Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Registration Statement has been signed below by the following persons on behalf
of Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ IRWIN MARK JACOBS Chief Executive Officer and July 21, 1999
- ------------------------------------------ Chairman of the Board
Irwin Mark Jacobs (Principal Executive Officer)
* Vice Chairman July 21, 1999
- ------------------------------------------
Andrew J. Viterbi
* Executive Senior Vice July 21, 1999
- ------------------------------------------ President, Chief Financial
Anthony S. Thornley Officer (Principal Financial
and Accounting Officer)
* Director July 21, 1999
- ------------------------------------------
Richard C. Atkinson
Director
- ------------------------------------------
Adelia A. Coffman
Director
- ------------------------------------------
Diana Lady Dougan
* Director July 21, 1999
- ------------------------------------------
Neil Kadisha
* Director July 21, 1999
- ------------------------------------------
Robert E. Kahn
* Director July 21, 1999
- ------------------------------------------
Jerome S. Katzin
* Director July 21, 1999
- ------------------------------------------
Duane A. Nelles
</TABLE>
II-4
<PAGE> 30
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director July 21, 1999
- ------------------------------------------
Peter M. Sacerdote
* Director July 21, 1999
- ------------------------------------------
Frank Savage
Director
- ------------------------------------------
Brent Scowcroft
* Director July 21, 1999
- ------------------------------------------
Marc I. Stern
*By: /s/ IRWIN MARK JACOBS
- -----------------------------------------
Irwin Mark Jacobs
Attorney-in-fact
</TABLE>
II-5
<PAGE> 31
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of underwriting agreement.
4.1 Certificate of Trust of QUALCOMM Financial Trust I, filed
with the Delaware Secretary of State on February 7, 1997.(1)
4.2 Declaration of Trust of QUALCOMM Financial Trust I, dated as
of February 7, 1997, among QUALCOMM Incorporated, as
Sponsor, Wilmington Trust Company, as Delaware Trustee and
Property Trustee, and Irwin Mark Jacobs, Harvey P. White,
and Anthony Thornley, as Regular Trustees.(1)
4.3 Amended and Restated Declaration of Trust of QUALCOMM
Financial Trust I, dated as of February 35, 1997, among
QUALCOMM Incorporated, as Sponsor, Wilmington Trust Company,
as Delaware Trustee and Property Trustee, and Irwin Mark
Jacobs, Harvey P. White, and Anthony Thornley, as Regular
Trustees.(1)
4.4 Indenture for the 5 3/4% Convertible Subordinated Debt
Securities, dated as of February 25, 1997, among QUALCOMM
Incorporated and Wilmington Trust company, as Indenture
Trustee.(1)
4.5 Form of 5 3/4% Trust Convertible Preferred Securities
(Included in Annex 1 to Exhibit 4.3 above).(1)
4.6 Form of 5 3/4% Convertible Subordinated Debt Securities
(Included in Annex 1 to Exhibit 4.3 above).(1)
4.7 Preferred Securities Guarantee Agreement, dated as of
February 25, 1997, between QUALCOMM Incorporated, as
Guarantor, and Wilmington Trust Company, as Guarantee
Trustee.(1)
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
24.1 Power of Attorney.*
</TABLE>
- -------------------------
* Previously filed.
(1) Filed as an exhibit to the Registrant's Registration Statement on Form S-3
(No. 333-26069) or amendments thereto and incorporated herein by reference.
<PAGE> 1
EXHIBIT 1.1
6,000,000 Shares
QUALCOMM INCORPORATED
Common Stock
UNDERWRITING AGREEMENT
July ___, 1999
LEHMAN BROTHERS INC.
GOLDMAN, SACHS & CO.
c/o LEHMAN BROTHERS INC.
Three World Financial Center
New York, New York 10285
Dear Sirs:
QUALCOMM Incorporated, a Delaware corporation (the "Company"), proposes
to issue and sell severally to the underwriters named in Schedule I hereto (the
"Underwriters") 6,000,000 shares (the "Firm Shares") of Common Stock ($.0001 par
value) (the "Common Stock") of the Company. In addition, for the sole purpose of
covering over-allotments in connection with the sale of the Firm Shares, the
Company proposes to grant to the Underwriters an option to purchase up to an
additional 900,000 shares (the "Option Shares") of Common Stock. The Firm Shares
and any Option Shares purchased pursuant to this Underwriting Agreement are
herein called the "Shares."
This is to confirm the agreement concerning the purchase of the Shares
from the Company by the Underwriters.
1. REPRESENTATIONS AND WARRANTIES. The Company represents, warrants and
agrees that:
(a) A registration statement on Form S-3 (File No. 333-82715)
with respect to the Shares has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the Rules and Regulations (as
defined herein) of the Securities and Exchange Commission (the
"Commission") thereunder and has been filed with the Commission under
the Securities Act. Copies of such registration statement as amended to
date have been delivered by the Company to
<PAGE> 2
you, the Underwriters. The Company will next file with the Commission
one of the following: (i) prior to effectiveness of such registration
statement, a further amendment to such registration statement,
including a form of final prospectus, (ii) a final prospectus in
accordance with Rules 430A and 424(b)(1) or (4), or (iii) a
registration statement under Rule 462(b) (as defined herein) and final
prospectus in accordance with Rules 430A and 424(b)(1) or (4). In the
case of clauses (ii) and (iii), the Company has included in such
registration statement, as amended at the Effective Date (as defined
herein), all information (other than Rule 430A Information (as defined
herein)) required by the Securities Act and the Rules and Regulations
thereunder to be included in the Prospectus with respect to the Shares
and the offering thereof. As filed, such amendment and form of final
prospectus, or such final prospectus, or such registration statement
and final prospectus, shall contain all Rule 430A Information, together
with all other such required information, with respect to the Shares
and the offering thereof and, except to the extent the Underwriters
shall agree in writing to a modification, shall be in all substantive
respects in the form furnished to you prior to the date hereof or, to
the extent not completed at the date hereof, shall contain only such
specific additional information and other changes (beyond that
contained in the latest Preliminary Prospectus) as the Company has
advised you, prior to the date hereof, will be included or made
therein.
For purposes of this Agreement, "Effective Time" means the date and the
time as of which such registration statement, or the most recent
post-effective amendment thereto, if any, was deemed effective or
declared effective by the Commission. "Effective Date" means the date
of the Effective Time. "Preliminary Prospectus" means each prospectus
included in such registration statement or in a registration statement
filed under Rule 462(b), or amendments thereof, before the Effective
Date and any prospectus included in such registration statement at the
Effective Date that omits Rule 430A Information. "Prospectus" means the
form of prospectus relating to the Shares, as first filed pursuant to
Rule 424(b), or as filed in a registration statement under Rule 462(b)
or, if no filing pursuant to Rule 424(b) or 462(b) is required, the
form of final prospectus included in the Registration Statement at the
Effective Date. "Registration Statement" means (i) such registration
statement, as amended at the Effective Time, (ii) any registration
statement filed pursuant to Rule 462(b), and (iii) any Rule 430A
Information deemed to be included therein at the Effective Date as
provided by Rule 430A. "Rule 424," "Rule 430A" and "Rule 462(b)" refer
to such rules under the Securities Act. "Rule 430A Information" means
information with respect to the Shares and the offering thereof
permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A. Any reference herein to the
Registration Statement, any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Act, as of
the date of the Registration Statement, such Preliminary Prospectus or
Prospectus, as the case may be,
2
<PAGE> 3
and any reference to any amendment or supplement to the Registration
Statement, any Preliminary Prospectus or Prospectus shall be deemed to
refer to and include any documents filed after such date under the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated by the Commission thereunder (collectively, the
"Exchange Act"), and so incorporated by reference (such incorporated
documents, financial statements and schedules being herein called the
"Incorporated Documents").
