<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 8, 1997
REGISTRATION NO. 333-22625
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
RF MICRO DEVICES, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
NORTH CAROLINA 3674 56-1733461
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification No.)
Organization)
</TABLE>
7625 THORNDIKE ROAD
GREENSBORO, NORTH CAROLINA 27409-9421
(910) 664-1233
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Office)
---------------------
DAVID A. NORBURY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
RF MICRO DEVICES, INC.
7625 THORNDIKE ROAD
GREENSBORO, NORTH CAROLINA 27409-9421
(910) 664-1233
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
COPIES TO:
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<C> <C>
JEFFREY C. HOWLAND MARK G. BORDEN
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC DAVID SYLVESTER
1600 BB&T FINANCIAL CENTER HALE AND DORR LLP
200 WEST SECOND STREET 1455 PENNSYLVANIA AVENUE, N.W.
WINSTON-SALEM, NC 27101 WASHINGTON, D.C. 20004
(910) 721-3516 (202) 942-8400
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
---------------------
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, 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. []
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION, DATED APRIL 8, 1997
2,537,000 SHARES
(RF MICRO DEVICES LOGO)
COMMON STOCK
Of the shares of Common Stock offered hereby, 2,500,000 shares are being
sold by RF Micro Devices, Inc. ("RFMD" or the "Company") and 37,000 shares are
being sold by the Selling Shareholders. The Company will not receive any portion
of the proceeds from the sale of shares by the Selling Shareholders. See
"Principal and Selling Shareholders."
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $11.00 and $13.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Common Stock has been approved for quotation on the Nasdaq
National Market under the symbol "RFMD."
SEE "RISK FACTORS" COMMENCING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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===================================================================================================================
Proceeds to
Price to Underwriting Proceeds to Selling
Public Discount(1) Company(2) Shareholders(2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.......................... $ $ $ $
Total(3)........................... $ $ $ $
===================================================================================================================
</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company, estimated at $600,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
380,550 additional shares of Common Stock solely to cover over-allotments,
if any. If the Underwriters exercise this option in full, the Price to
Public will total $ , the Underwriting Discount will total
$ and the Proceeds to Company will total $ . See
"Underwriting."
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor at
the office of Montgomery Securities on or about , 1997.
------------------------
MONTGOMERY SECURITIES
HAMBRECHT & QUIST
OPPENHEIMER & CO., INC.
, 1997
<PAGE> 3
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY, INCLUDING THE ENTRY OF STABILIZING BIDS, SYNDICATE COVERING
TRANSACTIONS OR THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
RF Micro Devices(R), the RF Micro Devices logo and Optimum Technology
Matching(R) are registered trademarks of the Company. This Prospectus may
contain certain other trademarks and service marks of other parties.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto included elsewhere in
this Prospectus. Except as otherwise noted, all information in this Prospectus
(i) reflects the automatic conversion of all outstanding shares of Preferred
Stock of the Company into an aggregate of 7,954,320 shares of Common Stock upon
the consummation of this offering, (ii) reflects the conversion of a convertible
note (the "TRW Convertible Note") held by TRW Inc. ("TRW") into an aggregate of
1,111,111 shares of Common Stock upon the consummation of this offering (after
which time TRW will hold an aggregate of 4,621,487 shares of Common Stock),
which conversion will be automatic if the initial public offering price of
shares of Common Stock in this offering is at least $12.00 per share, (iii)
gives effect to an amendment to the Company's articles of incorporation to be
adopted prior to the consummation of this offering pursuant to which the Company
will be authorized to issue 50,000,000 shares of Common Stock and 5,000,000
shares of Preferred Stock and (iv) assumes no exercise of the Underwriters'
over-allotment option. See "Description of Capital Stock" and "Underwriting."
THE COMPANY
The Company designs, develops and markets proprietary radio frequency
integrated circuits ("RFICs") for wireless communications applications such as
cellular and PCS, cordless telephony, wireless LANs, wireless local loop,
industrial radios, wireless security and remote meter reading. The Company
offers a broad array of products, including amplifiers, mixers and
modulators/demodulators, that represent a substantial majority of the RFICs
required in wireless subscriber equipment. The Company designs products using
three distinct process technologies: GaAs HBT, GaAs MESFET and silicon bipolar
transistor. The Company believes that for certain applications, GaAs HBT devices
offer advantages in terms of linearity, efficiency, reduced system complexity
and size.
The wireless communications industry has grown rapidly over the past decade
as cellular, PCS, paging and other wireless communications services have become
widely available and increasingly affordable. As wireless usage has grown,
wireless service providers have continued to improve the quality and
functionality of their services and have sought to offer greater bandwidth for
increased capacity. Capacity and functionality have been addressed by the
allocation of less congested frequency bands and by the wireless industry's
movement from analog to digital signal modulation standards. These digital
standards place a premium on linear power amplification, which can translate
into higher quality signals.
The wireless markets are characterized by a proliferation of analog and
digital signal modulation standards including AMPS, TACS, TDMA, CDMA and hybrid
standards. The equipment designed for each standard generally requires unique RF
and baseband integrated circuit solutions which must be designed to meet the
demands of subscriber equipment users for greater functionality, smaller and
lighter equipment, longer battery life and better security, all at reduced
costs. As a result, many OEMs have relied increasingly on third party, value-
added technology providers that have the component and systems level expertise
to design, and the production capacity to supply, these solutions. The Company
believes this trend has been particularly evident in the RF segment due to the
scarcity of RFIC engineers and the design complexity of RF technology.
TRW is currently manufacturing all of the Company's GaAs HBT products using
TRW's proprietary technologies and has granted the Company a license to use its
GaAs HBT process to design products for commercial wireless applications.