The Commission has not issued any stop order preventing or suspending
the use of the Preliminary Prospectus or the Prospectus or the
effectiveness of the Registration Statement, and no proceeding for any
such purpose has been initiated or, to the best of the Company's
knowledge, threatened by the Commission. For purposes of this
Agreement: "Rules and Regulations" means the rules and regulations
adopted by the Commission under either the Securities Act or the
Exchange Act, as applicable; "U.S. Person" means any resident or
national of the United States or Canada and its provinces, any
corporation, partnership or other entity created or organized in or
under the laws of the United States or Canada and its provinces, or any
estate or trust the income of which is subject to United States or
Canada federal income taxation regardless of the source of its income
(other than the foreign branch of any U.S. Person), and includes any
United States or Canadian branch of a person other than a U.S. Person;
and "United States" means the United States of America (including the
states thereof and the District of Columbia) and its territories, its
possessions and other areas subject to its jurisdiction.
(b) On the Effective Date, the Registration Statement and the
Prospectus did, and any further amendments or supplements to the
Registration Statement or the Prospectus will, conform in all material
respects to the requirements of the Securities Act and the Rules and
Regulations thereunder and did not and will not, as of the applicable
Effective Date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto, 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;
provided, however, that this representation and warranty shall not
apply to any statements in or omissions from the Registration Statement
or the Prospectus made in reliance upon and in conformity with written
information furnished to the Company through any Underwriter,
specifically for use in the preparation thereof.
(c) The accountants who certified the financial statements and
supporting schedules included in or incorporated by reference into the
Registration Statement are independent public accountants as required
by the Securities Act and the Rules and Regulations thereunder.
3
<PAGE> 4
(d) The financial statements (including the related notes and
supporting schedules) and the summary financial information included in
or incorporated by reference into the Registration Statement, any
Preliminary Prospectus or the Prospectus, present (or in the case of
any amendment or supplement to any such document filed with the
Commission after the date as of which this representation is being
made, will present) fairly and in accordance with generally accepted
accounting principles applied on a consistent basis throughout the
periods involved, the financial condition and results of operations of
the entities purported to be shown thereby, at the dates and for the
periods indicated and have been or will be, as the case may be,
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except
as otherwise stated therein).
(e) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus (excluding the
Incorporated Documents), except as otherwise stated or contemplated
therein, (A) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, assets, affairs
or business prospects of the Company, whether or not arising in the
ordinary course of business, (B) there have been no transactions,
entered into by the Company, other than those in the ordinary course of
business, which are material with respect to the Company, (C) there has
been no extraordinary dividend or distribution of any kind declared,
paid or made by the Company on any class of its capital stock, (D)
there has not been any change in the capital stock (other than
issuances of shares of Common Stock pursuant to employee benefit plans
or existing options), or any increase in the short-term indebtedness
for borrowed money (except increases due to long-term debt becoming
short-term debt through the passage of time) or long-term debt, or any
issuance of options, warrants, convertible securities or other rights
to purchase the capital stock (other than the grant of options pursuant
to existing option plans or rights pursuant to the Company's 1991
Employee Stock Purchase Plan), of the Company, and (E) the Company has
not sustained any material loss or damage to its property or
interference with its business, whether or not any of the foregoing is
insured.
(f) The Company has been duly incorporated and is validly
existing and in good standing under the laws of the State of Delaware,
and has full corporate power and authority to own or hold its
properties and conduct its business as described in the Registration
Statement; and the Company is duly qualified to transact business and
is in good standing in each jurisdiction in which failure so to qualify
could have a material adverse effect upon the Company or on its
earnings, assets, affairs or business prospects. Except as may be set
forth on Exhibit 21 to the Company's most recent Annual Report on Form
10-K filed with the Commission, the Company has no significant
subsidiaries.
4
<PAGE> 5
(g) The Company is not in violation of its corporate charter
or by-laws or, except as otherwise described or contemplated in the
Registration Statement, in default under any agreement, indenture or
instrument, the effect of which violation or default would be
materially adverse to the Company; and the issuance and sale of the
Shares and the execution, delivery and performance of this Agreement
have been duly authorized by all necessary corporate action and will
not conflict with, result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets of the Company pursuant to
the terms of, or constitute a default under, any agreement, indenture
or instrument (the effect of which conflict, lien, charge, encumbrance,
default or violation would be materially adverse to the Company, or
would materially and adversely affect the ability of the Company to
perform its obligations under this Agreement) or result in a violation
of the corporate charter or by-laws of the Company, nor will the
performance by the Company of its obligations hereunder violate any
law, rule, administrative regulation or decree of any court or
governmental agency having jurisdiction over the Company or its
properties. Except as required by the Securities Act, the Exchange Act
and applicable state securities laws or "Blue Sky" laws of any
jurisdiction, no consent, authorization or order of, or filing or
registration with, any court or governmental agency is required in
connection with the consummation of the transactions contemplated by
this Agreement.
(h) Other than as disclosed in the Registration Statement,
there is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened against or affecting the
Company, which is required to be disclosed in the Registration
Statement or which might result in any material adverse change in the
condition, financial or otherwise, or in the earnings, assets, affairs
or business prospects of the Company, or which might materially and
adversely affect its properties or assets or which might materially and
adversely affect the consummation of the transactions contemplated by
this Agreement; all summaries or descriptions of legal or governmental
proceedings or contingencies contained in the Registration Statement
are accurate in all material respects with respect to such matters; and
there are no contracts or other documents of the Company which are
required to be filed as exhibits to the Registration Statement which
have not been so filed.
(i) The Company is not in violation of any law, ordinance,
governmental rule or regulation or court decree to which it is subject,
other than violations (if any) that individually or in the aggregate
are not material to the Company. Other than as disclosed in the
Registration Statement, the Company possesses such certificates,
authorizations or permits issued by the appropriate state, federal or
foreign regulatory agencies or bodies the absence of which would have a
material adverse effect on its business, and the Company has not
received any notice of proceedings relating to the revocation or
5
<PAGE> 6
modification of any such certificate, authority or permit which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling
or finding, would materially and adversely affect the conduct of the
business, operations, financial condition or income of the Company.
(j) At and after the First Closing Date, there will be no
holders of securities of the Company who, by reason of the filing of
the Registration Statement or any Preliminary Prospectus or the
Prospectus under the Securities Act, have the right to request the
Company to register under the Securities Act securities held by them,
other than holders who have agreed in writing to waive such rights, or
other than where the failure to waive such rights, singly or in the
aggregate, would not materially and adversely affect the conduct of the
business, operations, financial condition or income of the Company.
(k) All outstanding shares of Common Stock have been, and the
Shares, upon issuance and delivery and payment therefor in the manner
herein described, will be, duly authorized, validly issued, fully paid
and nonassessable. Upon the closing of the offering, no preemptive
rights to subscribe for or to purchase, or any restriction upon the
voting or transfer of, any shares of Common Stock, will exist pursuant
to the Company's corporate charter, by-laws or any agreement or other
instrument to which the Company is a party or by which it may be bound.
The capitalization of the Company as of March 28, 1999, is as set forth
in the Company's Form 10-Q report for the quarter ended March 28, 1999,
which is incorporated by reference into each Preliminary Prospectus and
the Prospectus. The appropriate number of shares of Common Stock
issuable upon exercise of the outstanding options to employees and
directors has been duly reserved for issuance, and such shares have
been duly and validly authorized and will when issued upon exercise in
accordance with their terms, be validly issued, fully paid and
nonassessable. There are no other rights to subscribe for or to
purchase any shares of Common Stock pursuant to the Company's corporate
charter or by-laws or any agreement or other instrument to which the
Company is a party or by which it may be bound or has knowledge, other
than conversion rights of the holders of outstanding Trust Convertible
Preferred Securities and outstanding options to employees and directors
and rights pursuant to the Company's 1991 Employee Stock Purchase Plan.
(l) The Company has full right, corporate power and authority
to enter into this Agreement and to perform and discharge its
obligations hereunder, and this Agreement has been duly authorized,
executed and delivered by the Company and constitutes the valid and
legally binding agreement of the Company, except as rights to
indemnification may be limited by federal or state securities laws and
except for the effect of bankruptcy,
6
<PAGE> 7
insolvency, reorganization, moratorium and other similar laws relating
to or affecting the rights of creditors generally.
(m) Except as otherwise stated in the Registration Statement
and the Prospectus, the Company has good and marketable title, free and
clear of all liens, encumbrances or claims of which the Company has
knowledge, to all of the real and personal property described in the
Registration Statement and the Prospectus as being owned by it, except
liens, encumbrances and equities which are not material in the
aggregate and do not materially affect the value of such property or
interfere with the conduct of the business of the Company and, except
as otherwise stated in the Registration Statement and Prospectus, the
Company has valid and binding leases to all of the real and personal
property described in the Registration Statement and Prospectus as
under lease to it with such exceptions as are not material and do not
interfere with the conduct of the business of the Company.
(n) The Company has filed all necessary federal, state and
foreign income and franchise tax returns and has paid all taxes shown
as due thereon, and the Company has no knowledge of any material tax
deficiency which has been or might be asserted against the Company.
(o) The Incorporated Documents, when they became effective or
were filed (or, if an amendment with respect to any such Incorporated
Document was filed or became effective, when such amendment was filed
or became effective) with the Commission, as the case may be, complied
in all material respects with the requirements of the Exchange Act, and
any documents so filed and incorporated by reference in the
Registration Statement or the Prospectus subsequent to the effective
date of the Registration Statement will, when they are filed with the
Commission, comply in all material respects with the requirements of
the Securities Act and the Exchange Act, as applicable; no such
Incorporated Document, when it was filed or became effective (or, if an
amendment with respect to any such Incorporated Document was filed or
became effective, when such amendment was filed or became effective),
contained, and no document so filed and incorporated by reference in
the Registration Statement or Prospectus subsequent to the effective
date of the Registration Statement will contain, an untrue statement of
a material fact or omitted, or will omit, to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.
(p) The Company has reviewed its operations and those of its
subsidiaries and any third parties with which the Company or any of its
subsidiaries has a material relationship to evaluate the extent to
which the business or operations of the Company or any of its
subsidiaries will be affected by Year 2000 issues. As a result of such
review,
7
<PAGE> 8
the Company represents and warrants that the disclosure in the
Registration Statement relating to Year 2000 issues is accurate and
complies with the rules and regulations under the Act, in each case in
all material respects. "Year 2000 issues" as used herein means Year
2000 issues described in or contemplated by the Commission's
Interpretation: Disclosure of Year 2000 Issues and Consequences by
Public Companies, Investment Advisers, Investment Companies, and
Municipal Securities Issuers (Release No. 33-7558).
(q) The Company is not an "investment company" within the
meaning of such term under the Investment Company Act of 1940 and the
rules and regulations of the Commission thereunder.
2. PURCHASE OF THE SHARES BY THE UNDERWRITERS. (a) Subject to the terms
and conditions and upon the basis of the representations and warranties herein
set forth, the Company agrees to issue and sell to the Underwriters, and each of
the Underwriters agrees, severally and not jointly, to purchase at a price of
$________ per Share, the number of Firm Shares set forth opposite such
Underwriter's name in Schedule I hereto. The Underwriters agree to offer the
Firm Shares as set forth in the Prospectus. The Company is not obligated to
deliver any Firm Shares except upon payment for all the Firm Shares.
(b) The Company hereby grants to the Underwriters an option to purchase
from the Company, solely for the purpose of covering over-allotments in the sale
of Firm Shares, all or any portion of the Option Shares for a period of 30 days
from the date hereof at the purchase price per Share set forth above. Option
Shares shall be purchased from the Company, severally and not jointly, for the
accounts of the several Underwriters in proportion to the number of Firm Shares
set forth opposite such Underwriter's name in Schedule I hereto, except that the
respective purchase obligations of each Underwriter shall be adjusted by the
Underwriters so that no Underwriter shall be obligated to purchase Option Shares
other than in 100-Share quantities.
3. DELIVERY OF AND PAYMENT FOR SHARES. Delivery of certificates for the
Firm Shares and certificates for the Option Shares, if the option to purchase
the same is exercised on or before the second Business Day (as defined herein)
prior to the First Closing Date (as defined herein), to be purchased by the
Underwriters from the Company shall be made through the facilities of the
Depository Trust Company ("DTC") (including without limitation, by "full fast"
electronic transfers through DTC) to Lehman Brothers Inc. for the respective
accounts of the Underwriters, at 10:00 a.m., New York City time, on the fourth
full Business Day following the date hereof or at such other date as shall be
determined by you and the Company (the "First Closing Date"). For purposes of
this Agreement, "Business Day" means any day on which the New York Stock
Exchange is open for trading.
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The option to purchase Option Shares granted in Section 2 hereof may be
exercised on two occasions during the term thereof by written notice to the
Company from the Underwriters. Such notice shall set forth the aggregate number
of Option Shares as to which the option is being exercised and the time and
date, as determined by the Underwriters, when such Option Shares are to be
delivered (the "Option Closing Date"), which date shall be, subject to the first
sentence of this Section 3, the third Business Day after the date on which the
option shall have been exercised and in no event earlier than the First Closing
Date. (The First Closing Date and any Option Closing Date are herein
individually referred to as a "Closing Date" and collectively referred to as the
"Closing Dates".) Delivery of such Option Shares shall be made by the Company on
the applicable Closing Date at 10:00 a.m., New York City time, in the manner set
forth above for delivery of the Firm Shares.