Through its relationship with TRW, the Company has become a leading commercial
supplier of GaAs HBT RFICs. The Company's GaAs HBT power amplifiers and small
signal devices have been designed into advanced subscriber equipment
manufactured by leading OEMs such as QUALCOMM, Nokia, Hyundai, Samsung, Motorola
and LG. The Company also offers GaAs MESFET and silicon components through a
delivery strategy called Optimum Technology Matching(R) to complement its GaAs
HBT products. Optimum Technology Matching(R) allows the Company to offer RFIC
solutions, on a component by component basis, that best fulfill each OEM's
performance, cost and time-to-market requirements.
The Company's strategy is to focus on wireless markets by offering a broad
range of standard and custom-designed RFICs in order to position itself as a
"one-stop" solution for its customers' RFIC needs. To meet demand for the
Company's GaAs HBT products, TRW is expanding its GaAs manufacturing facility
and the Company is constructing an approximately 50,000 square foot fabrication
facility. The Company believes that operating its own GaAs HBT wafer fabrication
facility will improve its ability to respond to customer demand for GaAs HBT
products and will provide it with greater opportunities to enhance product and
process quality and reliability.
The Company was incorporated as a North Carolina corporation in 1991. The
Company's principal executive offices are located at 7625 Thorndike Road,
Greensboro, North Carolina, 27409-9421, and its telephone number is (910)
664-1233.
3
<PAGE> 5
THE OFFERING
Common Stock offered by the Company............. 2,500,000 shares
Common Stock offered by the Selling
Shareholders.................................... 37,000 shares
Common Stock to be outstanding after the
offering........................................ 14,852,441 shares(1)
Use of proceeds................................. To finance a portion of the
construction of a new wafer fabrication facility, to repay certain indebtedness
and for working capital and
other general corporate
purposes. See "Use of
Proceeds."
Nasdaq National Market symbol................... RFMD
SUMMARY FINANCIAL DATA(2)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
--------------------------- ---------------------
1994 1995 1996 1995 1996
------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................. $ 986 $ 1,688 $ 9,515 $ 5,819 $19,654
(Loss) income from operations............. (2,824) (4,163) (5,244) (3,083) 754
Net (loss) income......................... (2,846) (4,122) (5,188) (3,031) 788
Pro forma net (loss) income per
share(3)................................ $ (0.42) $ (0.41) $ (0.43) $ (0.27) $ 0.07
Pro forma weighted average shares
outstanding(3).......................... 6,800 10,040 12,166 11,265 13,379
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(3) AS ADJUSTED(3)(4)
-------- ------------ -----------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 3,321 $ 3,321 $14,928
Working capital...................................... 7,092 7,092 19,234
Cash restricted for capital additions................ 14,932 14,932 29,932
Total assets......................................... 35,195 35,195 61,802
Long-term debt....................................... 10,809 657 499
Shareholders' (deficiency) equity.................... (10,357) 28,052 55,352
</TABLE>
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(1) Excludes (a) 1,026,776 shares of Common Stock issuable upon exercise of
options outstanding at March 31, 1997 at a weighted average price of $2.06
per share, (b) 1,000,000 shares of Common Stock issuable upon exercise of an
outstanding warrant held by TRW at a price of $10.00 per share if certain
conditions are met (the "TRW Warrant") and (c) 149,591 shares of Common
Stock reserved for issuance pursuant to outstanding warrants that have been
or may be issued by the Company in connection with certain financing
transactions, which warrants are or will be exercisable at a weighted
average price of approximately $6.48 per share (the "Lender Warrants"). See
"Dilution," "Management -- Stock Option Plans," "Certain Transactions" and
"Description of Capital Stock -- Warrants."
(2) The Company uses a 52 or 53 week fiscal year ending on the Saturday closest
to March 31 of each year. Each of the fiscal years ended April 2, 1994,
April 1, 1995 and March 30, 1996 was a 52 week year. The Company's other
fiscal quarters end on the Saturday closest to June 30, September 30 and
December 31 of each year. For purposes of this Prospectus (including the
Financial Statements and Notes thereto), each fiscal year is described as
having ended on March 31 and each of the first three quarters of each fiscal
year is described as having ended on June 30, September 30 and December 31.
(3) Pro forma per share and balance sheet data give effect to the conversion of
outstanding shares of Preferred Stock and the TRW Convertible Note upon the
consummation of this offering.
(4) Pro forma as adjusted data give effect to the conversion of outstanding
shares of Preferred Stock and the TRW Convertible Note upon consummation of
this offering and the sale by the Company of 2,500,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $12.00
per share, after deducting the underwriting discount and estimated offering
expenses payable by the Company and the application of net proceeds
therefrom. See "Use of Proceeds."
4
<PAGE> 6
RISK FACTORS
This offering involves a high degree of risk. In addition to the other
information set forth in this Prospectus, the following risk factors should be
considered carefully in evaluating the Company and its business before
purchasing any of the shares of Common Stock offered hereby. This Prospectus
contains certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this Prospectus. The Company's actual results could
differ materially from those discussed in this Prospectus. Factors that could
cause or contribute to such differences include those discussed below, as well
as those discussed elsewhere in this Prospectus.
VARIABILITY OF OPERATING RESULTS; DEPENDENCE ON A LIMITED NUMBER OF CUSTOMERS;
GAAS HBT CAPACITY CONSTRAINTS
The Company has experienced and expects to continue to experience
significant variability of its operating results. Future variability of
operating results may be caused by a variety of factors, including, but not
limited to: the demand for wireless subscriber equipment; the rate at which the
Company's gallium arsenide heterojunction bipolar transistor ("GaAs HBT") and
other products are adopted by customers; the ability of the Company to commence
commercial production at its planned fabrication facility; the ability of the
Company eventually to manufacture and deliver products in a timely and
cost-effective manner at acceptable yields and in volumes sufficient to satisfy
customer demands; the timing of significant orders; the mix of products sold;
changes in pricing by the Company and its competitors, customers or suppliers;
the length of sales cycles for the Company's products; variations in
manufacturing, assembly and test yields; market acceptance of customers'
products; the pattern of end-user or customer purchasing cycles; the
introduction of new products, processes and technologies by the Company and its
competitors; and general industry and global economic conditions.
A substantial portion of the Company's revenues is attributable to
custom-designed products that are designed and manufactured for specific
customers. Custom products are often manufactured on an exclusive basis for the
originating customer for a negotiated period of time. In late calendar 1995 and
early calendar 1996, the Company's operating results fluctuated substantially
due to high material scrap caused by low manufacturing, assembly and test yields
related to the Company's development of a Code Division Multiple Access ("CDMA")
chipset for QUALCOMM Incorporated ("QUALCOMM"). There can be no assurance that
the Company will not experience similar problems while developing future
products. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview."
A relatively limited number of customers have historically accounted for a
significant portion of the Company's revenues, and the identity of those
customers has varied significantly from period to period. For the nine months
ended December 31, 1996, sales to QUALCOMM and Samsung Electronics Co., Ltd.
("Samsung") accounted for 38.9% and 20.3%, respectively, of the Company's
revenues, and sales to the Company's five most significant customers in the
aggregate accounted for 76.2% of revenues. In fiscal 1996, sales to QUALCOMM and
Cincinnati Microwave, Inc. ("Cincinnati Microwave") accounted for 31.3% and
11.9%, respectively, of the Company's revenues, and sales to the Company's five
most significant customers in the aggregate accounted for 61.7% of revenues. The
Company expects that sales of its products to a limited number of customers will
continue to account for a high percentage of its revenues in future periods. The
Company also expects that some of its key customers in future periods may be
different from its key customers in prior periods, and there can be no assurance
that the Company will be able to replace revenues generated by former key
customers in prior periods with revenues generated from existing or new
customers in future periods.
Due primarily to the Company's inability to meet requested delivery times
and quantity requirements, QUALCOMM has determined to produce internally certain
components and to look to other sources for other components to replace all
products currently purchased from the Company. Accordingly, the Company expects
sales to QUALCOMM to cease in May 1997. Further, the Company believes that
certain prospective
5
<PAGE> 7
original equipment manufacturer ("OEM") customers have been reluctant to use the
Company's GaAs HBT products in their devices due to the Company's capacity
constraints with respect to such products. Although TRW is in the process of
expanding its manufacturing capacity and the Company is constructing its own
GaAs HBT wafer fabrication facility, the Company remains and will remain subject
to capacity constraints with respect to GaAs HBT products. As a result, there
can be no assurance that other customers will not seek alternate sources for
certain high volume requirements. The Company is attempting to replace sales
previously made to QUALCOMM with sales to other customers. A failure to replace
sales previously made to QUALCOMM would have a material adverse effect on the
Company's business, financial conditions and results of operations.
The Company has significantly increased its expense levels to support its
recent growth and intends to continue to make significant investments in
research and development, capital equipment and customer service and support
capabilities worldwide, especially as it constructs and begins to operate its
own wafer fabrication facility. These investments will make it difficult for the
Company to reduce its operating expenses in a particular period if the Company's
revenue goals for that period are not met. There can be no assurance that the
Company will achieve a rate of growth or level of sales in any future period
commensurate with its increased level of operating expenses and the failure to
do so would have a material adverse effect on the Company's business, financial
conditions and results of operations.
Due to the foregoing factors, as well as other unanticipated factors, it is
likely that in some future quarter the Company's operating results will be below
the expectations of public market analysts or investors. In such event, the
price of the Company's Common Stock would be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DEPENDENCE ON TRW
The Company believes TRW is one of only two suppliers of commercial
quantities of GaAs HBT wafers. The Company's GaAs HBT products are fabricated
solely by TRW using TRW's proprietary technologies. For the nine months ended
December 31, 1996, sales of GaAs HBT products constituted approximately 86% of
the Company's revenues. The Company has entered into a supply contract with TRW
pursuant to which TRW is required to deliver to the Company certain minimum
quantities of GaAs HBT wafers until December 31, 2000, which quantities decline
significantly from current levels beginning in 1999. The Company currently is
purchasing from TRW a number of wafers that approximates the minimum number of
wafers required to be delivered by TRW to the Company under the supply contract.
However, the Company believes that in future periods it may purchase from TRW a
quantity of wafers in excess of the minimum quantity of wafers required to be
supplied by TRW under such contract. Although TRW has to date allocated to the
Company a substantial portion of TRW's commercial GaAs HBT wafer production, the
Company nevertheless has experienced significant difficulty obtaining sufficient
production capacity to meet demand for certain of its GaAs HBT products.
Further, although the Company plans to begin fabricating its own GaAs HBT wafers
in commercial quantities in the second half of 1998 using technologies licensed
from TRW, the Company expects to remain dependent upon TRW to satisfy the
Company's GaAs HBT production requirements in the future. The fabrication of
GaAs HBT wafers involves highly complex and unique processes, and a failure by
TRW to manufacture and deliver wafers on a timely basis, to maintain acceptable
manufacturing yields, to continue to allocate to the Company a substantial
portion of TRW's commercial wafer production or to successfully defend against
any claim that its GaAs HBT process infringes on third parties' intellectual
property rights would have a material adverse effect on the Company's business,
financial condition and results of operations.
TRW currently is in the process of expanding its fabrication facility to
increase its capacity to fabricate GaAs HBT wafers. Technological, personnel and
manufacturing changes and new equipment purchases associated with TRW's
expansion, among other factors, may prevent or delay an increase in the number
of GaAs HBT wafers manufactured for the Company by TRW. Accordingly, there can
be no assurance that TRW will be able successfully to expand its capacity in a
manner that achieves acceptable manufacturing yields, cost and quality. Further,
the expansion of TRW's fabrication facility is subject to a determination by TRW
to postpone, downsize or terminate such expansion plans. A decision by TRW to
postpone, downsize or
6
<PAGE> 8
terminate its expansion plans, a delay in such expansion for any reason or a
failure to achieve acceptable manufacturing yields would have a material adverse
effect on the Company's business, financial condition and results of operations.