Delivery of certificates for the Shares shall be made by or on behalf
of the Company to you in the manner set forth above, for the respective accounts
of the Underwriters, against payment by the Underwriters of the purchase price
therefor by wire transfer of immediately available funds to such account as the
Company shall designate, at the offices of Cooley Godward LLP, 4365 Executive
Drive, Suite 1100, San Diego, California 92121 (or at such other location as
shall be agreed upon by the Company and the Underwriters), at 10:00 a.m., New
York City time, on the applicable Closing Date. The certificates for the Shares
shall be registered in such names and denominations as you shall have requested
at least two full Business Days prior to the applicable Closing Date. For the
purpose of expediting the checking and packaging of the certificates for the
Shares, the Company shall make such certificates available for inspection by the
Underwriters at a location in New York, New York as may be designated by the
Company not later than 1:00 p.m., New York City time, on the Business Day prior
to each such Closing Date. Time shall be of the essence and delivery of the
certificates for the Shares to be purchased at the time and place specified in
this Agreement is a further condition to the obligations of each Underwriter.
If an Underwriter shall direct that any Shares be issued in a name or
names other than that of the Underwriter agreeing to purchase such Shares, such
Underwriter shall pay any transfer tax resulting from issuance.
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<PAGE> 10
4. COVENANTS. The Company covenants and agrees with each Underwriter
that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the date hereof, and any
amendment thereof, to become effective. Subject to the foregoing
sentence, if the Registration Statement has become or becomes effective
pursuant to Rule 430A or Rule 462(b), or filing of the Prospectus is
otherwise required under Rule 424(b), the Company will cause the
Prospectus, properly completed, and any supplement thereto to be filed
with the Commission pursuant to the applicable paragraph of Rule 424(b)
within the time period prescribed and will provide evidence
satisfactory to the Underwriters of such timely filing. The Company
shall prepare and file with the Commission during such period following
the date hereof as, in the reasonable opinion of counsel for the
Underwriters, the Prospectus is required by law to be delivered, any
amendments of or supplements to the Registration Statement, the
Preliminary Prospectus or the Prospectus that, in your opinion, may be
necessary or advisable in connection with the distribution of the
Shares; and the Company shall not file any amendment of or supplement
to the Registration Statement, the Preliminary Prospectus or the
Prospectus if such filing has not been consented to by you after
reasonable notice thereof, such consent not to be unreasonably withheld
or delayed.
(b) The Company shall furnish promptly to each of the
Underwriters and to counsel for the Underwriters a signed copy of the
Registration Statement as originally filed and each amendment thereto
filed with the Commission, including all consents and exhibits filed
therewith, and shall furnish to the Underwriters such number of (i)
conformed copies of the Registration Statement, as originally filed and
each amendment thereto (excluding exhibits other than this Agreement),
(ii) any Preliminary Prospectus and the Prospectus and (iii) all
amendments and supplements to any of such documents (including the
Incorporated Documents to the extent not previously provided to you),
in each case as soon as available and in such quantities as the
Underwriters may from time to time reasonably request, provided, that
the Company shall furnish to such Underwriters and counsel such copies
of the Prospectus not later than the end of the first Business Day
after the date hereof; and the Company authorizes the Underwriters and
all dealers to whom any Shares may be offered or sold by the several
Underwriters to use the Prospectus, and if supplemented or amended then
after such date as supplemented or amended, during the period referred
to in Section 4(a), in connection with the sale of the Shares in
accordance with the applicable provisions of the Securities Act, the
Rules and Regulations thereunder and this Agreement.
(c) The Company will promptly advise the Underwriters (i) when
the Registration Statement, if not effective at the date hereof, and
any amendment thereto, shall
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<PAGE> 11
have been filed or become effective, (ii) when the Prospectus, and any
supplement thereto, shall have been filed (if required) with the
Commission pursuant to Rule 424(b), (iii) of any request by the
Commission for any amendment of the Registration Statement or
supplement to the Prospectus or for any additional information, (iv) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any order directed to
the Prospectus or the initiation or threat of any such stop order
proceeding by the Commission, (v) of receipt by the Company of any
notification with respect to the suspension of the qualification of the
Shares for sale in any jurisdiction or the initiation or threat of any
proceeding for that purpose and (vi) of the happening during the period
that any Prospectus is required to be delivered under the Securities
Act of any event which makes untrue any statement of a material fact
made in the Registration Statement or the Prospectus or which requires
the making of a change in the Registration Statement or the Prospectus
in order to make any material statement therein not misleading. As long
as the Prospectus relating to the Shares is required to be delivered
under the Securities Act, the Company shall advise the Underwriters
promptly of any event which materially affects the Company or the
Shares and which should be set forth in a supplement to or an amendment
of the Prospectus relating to the Shares in order to make the
statements therein not misleading or if during such period it is
necessary to amend the Registration Statement or supplement the
Prospectus to comply with the Securities Act or to file any document.
The Company agrees to prepare and furnish to the several Underwriters
at its own expense such amendment or amendments to such Prospectus so
as to correct such statement or omission or to effect such compliance.
(d) If during the period referred to in Section 4(a) the
Commission shall issue a stop order or other order suspending the
effectiveness of the Registration Statement, suspending or preventing
the use of any Preliminary Prospectus or the Prospectus, or if the
Commission shall institute any proceedings for any such purpose, the
Company shall make every reasonable effort to obtain the lifting of any
such order at the earliest possible time.
(e) As soon as practicable and in any event not later than 45
days after the end of its fiscal quarter in which the first anniversary
date of the Effective Date occurs, the Company shall make generally
available to its security holders in accordance with Rule 158 of the
Rules and Regulations under the Securities Act and deliver to the
Underwriters an earnings statement, conforming with the requirements of
Section 11(a) of the Securities Act and covering a period of at least
twelve consecutive months beginning after the Effective Date.
(f) The Company shall endeavor to qualify the Shares for offer
and sale under the securities laws of such jurisdictions (including
Canada and its provinces) as the Underwriters shall reasonably
designate and to continue such qualifications in effect so
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<PAGE> 12
long as is required for the distribution of the Shares; provided,
however, that the Company will not be obligated to qualify the Shares
in any such jurisdiction where such qualification would require the
Company to qualify to do business as a foreign corporation or file a
general consent to service of process.