Pursuant to a license agreement between TRW and the Company, TRW has
granted to the Company certain licenses to TRW's GaAs HBT and molecular beam
epitaxial ("MBE") processes used to produce certain GaAs HBT products for
commercial wireless communications applications that operate on signals having a
frequency of less than 10 GHz. The Company plans to construct a fabrication
facility and begin manufacturing its own GaAs HBT products in commercial
quantities in the second half of 1998 using processes covered by such licenses.
Such licenses are granted without representation or warranty as to validity or
noninfringement and may be terminated by TRW if the Company's facility is not
operational, based on certain specified parameters, by December 31, 1998.
Further, certain exclusive licenses for GaAs HBT processes that may be used to
produce products for wireless communications applications may be made entirely
non-exclusive by TRW if the Company fails to meet certain revenue goals. A
decision by TRW to terminate such license agreement or to make the rights
granted therein non-exclusive or a determination that its GaAs HBT processes
infringe a third party's intellectual property rights would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Strategic Relationship with TRW" and "Certain
Transactions -- TRW."
CONSTRUCTION AND OPERATION OF FABRICATION FACILITY
The Company currently is in the process of constructing an approximately
50,000 square foot wafer fabrication facility at which the Company intends to
fabricate four-inch GaAs HBT wafers using technologies licensed from TRW. See
"Business -- Facilities." The Company expects to be able to manufacture GaAs HBT
products at a cost that is less than the price paid by the Company to TRW for
such products; however, there is no assurance that the Company will be able to
do so. Further, to date, the Company has never fabricated any semiconductor
wafers of any kind. Replicating at the Company's planned wafer fabrication
facility the precise manufacturing processes used by TRW at its GaAs HBT
facility will be labor intensive, technically challenging, time consuming and
logistically complex. It will require significant investments of labor and
capital by both the Company and TRW. The transfer process is scheduled to occur
over a two-year period and the major steps will include facility design,
equipment and material specifications and sourcing, clean room certification,
equipment installation and the hiring and training of skilled production
personnel. Once the clean room is operational, the Company must transfer TRW's
manufacturing process and run test wafers until the manufacturing process is
adjusted to the point where commercial production is feasible. Before production
can commence, wafers must be qualified by individual customers on a
component-by-component basis, even for products previously qualified by TRW at
its facility. While many of the technology transfer steps must occur
concurrently, other steps must occur after the achievement of certain milestones
and thus the delay in one or more steps could materially delay the entire
technology transfer process. As a result, there can be no assurance that the
Company will be able to transfer TRW's GaAs HBT processes successfully or in a
timely manner or that the Company will be able successfully to produce GaAs HBT
wafers in a manner that achieves acceptable manufacturing yields or allows the
Company to offer its GaAs HBT products at competitive prices. The failure or any
delay by the Company to adapt successfully the technologies employed by TRW or
to fabricate GaAs HBT wafers at acceptable manufacturing yields, costs and
quality and in volumes sufficient to satisfy customer demands would have a
material adverse effect on the Company's business, financial condition and
results of operations.
Although TRW has agreed to provide the Company with technical assistance,
training and instruction to facilitate this technology transfer, the ability of
the Company to complete a successful technology transfer from TRW will be
subject to numerous risks. In particular, TRW fabricates three-inch MBE wafer
starting material and three-inch GaAs HBT wafers at its facility, while the
Company will fabricate four-inch wafers at its facility. Accordingly, in
addition to replicating TRW's complex proprietary manufacturing processes, the
Company must be able to adapt such processes from three-inch wafers to four-inch
wafers, which involves a number of technical hurdles including the development
of new back-side wafer thinning processes for the
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<PAGE> 9
larger wafers. These processes have not yet been developed and no assurance can
be given that such development will be successful.
The Company currently believes its fabrication facility will be operating
at commercial levels in the second half of 1998. Until such time, the Company
will purchase all or substantially all of its GaAs HBT products from TRW, which
currently is allocating to the Company a substantial portion of TRW's
manufacturing capacity. The Company believes the risk of losing orders for GaAs
HBT products, particularly from large OEMs who may require significant volumes
of certain products for their wireless devices, will increase significantly
during the second half of 1998 until its fabrication facility has begun
operating at commercial levels. The construction of such facility is subject to
various risks, including inclement weather conditions, unforeseen hazards or
conditions that hinder, delay or increase the cost of development,
unavailability of building materials, unavailability of manufacturing equipment,
construction delays and other conditions beyond the control of the Company.
Accordingly, there can be no assurance that the Company will be able to complete
such construction by the time indicated above. A delay in the completion of such
fabrication facility would have a material adverse effect on the Company's
business, financial condition and results of operations. In this regard, TRW has
the right to terminate the licenses granted to the Company if such facility is
not operational by December 31, 1998. See "-- Dependence on TRW."
The fabrication of GaAs wafers involves precise processes that are highly
complex and unique, that require advanced and costly equipment and that are
being modified continually in an effort to improve yields and product
performance. The Company expects that its customers will continue to establish
demanding specifications for quality, performance and reliability that must be
met by the Company's products. Defects in masks, minute impurities in materials
used, contamination of the manufacturing environment, equipment failure and
small imperfections in the fabrication process can cause a substantial
percentage of wafers to be rejected or numerous die on each wafer to be
nonfunctional. In addition, the more brittle nature of GaAs wafers can result in
higher processing losses relative to traditional silicon-based semiconductor
processes. Moreover, the operation of a wafer fabrication facility requires
significant fixed costs, consisting primarily of occupancy costs, investments in
manufacturing equipment, repair, maintenance and depreciation costs related to
such equipment and labor costs related to manufacturing and process engineering.
There can be no assurance that the Company will have revenue to offset such cost
increases.