(g) The Company shall pay all costs incident to the
authorization, issuance, sale and delivery of the Shares to be sold to
the Underwriters and any taxes payable in that connection; the costs
incident to the preparation, printing and filing under the Securities
Act of the Registration Statement and any amendments, supplements and
exhibits thereto; the costs of distributing the Registration Statement
as originally filed and each amendment and post-effective amendment
thereof (including exhibits), any Preliminary Prospectus and the
Prospectus; the costs of printing this Agreement; costs of the
Company's counsel; any applicable filing fee of the National
Association of Securities Dealers, Inc.; any applicable listing or
other stock exchange fees; the fees and expenses of qualifying any
Shares under the securities laws of the several jurisdictions
(including Canada and its provinces) as provided in this Section and of
preparing and printing a Blue Sky Memorandum (including reasonable fees
and expenses of counsel to the Underwriters in connection therewith)
and all other costs and expenses incident to the performance of the
Company's obligations under this Agreement; provided that, (i) except
as provided in this Section, the Underwriters shall pay their own costs
and expenses, including the fees and expenses of their counsel, any
transfer taxes on the Shares which they may sell and the expenses of
advertising any offering of the Shares made by the Underwriters; and
(ii) if the sale of the Shares provided for herein is not consummated
by reason of any failure, refusal or inability on the part of the
Company to perform any agreement on its part to be performed or because
any other condition of the Underwriters' obligations hereunder is not
fulfilled or if the Underwriters shall decline to purchase the Shares
for any reason permitted under this Agreement, the Company shall
reimburse the several Underwriters for all reasonable out-of-pocket
disbursements (including reasonable fees and disbursements of counsel)
incurred by the Underwriters in connection with their investigation of
or any preparation by them in respect of the marketing of the Shares or
in contemplation of performing their obligations hereunder; provided,
however, that in no event shall the Company be obligated to pay such
expenses of the Underwriters in the event this Agreement is terminated
by the Underwriters pursuant to Section 7 or 8(a) hereof, or pursuant
to Subsection 8(b)(iii), 8(b)(iv), 8(b)(v), 8(b)(vi) or 8(b)(vii)
hereof.
(h) The Company shall not take, directly or indirectly, any
action designed to cause or result in, or which might reasonably be
expected to constitute, the stabilization or manipulation of the price
of the shares of Common Stock to facilitate the sale or resale of the
Shares.
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<PAGE> 13
(i) During a period of five years from the Effective Date, the
Company shall furnish to the Underwriters copies of all reports,
documents and financial statements furnished by the Company to
stockholders or to any securities exchange or the National Association
of Securities Dealers, Inc., pursuant to requirements of or agreements
with such organizations, or to the Commission pursuant to the Exchange
Act or any of the Rules and Regulations thereunder.
(j) The Company shall apply the net proceeds of the sale of
the Shares as set forth in any Preliminary Prospectus and the
Prospectus.
(k) The Company will for a period of at least five years after
the Effective Date maintain a registration with the Commission pursuant
to Section 12(g) of the Exchange Act and will provide to you, at the
same time as filed, copies of all filings made with the Commission
pursuant to the Exchange Act.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters hereunder are subject to the accuracy, as of the date
hereof and each Closing Date (as if made at such Closing Date), of the
representations and warranties of the Company contained herein, to the
performance by the Company of its obligations hereunder and to the following
additional terms and conditions:
(a) If the Registration Statement has not become effective
prior to the date hereof, unless the Underwriters agree in writing to a
later time, the Registration Statement will become effective not later
than 11:00 a.m., New York City time, on the first full Business Day
following the date hereof; all post-effective amendments to the
Registration Statement shall have become effective; all filings
required by Rule 424 shall have been made within the time period
required by such Rule; no stop order suspending the effectiveness of
the Registration Statement shall have been issued and prior to that
time no stop order proceeding shall have been initiated or threatened
by the Commission; any request of the Commission for inclusion of
additional information in the Registration Statement or the Prospectus
or otherwise shall have been complied with or adequately disposed of
following discussions with the Commission's staff; and after the date
hereof the Company shall not have filed with the Commission any
amendment or supplement to the Registration Statement or the Prospectus
without the consent of the Underwriters, which consent will not have
been unreasonably withheld or delayed.
(b) No Underwriter shall have discovered and disclosed to the
Company that the Registration Statement, any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto contains an
untrue statement of a fact that, in the reasonable
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<PAGE> 14
opinion of counsel for the Underwriters, is material or omits to state
a fact that, in the reasonable opinion of such counsel, is material and
is required to be stated therein or is necessary to make the statements
therein not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the Shares,
and the form of the Registration Statement, the Prospectus (other than
financial statements and other financial data) and all other legal
matters relating to this Agreement, such other documents and the
transactions contemplated hereby shall be reasonably satisfactory in
all material respects to counsel for the Underwriters, and the Company
shall have furnished to such counsel all documents and information that
such counsel may reasonably request to enable it to pass upon such
matters.
(d) The Company shall have furnished to you a certificate,
dated such Closing Date and addressed to the Underwriters, of its Chief
Executive Officer and Chief Financial Officer, certifying that the
signers of said certificate have carefully examined the Registration
Statement, the any Preliminary Prospectus and the Prospectus, and any
amendments or supplements thereto, and that:
(i) There has not been, since the respective dates as
of which information is given in the Registration Statement,
any material adverse change in the condition, financial or
otherwise, or the earnings, assets, affairs or business
prospects of the Company, whether or not arising in the
ordinary course of business, except as set forth in, or
contemplated by, the Registration Statement and the
Preliminary Prospectus and the Prospectus;
(ii) The representations and warranties of the
Company contained in Section 1 hereof are true and correct
with the same force and effect as though expressly made at and
as of such Closing Date;
(iii) The Company has complied with all agreements
and satisfied all conditions on its part to be performed or
satisfied at or prior to such Closing Date;
(iv) No stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings
for such purpose have been initiated or threatened by the
Commission; and
(v) Such documents do not include any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading.
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<PAGE> 15
The delivery of the certificate provided for in this subparagraph (d)
shall be and constitute a representation and warranty of the Company as
to the facts required in the immediately foregoing clauses (i), (ii),
(iii), (iv) and (v) of this subparagraph (d) to be set forth in such
certificate.
(e) On such Closing Date you shall have received a letter of
PricewaterhouseCoopers, LLP, addressed to the Underwriters and dated
such date, confirming that they are independent public accountants with
respect to the Company within the meaning of the Securities Act and
restating, as of the date of such letter (or with respect to matters
involving changes or developments since the respective dates as of
which specified financial information is given in the Prospectus, as of
a date not more than five days prior to the date of such letter), their
conclusions and findings with respect to the financial information and
other matters covered by their letter delivered to the Underwriters
concurrently with the execution of this Agreement and confirming in all
material respects the conclusions and findings set forth in such prior
letter.
(f) Since the latest date as of which such condition is set
forth in the Registration Statement, the Preliminary Prospectus and the
Prospectus, there shall have been no material adverse change in the
condition, financial or otherwise, or the earnings, affairs or business
prospects of the Company, except in all cases for changes or
developments that the Prospectus discloses or expressly contemplates.
(g) The inclusion of the Company in the Standard & Poor's
Corporation 500 Composite Price Index shall not have been withdrawn,
nor shall the inclusion date have been delayed from that heretofore
announced.