ADOPTION OF GAAS HBT COMPONENTS
Commercial applications of GaAs HBT technologies are relatively new, and
certain current and potential customers of the Company may be reluctant to
design wireless systems that incorporate GaAs HBT products because of perceived
risks relating to GaAs HBT technology generally. Such perceived risks include
product reliability, the unfamiliarity of designing systems with GaAs HBT
components as compared with silicon or gallium arsenide metal semiconductor
field effect transistor ("GaAs MESFET") components, novel design requirements,
unfamiliar manufacturing processes and uncertainties about the relative cost
effectiveness of GaAs HBT products compared to high performance silicon-based or
GaAs MESFET integrated circuits. Further, there currently are only two suppliers
of commercial quantities of GaAs HBT wafers. Certain customers may be reluctant
to rely on a small company such as RFMD as a sole supplier of large quantities
of critical GaAs HBT components. For the nine months ended December 31, 1996,
approximately 86% of the Company's revenues was attributable to the sale of GaAs
HBT products, and the Company may remain dependent upon GaAs HBT products to
generate a substantial portion of future revenues. There can be no assurance
that additional OEMs will design the Company's GaAs HBT products into their
respective systems, that the companies that have utilized the Company's GaAs HBT
products will continue to do so in the future or that GaAs HBT integrated
circuit technology will achieve widespread market acceptance. Failure of GaAs
HBT to become widely adopted would have a material adverse effect on the
Company's business, financial condition and results of operations.
MANAGEMENT OF GROWTH
The Company currently is experiencing a period of significant growth that
has placed and will continue to place a significant strain on the Company's
resources. The Company has grown from 67 employees on
8
<PAGE> 10
March 31, 1996 to 112 employees on January 31, 1997. The Company's ability to
manage its growth effectively will require it to implement and improve
operational and financial systems and to expand, train and manage its employee
base. In particular, the Company's prospects depend upon its ability to attract
qualified persons with experience in RF engineering, integrated circuit design,
wireless systems and technical marketing and support. Competition for such
persons is intense, and the number of persons with such experience is limited.
The Company also will be required to manage multiple relationships with various
customers, business partners and other third parties, such as its foundry and
assembly partners. Moreover, the Company will incur significant expenses
associated with its rapid growth and may incur additional unexpected costs
relating to its anticipated expansion, particularly related to its current plan
to build its own wafer fabrication facility. The Company's systems, procedures
or controls may not be adequate to support the Company's operations and Company
management may not be able to achieve the rapid expansion necessary to exploit
potential market opportunities for the Company's products. The Company's future
operating results will also depend on its ability to expand its sales and
marketing and research and development organizations, and expand its
administrative support organization. If the Company is unable to attract
qualified persons or manage growth effectively, the Company's business,
financial condition and results of operations would be materially adversely
affected.
RELATIONSHIP WITH NOKIA
The Company, TRW and Nokia Mobile Phones Ltd. ("Nokia") have agreed in
principle to cooperate to develop and supply Nokia with RFICs that are
manufactured using TRW's GaAs HBT processes. The arrangement contemplates that
the Company and Nokia will negotiate separate agreements to address the
development and supply of each product. Pursuant to the arrangement, the Company
has agreed to provide Nokia with access to certain RFIC technologies and to the
Company's GaAs HBT foundry if and when such facility becomes operational, and
Nokia has agreed to provide the Company with rights to bid for and supply
Nokia's requirements for certain RFICs. The arrangement can be terminated
without penalty by TRW, the Company or Nokia for any reason. The arrangement
does not obligate Nokia to purchase any products from the Company, and there can
be no assurance that Nokia will become or subsequently remain a significant
customer or that the Company's relationship with Nokia will continue. A
termination by Nokia or TRW of this relationship would have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Customers."
LIMITED OPERATING HISTORY AND OPERATING LOSSES
The Company was incorporated in 1991 and was in the development stage prior
to the year ended March 31, 1995. The Company had net losses totalling
approximately $14.4 million from the period of inception to March 31, 1996. As
of December 31, 1996, the Company had an accumulated deficit of approximately
$13.6 million. The Company expects to incur substantial additional costs to
construct a fabrication facility and expand its operations and to design and
develop new products. Although the Company was profitable for the nine months
ended December 31, 1996, there can be no assurance, due to the Company's history
of annual and quarterly operating losses, its planned substantial expansion of
manufacturing capacity, its dependence on third parties and the difficulty of
predicting the demand for its products, among other factors, that the Company
will be able to sustain such profitability. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON THIRD PARTIES
All of the Company's products currently are manufactured by independent
third parties, and the Company expects to continue to rely heavily on
independent third parties in the future. The Company purchases all of its GaAs
HBT products from TRW, which the Company believes is currently one of only two
suppliers of commercial quantities of GaAs HBT wafers. In addition, the Company
uses two independent foundries to manufacture its silicon-based products and two
independent foundries to manufacture its GaAs MESFET products. The foundries
that supply the Company's GaAs MESFET requirements are owned and operated by ITT
Industries, Inc. and TriQuint Semiconductor, Inc. ("TriQuint"), which are
competitors of
9
<PAGE> 11
the Company. Foundry capacity for GaAs products has been difficult to obtain at
times in the past. The Company is and will remain dependent on a small number of
independent foundries to manufacture and deliver its products on a timely basis,
to achieve acceptable manufacturing yields and to offer competitive pricing to
the Company. Accordingly, the failure of such independent foundries to
manufacture and deliver the Company's products on a timely basis, to allocate to
the Company sufficient capacity to meet the Company's requirements, to achieve
acceptable manufacturing yields or to offer competitive pricing to the Company
would have a material adverse effect on the Company's business, financial
condition and results of operations. Further, no assurance can be given that the
Company would be able to locate other foundries to fabricate its products in the
event of a loss of any current source of supply.
The Company uses independent vendors to package all of its integrated
circuits. The Company has encountered packaging quality problems with certain of
such vendors, particularly with regard to GaAs products. There can be no
assurance that the Company will not experience packaging problems in the future.
A delay or reduction in product shipment or reduced assembly yields would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "-- International Sales and Operations" and
"Business -- Manufacturing, Packaging and Testing."
COMPETITION
Competition in the markets for the Company's products is intense. The
Company faces competition from several companies primarily engaged in the
business of designing, manufacturing and selling silicon and GaAs MESFET RFICs,
as well as suppliers of discrete products such as transistors, capacitors and
resistors. The Company also faces competition from companies that have or may
develop GaAs HBT or other new fabrication processes. In addition, many of the
Company's existing and potential OEM customers manufacture or assemble wireless
communications devices and have substantial in-house technological capabilities.
Such OEMs currently may be developing, or may develop in the future, products
that compete directly with the Company's products. A decision by one or more
large OEM customers of the Company to design and manufacture integrated circuits
internally would have a material adverse effect on the Company's business,
financial condition and results of operations. The Company expects competition
in the future to increase. Increased competition could result in decreased
prices for the Company's products, reduced demand for the Company's products and
a reduction in the Company's ability to recover development engineering costs.
Any of these developments would have a material adverse effect on the Company's
business, financial condition and results of operations.
Many of the Company's current and potential customers have entrenched
market positions, substantial internal manufacturing capacity, established
patents, copyrights, trade names, trademarks and intellectual property rights
and substantial technological capabilities. Most of the Company's current and
potential competitors, including ANADIGICS, Inc. ("ANADIGICS"), Motorola Inc.
("Motorola"), NEC Corp. ("NEC"), Philips N.V. ("Philips"), Rockwell
International Corp. ("Rockwell") and TriQuint, have significantly greater
financial, technical, manufacturing and marketing resources than the Company.
There can be no assurance that the Company will be able to compete successfully
with its existing or new competitors. See "Business -- Competition."
RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON DEVELOPMENT AND GROWTH OF WIRELESS
MARKETS
The Company's prospects depend upon continued development and growth of
markets for wireless communications products and services, including cellular
telephony, PCS handsets, wireless LANs, wireless security systems and other
wireless applications. No assurance can be given regarding the rate at which the
markets for such products will develop or the Company's ability to produce
competitive products for such markets as they develop.
The Company supplies RFICs almost exclusively for wireless applications.
The wireless markets currently are characterized by frequent introduction of new
products and services in response to evolving product and process technologies
and consumer demand for greater functionality, lower costs, smaller products and
better performance. Consequently, the Company has experienced a degree of
product design
10
<PAGE> 12
obsolescence. Because the demand of OEMs for improvements in product performance
is expected to increase, the Company believes that its future success will
depend in part upon its ability to continue to improve its product designs and
to develop new products based on emerging wafer fabrication technologies. If a
competing process technology emerges that permits the fabrication of integrated
circuits that are superior to the RFICs fabricated under the existing processes
available to the Company, and if the Company is unable to design successfully
products under such technology or to develop competitive or alternative products
that are economically viable and that can be delivered in sufficient product
quantity to OEMs at acceptable yields, the Company's business, financial
condition and results of operations would be materially and adversely affected.
Competition among the Company's target customers is intense and thus many OEMs
may be reluctant to implement new technologies. Further, in each of the markets
in which the Company competes, prices of established products tend to decline
significantly over time. Developing these enhancements, new designs and
technologies requires significant investments by the Company in research and
development efforts, and there can be no assurance that funds for such
investments will be available when needed on acceptable terms or that such
efforts will be successful. See "Business -- Research and Development."
NEED FOR ADDITIONAL CAPITAL
The Company will require substantial capital to construct its wafer
fabrication facility and to fund its operations and growth. The Company's wafer
fabrication facility is scheduled to be developed in two phases, the first of
which has a budgeted cost of $40 million and the second of which involves an
expansion of production capacity at a budgeted cost of $30 million. The Company
expects to use approximately $15 million of the net proceeds from this offering
to finance a portion of the cost of constructing the first phase of the
fabrication facility, and to finance the remainder of such phase with cash on
hand and previously obtained financing commitments. The Company's future capital
requirements will depend on many factors, including the actual cost of
constructing the new fabrication facility, whether demand for the Company's
products justifies the phased expansion of its facility, the timing and extent
of spending to support product development efforts and expansion of sales and
marketing, the timing of introductions of new products and market acceptance of
the Company's products. The Company expects that it may need to raise additional
equity or debt financing during 1998 to finance a portion of the cost of
constructing the second phase of the fabrication facility. However, there can be
no assurance that additional financing will not be required prior to such time.
There can be no assurance that additional equity or debt financing, if required,
will be available on acceptable terms or at all. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
DEPENDENCE UPON KEY PERSONNEL
The Company's success depends in part upon retaining the services of
certain technical, marketing, sales and management personnel. None of the
Company's employees has an employment agreement with the Company. The loss of
any key personnel would have a material adverse effect on the Company's
business, financial condition and results of operations. Further, the Company's
prospects depend upon its ability to attract qualified personnel for its
operations. The competition for qualified personnel is intense, and the number
of persons with experience, particularly in RF engineering, integrated circuit
design, wireless systems and technical marketing and support, is limited. There
can be no assurance that the Company will be able to attract, assimilate or
retain other skilled personnel in the future. Any inability on the part of the
Company to attract or retain additional key employees or the loss of one or more
of its current key employees would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management."
INTERNATIONAL SALES AND OPERATIONS
Sales to customers located outside the United States accounted for
approximately 44%, 27%, 24% and 36% of total revenues for fiscal 1994, 1995 and
1996 and the nine months ended December 31, 1996, respectively. The Company
expects that revenues derived from international sales will continue to
represent a significant portion of its total revenues. International sales are
subject to a variety of risks, including those
11
<PAGE> 13
arising from currency fluctuations and restrictions, tariffs, trade barriers,
taxes and export license requirements. Because all of the Company's foreign
sales are currently denominated in U.S. dollars, the Company's products become
less price competitive in countries with currencies that are low or are
declining in value against the U.S. dollar. In addition, there can be no
assurance that the Company's international customers will continue to accept
orders denominated in U.S. dollars. If such customers do not continue to accept
orders denominated in U.S. dollars, the Company's reported revenues and earnings
would become more directly subject to foreign exchange fluctuations. See Note 2
of Notes to Financial Statements.