(h) Cooley Godward LLP, counsel for the Company, shall have
furnished to the Underwriters their opinion, addressed to the
Underwriters, dated such Closing Date and in form and substance
reasonably satisfactory to counsel for the Underwriters, to the effect
that:
(i) the Company (A) has been duly incorporated and is
validly existing in good standing under the laws of the State
of Delaware, (B) to such counsel's knowledge, is duly
qualified and in good standing as a foreign corporation in
each jurisdiction in which the owning or leasing of properties
or the conduct of business makes such qualification necessary,
except where the failure to so qualify would not have a
material adverse effect on the Company, and (C) has full
corporate power and authority to carry on its business as
described in the Prospectus and to own and operate the
properties used in said business. The Company has full
corporate power and authority to enter into
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<PAGE> 16
and perform this Agreement and to issue, sell and deliver the
Shares. To the best of such counsel's knowledge, except as may
be set forth on Exhibit 21 to the Company's most recent Annual
Report on Form 10-K filed with the Commission, the Company has
no significant subsidiaries.
(ii) this Agreement has been duly executed and
delivered by the Company and is a legal, valid and binding
agreement of the Company enforceable in accordance with its
terms, except as rights to indemnification and contribution
hereunder may be limited by Federal or state securities laws;
and public policies thereunder;
(iii) all legally required corporate proceedings in
connection with the authorization and issuance of the Shares
and the sale of the Shares by the Company in accordance with
the terms of this Agreement have been taken and all orders,
consents or other authorizations or approvals of any public
board or body legally required for the validity of the Shares
or for the issuance, sale and distribution of the Shares
hereunder have been obtained (except that no opinion need be
expressed with respect to such orders, consents or other
authorizations or approvals as may be required by the Blue Sky
or securities laws of any jurisdiction in connection with the
offer and sale of the Shares);
(iv) all the outstanding shares of the Company's
Common Stock have been, and the Shares, upon issuance and
delivery and payment therefor in the manner herein described,
will be, duly authorized, validly issued, fully paid and
nonassessable. Upon the closing of the offering, no preemptive
rights to subscribe for or to purchase, or any restriction
upon the voting or transfer of, any shares of Common Stock
will exist pursuant to the Company's corporate charter or
by-laws, or, to the best of such counsel's knowledge, pursuant
to any agreement or other instrument to which the Company is a
party or by which it may be bound;
(v) the certificates for the common stock of the
Company in the form filed with the Commission are in valid and
sufficient form under the General Corporation Law of the State
of Delaware;
(vi) the Registration Statement has become effective
under the Act, the applicable provisions of Rule 424, Rule
430A and Rule 462(b) under the Act have been fully complied
with in a timely manner, and, to the best of such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or
threatened;
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<PAGE> 17
(vii) there are no contracts or other documents known
to such counsel which are required to be filed as exhibits to
the Registration Statement other than those filed as exhibits
thereto, and there are no legal or governmental proceedings
known to such counsel pending or, to the best of such
counsel's knowledge, threatened against the Company required
to be disclosed in the Prospectus under the Securities Act,
the Exchange Act or the Rules and Regulations thereunder which
are not so disclosed;
(viii) the execution and delivery of this Agreement
by the Company, and the issuance and sale of the Shares and
the fulfillment of this Agreement by the Company will not
conflict with or constitute a breach of or a default (with the
passage of time or otherwise) under (i) the charter or by-laws
of the Company (ii) any statute, law or regulation to which
the Company or any of its properties may be subject or any
judgment, decree or order, known to such counsel, of any court
or governmental agency or authority entered against the
Company in any proceeding to which the Company was or is now a
party or by which it is bound, except for any conflict, breach
or default that would not have a material adverse effect on
the Company or (iii) to the best of such counsel's knowledge,
any agreement or document filed as an exhibit to the
Registration Statement, except for any conflict, breach or
default that would not have a material adverse effect on the
Company;
(ix) to the best of such counsel's knowledge, the
Company is not in violation of its certificate of
incorporation or by-laws; and
(x) except as to financial statements and schedules
included therein, as to which such counsel need not express
any opinion, such counsel is of the opinion that the
Registration Statement and the Prospectus and any supplements
or amendments thereto (including the Incorporated Documents)
comply as to form in all material respects with the Securities
Act and the Exchange Act.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company, counsel for
the Underwriters, representatives of the independent public accountants for the
Company, and you, at which the contents of the Registration Statement and
Prospectus and related matters were discussed and, although such counsel is not
passing upon, and does not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and Prospectus and has not made any independent check or verification
thereof, on the basis of the foregoing, no facts have come to such counsel's
attention that lead them to believe that either the Registration Statement
(including the Incorporated Documents) at the time such Registration Statement
became effective contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or
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<PAGE> 18
the Prospectus (including the Incorporated Documents) as of its date or the
Closing Date contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that such
counsel need express no opinion with respect to the financial statements,
schedules and other financial data included in the Registration Statement or
Prospectus.
In rendering such opinion such counsel may rely (A) as to questions of
the law of jurisdictions other than the State of California or the United States
upon an opinion (dated the Closing Date, addressed to the Underwriters) of
counsel acceptable to counsel to the Underwriters and (B) as to matters of fact,
to the extent they deem proper, upon certificates of officers of the Company and
public officials. Such opinion may also be limited as to the effect thereon of
laws relating to bankruptcy or insolvency, the application of equitable
principles and limitations on the effectiveness of indemnification and
contribution provisions and may contain such other customary exceptions or
qualifications as are acceptable to counsel for the Underwriters. Such opinion
of counsel to the Company shall state that the opinion of such other counsel is
in form and substance satisfactory to counsel to the Company and, in their
opinion, the Underwriters are justified in relying thereon.
(i) You shall have received from Latham & Watkins, counsel for
the Underwriters, their opinion, addressed to the Underwriters and
dated such Closing Date, with respect to the Shares, the Registration
Statement, the Prospectus, and other related matters as you reasonably
may request, and the Company shall have furnished to such counsel such
papers and information as they request to enable them to pass upon such
matters.
Any such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to the Underwriters and to counsel for the Underwriters.
The Company shall furnish to the Underwriters such conformed copies of such
opinions, certificates, letters and other documents as the Underwriters shall
reasonably request. If any of the conditions specified in this Section 5 shall
not have been fulfilled when and as required by this Agreement, this Agreement
and all obligations of the Underwriters hereunder may be cancelled at, or at any
time prior to, such Closing Date, by you. Any such cancellation shall be without
liability of the Underwriters to the Company. Notice of such cancellation shall
be given to the Company in writing, or by telex or telephone and confirmed in
writing.