All of the packaging materials used to assemble the Company's integrated
circuits are supplied by, and all of the Company's products are assembled by,
independent circuit assembly vendors, most of which are located in Asia. Due to
its reliance on such foreign suppliers and assemblers, the Company is subject to
the risks of conducting business outside of the United States. These risks
include unexpected changes in, or impositions of, legislative or regulatory
requirements, delays resulting from difficulty in obtaining export licenses,
tariffs and other trade barriers and restrictions, and the burdens of complying
with a variety of foreign laws and other factors beyond the Company's control.
The Company also is subject to general geopolitical risks in connection with its
international operations, such as political, social and economic instability,
potential hostilities and changes in diplomatic and trade or business
relationships. Although the Company has not to date experienced any material
adverse effect on its operations as a result of such regulatory, geopolitical
and other factors, there can be no assurance that such factors will not
adversely affect the Company's operations in the future or require the Company
to modify its current business practices. The Company currently transacts
business with its foreign assemblers in U.S. dollars and consequently the cost
of the Company's packaging components, as well as assembly costs, would increase
in countries with currencies that are increasing in value against the U.S.
dollar. In addition, there can be no assurance that the Company's international
assemblers will continue to accept orders denominated in U.S. dollars. If such
assemblers do not continue to accept orders denominated in U.S. dollars, the
Company's costs would become more directly subject to foreign exchange
fluctuations.
INTELLECTUAL PROPERTY CLAIMS
The Company's success depends in part on its ability to obtain patents,
trademarks and copyrights, maintain trade secret protection and operate its
business without infringing on the proprietary rights of third parties. See
"-- Dependence on TRW."
The Company may be notified in the future that it is infringing patent or
other intellectual property rights of others, although there are no such pending
lawsuits against the Company or notices that the Company is infringing
intellectual property rights of others. No assurance can be given that in the
event of such infringement, licenses could be obtained on commercially
reasonably terms or that litigation will not occur. The failure to obtain
necessary license or other rights or the occurrence of litigation arising out of
such claims would have a material adverse effect on the Company's business,
financial condition and results of operations.
In addition to patent and copyright protection, the Company also relies on
trade secrets, technical know-how and other unpatented proprietary information
relating to its product development and manufacturing activities which it seeks
to protect, in part, by confidentiality agreements with its employees and third
parties. There can be no assurance that these agreements will not be breached,
that the Company would have adequate remedies for any breach or that the
Company's trade secrets and proprietary know-how will not otherwise become known
or independently discovered by others. See "Business -- Intellectual Property."
GOVERNMENT REGULATION OF COMMUNICATIONS INDUSTRY
The sale of products by customers who purchase the Company's products may
be materially and adversely affected by governmental regulatory policies, the
imposition of common carrier tariffs or taxation of telecommunications services.
Further, national governments control the allocation and use of radio
frequencies and may implement regulations or take other action that directly or
indirectly has a material adverse effect on the Company's business, financial
condition or results of operations.
12
<PAGE> 14
CONCENTRATION OF STOCK OWNERSHIP
Upon consummation of this offering, directors and executive officers of the
Company and their affiliates (including TRW) collectively will beneficially own
approximately 53.9% of the Common Stock (52.6% if the Underwriters'
over-allotment option is exercised in full), and TRW, the Company's largest
shareholder, will beneficially own approximately 31.1% of the Common Stock
(30.3% if the Underwriters' over-allotment option is exercised in full). As a
result, these shareholders will be able to exercise significant influence over
all matters requiring shareholder approval, including the election of directors
and approval of significant corporate transactions. TRW has granted David A.
Norbury, President and Chief Executive Officer of the Company, an irrevocable
proxy to vote 2,683,930 of the 4,621,487 shares of Common Stock beneficially
owned by TRW. Such proxy will expire if and when the Company's fabrication
facility becomes operational. See "Certain Transactions -- TRW -- Restricted
Stock Agreement" and "Principal and Selling Shareholders."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active public market for the
Common Stock will develop or be sustained after this offering. The initial
public offering price will be determined by negotiation between the Company, the
Selling Shareholders and the representatives of the Underwriters. See
"Underwriting."
The trading price of the Company's Common Stock could be subject to wide
fluctuations in response to quarterly variations in operating results, changes
in financial estimates by securities analysts, announcements of technological
innovations or new products by the Company or its competitors, or other events
or factors. In addition, the stock market has experienced extreme price and
volume fluctuations that have particularly affected the market prices for many
high technology companies. These broad market fluctuations may materially and
adversely affect the market price of the Company's Common Stock.
SUBSTANTIAL DILUTION
Purchasers of the Common Stock offered hereby will incur immediate and
substantial dilution of approximately $8.48 per share in the net tangible book
value per share of the Common Stock from the initial public offering price. See
"Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of the Company's Common Stock in the public market after this
offering could adversely affect the market price of the Company's Common Stock.
Following this offering, there will be 14,852,441 shares of Common Stock
outstanding, of which the 2,537,000 shares offered hereby will be freely
tradeable without restriction under the Securities Act of 1933, as amended (the
"Securities Act"), except for shares acquired in this offering by "affiliates"
of the Company, as that term is defined in Rule 144 under the Securities Act.
Upon expiration of the lock-up agreements 180 days after the date of this
Prospectus, approximately 9,631,511 additional shares of Common Stock will
become eligible for sale in the public market, subject to the provisions of Rule
144 or Rule 701. Such lock-up agreements are subject to release at the
discretion of the representatives of the Underwriters. Moreover, the Company
intends to file registration statements under the Securities Act covering shares
of Common Stock reserved for issuance under stock option and stock purchase
plans, including up to 463,567 shares of Common Stock that were or may be issued
upon the exercise of stock options during 1997. Certain of the Company's
shareholders have the right to cause the Company to register their shares under
the Securities Act and to include their shares in any future registration of
securities effected by the Company under the Securities Act. See "Shares
Eligible For Future Sale" and "Description of Capital Stock -- Registration
Rights."