6. INDEMNIFICATION AND CONTRIBUTION. (a) The Company shall indemnify
and hold harmless each Underwriter and each person, if any, who controls each
Underwriter within the meaning of the Securities Act from and against any
losses, claims, damages or liabilities,
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<PAGE> 19
joint or several (and any actions in respect thereof), to which that Underwriter
or such controlling person may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (and actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or the Registration
Statement, any Preliminary Prospectus or the Prospectus as amended or
supplemented, or arise out of or 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; and shall reimburse each Underwriter
and each such controlling person promptly after receipt of invoices from such
Underwriter or such controlling person, as applicable, for any legal or other
expenses reasonably incurred by that Underwriter or such controlling person, as
applicable, in connection with investigating, defending or preparing to defend
against or appearing as a third-party witness in connection with any such loss,
claim, damage, liability or action, notwithstanding the possibility that
payments for such expenses might later be held to be improper, in which case the
person receiving them shall promptly refund them; provided, however, that the
Company shall not be liable under this Section 6(a) in any such case to the
extent, but only to the extent, that any such loss, claim, damage, liability or
action arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement, or
any amendment or supplement thereto in reliance upon and in conformity with
written information regarding such Underwriter or the arrangements with respect
to the underwriting of the transactions contemplated hereby furnished to the
Company through the Underwriters specifically for use in the preparation
thereof; and provided further, however, that the foregoing indemnity agreement
is subject to the condition that, insofar as it relates to any untrue
statement, alleged untrue statement, omission or alleged omission made in any
Preliminary Prospectus but eliminated or remedied in the Prospects, such
indemnity agreement shall not inure to the benefit of any Underwriter from whom
the person asserting any loss, claim, damage or liability purchased the Shares
which are the subject thereof (or to the benefit of any person who controls
such Underwriter) if a copy of the Prospectus (excluding Incorporated
Documents) was not sent or given to such person with or prior to the written
confirmation of the sale of such Shares to such person and provided that the
Company has complied with its obligations under Sections 4(b) and 4(c) hereof.
This indemnity agreement is in addition to any liability which the Company may
otherwise have.
(b) Each Underwriter severally, but not jointly, shall indemnify and
hold harmless the Company, each of the Company's directors, each of the
Company's officers who has signed the Registration Statement and each person, if
any, who controls the Company within the meaning of the Securities Act from and
against any losses, claims, damages or liabilities (and any actions in respect
thereof) to which the Company or any such director, officer or controlling
person may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or the Registration Statement, any Preliminary
Prospectus or the Prospectus as amended or supplemented, or arise out of or 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, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information regarding such Underwriter or
the arrangements with respect to the underwriting of the transactions
contemplated hereby furnished to the Company through the Underwriters
specifically for use in the preparation thereof, and
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<PAGE> 20
shall reimburse the Company or any such director, officer or controlling person
promptly after receipt of invoices from the Company or any such director,
officer or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating, defending or preparing to
defend against or appearing as a third-party witness in connection with any such
loss, claim, damage, liability or action, notwithstanding the possibility that
payments for such expenses might later be held to be improper, in which case the
Company or any such director, officer or controlling person, as applicable,
shall promptly refund them.
(c) Promptly after receipt by an indemnified party under this Section 6
of notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 6, notify the indemnifying party in writing of the
claim or the commencement of the action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability that it
may have under this Section 6 except to the extent it has been prejudiced in any
material respect by such failure. If any such claim or action is brought against
an indemnified party, and it notifies the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other indemnifying party similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, and
approval of counsel by the indemnified party in accordance with the foregoing,
the indemnifying party shall not be liable to the indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that the indemnified party shall have
the right to employ counsel to represent itself in connection with any claim in
respect of which indemnity may be sought against the indemnifying party under
this Section 6 if the defendants with respect to any such claim shall have
reasonably concluded that there may be legal defenses available to them and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party or that there exists some other conflict of
interest between the interests of the indemnified parties and the indemnifying
party with respect to such claim that makes separate representation desirable in
the reasonable judgment of the indemnified parties, and, in the event of the
foregoing, the reasonable fees and expenses of such separate counsel shall be
paid by the indemnifying party. It is understood, however, in connection with
the indemnifying party's undertaking in the preceding proviso, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel representing all indemnified parties who are parties to the
claim referred to in such proviso in each jurisdiction in which any claim or
action is brought.
20
<PAGE> 21
(d) If the indemnification provided for in this Section 6 shall for any
reason be unenforceable by an indemnified party under Section 6(a) or 6(b)
hereof in respect of any loss, claim, damage or liability (or any action in
respect thereof) referred to therein, although otherwise available in accordance
with its terms, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability (or action in respect
thereof) (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other from the offering of the Shares, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the
Underwriters on the other, with respect to the statements or omissions that
resulted in such loss, claim, damage or liability (or action in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Shares (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by the
Underwriters in question with respect to such offering, as set forth in the
table on the cover page of the Prospectus. Relative fault shall be determined by
reference to 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 or the Underwriters in question, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The Company
and the Underwriters agree that it would not be just and equitable if
contributions pursuant to this subsection (d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this
subsection (d). The amount paid by an indemnified party as a result of the loss,
claim, damage or liability (or action in respect thereof) referred to above in
this subsection (d) shall be deemed to include, for purposes of this subsection
(d), any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter and its
controlling persons in the aggregate shall be required to contribute any amount
in excess of the amount by which the total purchase price for the Shares
underwritten by such Underwriter and distributed to the public exceeds the
amount of any damages which such Underwriter and its controlling persons in the
aggregate have otherwise paid or become liable 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
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint. Each party entitled to contribution
agrees
21
<PAGE> 22
that upon the service of a summons or other initial legal process upon it in any
action instituted against it in respect of which contribution may be sought, it
shall promptly give written notice of such service to the party or parties from
whom contribution may be sought, but the omission so to notify such party or
parties of any such service shall not relieve the party from whom contribution
may be sought from any obligation it may have hereunder or otherwise (except as
specifically provided in subsection (c) hereof).
7. SUBSTITUTION OF UNDERWRITERS. If any Underwriter defaults in the
performance of its obligations to purchase the number of Shares which it has
agreed to purchase under this Agreement, the non-defaulting Underwriter shall be
obligated to purchase (in the respective proportions which the number of Shares
set forth opposite the name of each non-defaulting Underwriter in Schedule I
hereto bears to the total number of Shares set forth opposite the name of the
non-defaulting Underwriter in Schedule I hereto) the Shares which the defaulting
Underwriter agreed but failed to purchase; except that the non-defaulting
Underwriter shall not be obligated to purchase any of the Shares if the total
number of Shares which the defaulting Underwriter agreed but failed to purchase
exceeds 9.09% of the total number of Firm Shares, and the nondefaulting
Underwriter shall not be obligated to purchase more than 110% of the number of
Shares set forth opposite its name in Schedule I hereto plus the total number of
Option Shares purchasable by it pursuant to the terms of Section 2. If the
foregoing maximums are exceeded, the nondefaulting Underwriter, and any other
underwriters satisfactory to you who so agree, shall have the right, but shall
not be obligated, to purchase (in such proportions as may be agreed upon among
them) all the Shares. If the non-defaulting Underwriter or the other
underwriters satisfactory to you do not elect to purchase the Shares that the
defaulting Underwriter agreed but failed to purchase, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter or the
Company except for the payment of expenses to be borne by the Company and the
Underwriters as provided in Section 4(g) and the indemnity and contribution
agreements of the Company and the Underwriters contained in Section 6 hereof.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have for damages caused by its default. If the other
underwriters satisfactory to you are obligated or agree to purchase the Shares
of a defaulting Underwriter, either you or the Company may postpone the First
Closing Date for up to seven full Business Days in order to effect any changes
in the Registration Statement, any Preliminary Prospectus or the Prospectus
which in your opinion may thereby be made necessary.
8. EFFECTIVE DATE AND TERMINATION. (a) This Agreement shall become
effective on the earlier of (i) the initial release of the public offering of
the Firm Shares, or (ii) at 11:00 A.M., New York City time, on the first full
Business Day following the date hereof. You shall notify the Company immediately
after you have taken any action which causes this Agreement to become effective.
Until this Agreement is effective, it may be terminated by the Company by
22
<PAGE> 23
giving notice as hereinafter provided to you, or by you by giving notice as
hereinafter provided to the Company, except that the provisions of Section 4(g)
and Section 6 shall at all times be effective. For purposes of this Agreement,
the initial release of the public offering of the Firm Shares for sale to the
public shall be deemed to have been made when you release, by telegram or
otherwise, firm offers of the Firm Shares to securities dealers or release for
publication a newspaper advertisement relating to the Firm Shares, whichever
occurs first.
(b) From the time of effectiveness of this Agreement until the First
Closing Date, this Agreement may be terminated by you in your absolute
discretion by giving notice as hereinafter provided to the Company, if (i) the
Company shall have failed, refused or been unable, at or prior to the First
Closing Date, to perform in any material respect any agreement on its part to be
performed hereunder, (ii) any other condition to the obligations of the
Underwriters hereunder is not fulfilled in any material respect, (iii) the
Company shall have sustained a loss or damage by fire, flood, accident or other
calamity which is material to the property, business or financial condition of
the Company, or the Company or any of its property shall have become a party or
subject to litigation material to the Company or there shall have been, since
the respective dates as of which information is given in the Registration
Statement or the Prospectus, any material adverse change or any development
involving a prospective material adverse change in the general affairs,
condition (financial or other), business, key personnel, capitalization,
properties, results of operations or net worth of the Company whether or not
arising in the ordinary course of business, which loss, damage or change, in
your judgment shall render it inadvisable to proceed with the delivery of the
Shares, whether or not any such loss shall have been insured, (iv) trading in
the Company's Common Stock shall have been suspended by the Commission or
trading in securities generally on the New York Stock Exchange shall have been
suspended or materially limited, or minimum prices shall have been established
on such exchange by the Commission, or by such exchange or other regulatory body
or governmental authority having jurisdiction, (v) a general banking moratorium
shall have been declared by Federal or state authorities, (vi) there is an
outbreak or escalation of hostilities involving the United States on or after
the date hereof, or the United States is or becomes engaged in hostilities which
result in the declaration of a national emergency or war, the effect of which
shall be, in your judgment, to make it inadvisable or impracticable to proceed
with the public offering or delivery of the Shares on the terms and in the
manner contemplated in the Prospectus, or (vii) there shall have been such a
material adverse change in general economic, political or financial conditions
or if the effect of international conditions on the financial markets in the
United States shall be such as, in the judgment of a majority in interest of the
several Underwriters, makes it inadvisable or impracticable to proceed with the
delivery of the Shares. Any termination of this Agreement pursuant to this
Section 8 shall be without liability on the part of the Company or any
Underwriter, except as otherwise provided in Section 4(g) and Section 6 hereof.
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<PAGE> 24
Any notice referred to above may be given at the address specified in
Section 10 hereof in writing or by telecopier, telex or telephone, and if by
telecopier, telex or telephone, shall be immediately confirmed in writing.
9. SURVIVAL OF CERTAIN PROVISIONS. The agreements contained in Section
6 and the representations, warranties and agreements of the Company in Sections
1 and 4 shall survive the delivery of the Shares to the Underwriters hereunder
and shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
indemnified party.
10. NOTICES. Except as otherwise provided in this Agreement, (a)
whenever notice is required by the provisions of this Agreement to be given to
the Company, such notice shall be in writing addressed to the Company at 5775
Morehouse Drive, San Diego, California 92121, Attention: President; and (b)
whenever notice is required by the provisions of this Agreement to be given to
the Underwriters, such notice shall be in writing addressed to you in care of
Lehman Brothers Inc., Eighth Floor, Three World Financial Center, New York, New
York 10285-0800, Attention: Syndicate Department and in care of Goldman, Sachs &
Co., 32 Old Slip, 21st Floor, New York, New York 10005, Attention: Registration
Department.
11. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters, the Company and their respective
successors. This Agreement and the terms and provisions hereof are for the sole
benefit of only those persons, except that (a) the representations, warranties,
indemnities and agreements of the Company contained in this Agreement shall also
be deemed to be for the benefit of the person or persons, if any, who control
any Underwriter within the meaning of Section 15 of the Securities Act and (b)
the indemnity agreement of the Underwriters contained in Section 6 hereof shall
be deemed to be for the benefit of directors of the Company, officers of the
Company who signed the Registration Statement and any person controlling the
Company within the meaning of Section 15 of the Securities Act. Nothing in this
Agreement shall be construed to give any person, other than the persons referred
to in this paragraph, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein. The term
"successors," as used in this Agreement, shall not include any purchaser of any
of the Shares from any of the Underwriters merely by reason of such purchase.
12. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
choice of law or conflict of laws principles thereof.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which together shall constitute a single agreement.
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<PAGE> 25
If the foregoing correctly sets forth the agreement among the Company
and the several Underwriters, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
QUALCOMM INCORPORATED
By: _________________________
Confirmed and accepted as of the
date first above mentioned:
LEHMAN BROTHERS INC.
GOLDMAN, SACHS & CO.
By: LEHMAN BROTHERS INC.
By: ____________________________
Authorized Representative
By: GOLDMAN, SACHS & CO.
By: ____________________________
(Goldman, Sachs & Co.)
25
<PAGE> 26
SCHEDULE I
Underwriting Agreement dated July ____, 1999
6,000,000 Shares
QUALCOMM INCORPORATED
Common Stock
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Lehman Brothers Inc...........................................
Goldman, Sachs & Co...........................................
Total......................................................... 6,000,000
=========
</TABLE>
26
<PAGE> 1
EXHIBIT 5.1
[COOLEY GODWARD LLP LETTERHEAD]
July 21, 1999
QUALCOMM INCORPORATED
5775 Morehouse Drive
San Diego, CA 92121-1704
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by QUALCOMM INCORPORATED, a Delaware corporation (the
"Company"), of a Registration Statement on Form S-3, as amended (the
"Registration Statement"), with the Securities and Exchange Commission, covering
an underwritten public offering of up to 6,900,000 shares of Common Stock (the
"Shares").
In connection with this opinion, we have examined and relied upon the
Registration Statement and related Prospectus, the Company's Certificate of
Incorporation and Bylaws, as amended, and the originals or copies certified to
our satisfaction of such records, documents, certificates, memoranda and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below. We have assumed the genuineness and
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as copies thereof and the due
execution and delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when issued and sold in accordance with the Registration
Statement and related Prospectus, will be validly issued, fully paid and
nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included on the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
/s/ THOMAS A. COLL
Thomas A. Coll
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated October 30, 1998 relating to the
financial statements and financial statement schedule, which appears in QUALCOMM
Incorporated's Annual Report on Form 10-K for the year ended September 30, 1998.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
PRICEWATERHOUSECOOPERS LLP
San Diego, California
July 20, 1999