ANTI-TAKEOVER AND CERTAIN OTHER PROVISIONS
Certain provisions of the Company's articles of incorporation and bylaws
could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from attempting to acquire, control of the
Company. These provisions include the ability of the Board of Directors to
designate the rights and
13
<PAGE> 15
preferences of Preferred Stock and issue such shares without shareholder
approval and the requirement of supermajority shareholder approval of certain
transactions with parties affiliated with the Company. Such provisions could
limit the price that certain investors might be willing to pay in the future for
shares of the Company's Common Stock. See "Description of Capital Stock."
Pursuant to an agreement among the Company, TRW and certain other
shareholders of the Company, TRW has agreed to refrain from taking certain
actions affecting the control of the Company for five years following this
offering. This agreement further provides, however, that in the event of an
offer by a third party to acquire all of the outstanding shares of the Company,
TRW will have a 30-day period in which to make a counterproposal on the same or
better terms and to have such proposal submitted to the Company's shareholders.
This right could have the effect of discouraging a third party from offering to
acquire all of the outstanding shares of the Company. See "Certain
Transactions -- TRW -- Standstill Agreement." In addition, under the terms of
its credit facility with Silicon Valley Bank, the Company is prohibited from
entering into mergers or acquisitions, undergoing a material change in ownership
or making dispositions of assets other than in the ordinary course of business.
14
<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered by it hereby are estimated to be approximately $27.3
million assuming an initial public offering price of $12.00 per share and after
deducting underwriting discount and estimated offering expenses (approximately
$31.5 million if the Underwriters' over-allotment option is exercised in full).
The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Shareholders.
The Company intends to use approximately $15 million of the net proceeds to
the Company to finance a portion of the cost of constructing the first phase of
a new GaAs HBT wafer fabrication facility that will be located adjacent to the
Company's existing facility in Greensboro, North Carolina. The wafer fabrication
facility is scheduled to be developed in two phases, the first of which has a
budgeted cost of $40 million and the second of which involves an expansion of
production capacity at a budgeted cost of $30 million. The Company expects to
finance the remainder of the first phase with cash on hand and previously
obtained financing commitments. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
The Company intends to use a portion of the net proceeds to the Company to
repay all outstanding indebtedness under its credit facility with Silicon Valley
Bank, which indebtedness consists of approximately $350,000 outstanding at
February 28, 1997 under a revolving line of credit that bears interest at prime
plus 0.75% and matures in December 1997 and approximately $350,000 outstanding
at February 28, 1997 for separate term loans made under an equipment line of
credit that bear interest at prime plus 1.5% and mature 36 months from the date
of each loan.
The remaining net proceeds will be used for working capital and general
corporate purposes, which may include expansion of the Company's facilities.
Pending application of net proceeds as set forth above, the Company intends to
invest the net proceeds in short-term, investment grade debt securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying any cash dividends in the foreseeable
future. The Company intends to retain its future earnings, if any, to fund the
development and growth of its business. Any future decision concerning the
payment of dividends on the Common Stock will depend upon the earnings,
financial condition and capital requirements of the Company, as well as such
other factors deemed relevant by the Board of Directors, in its sole discretion.
Under the terms of its credit facility with Silicon Valley Bank, the Company is
prohibited from paying any dividends or making any other distributions or
payments on account, or in redemption, retirement or purchase, of any of its
capital stock. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
15
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996 on an actual, pro forma and pro forma as adjusted basis. The
pro forma capitalization gives effect to the conversion of outstanding shares of
Preferred Stock and the TRW Convertible Note into an aggregate of 9,065,431
shares of Common Stock and the pro forma as adjusted capitalization gives effect
to such conversion and the sale of 2,500,000 shares of Common Stock by the
Company in this offering and the application of the estimated net proceeds
therefrom, after deducting the underwriting discount and estimated offering
expenses. See "Use of Proceeds." This information should be read in conjunction
with the Company's Financial Statements and the Notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt(1)......................................... $ 10,809 $ 657 $ 499
Redeemable convertible preferred stock(2)................. 28,257 -- --
Shareholders' (deficiency) equity:
Preferred Stock, no par value; 1,200,000 shares
authorized and none issued and outstanding, actual;
5,000,000 shares authorized and none issued and
outstanding, pro forma and pro forma as adjusted..... -- -- --
Common Stock, no par value; 15,000,000 shares
authorized, 3,268,930 shares issued and outstanding,
actual, and 12,334,361 shares issued and outstanding,
pro forma; 50,000,000 shares authorized and
14,834,361 shares issued and outstanding, pro forma
as adjusted.......................................... 2,960 41,217 68,517
Additional paid-in capital................................ 550 702 702
Deferred compensation(3).................................. (290) (290) (290)
Accumulated deficit....................................... (13,577) (13,577) (13,577)
-------- -------- -------
Total shareholders' (deficiency) equity(4)........... (10,357) 28,052 55,352
-------- -------- -------
Total capitalization............................ $ 28,709 $ 28,709 $55,851
======== ======== =======
</TABLE>
- ---------------
(1) Includes the TRW Convertible Note in the principal amount of $10 million and
$152,000 of accrued interest that will be forfeited upon the conversion of
the TRW Convertible Note into 1,111,111 shares of Common Stock upon
consummation of this offering.
(2) Consists of 7,954,320 shares of Preferred Stock that will automatically
convert into 7,954,320 shares of Common Stock upon the consummation of this
offering.
(3) For financial reporting purposes, the Company records deferred compensation
expense with respect to stock options granted at exercise prices below the
deemed fair market value of the underlying Common Stock in an amount equal
to the difference between the exercise price of such options and the deemed
fair market value of the underlying Common Stock at the time of grant.
Deferred compensation expense is amortized ratably over the vesting period
of the related options. See Notes 2 and 10 of Notes to Financial
Statements.
(4) Excludes (i) 1,026,776 shares of Common Stock issuable upon exercise of
options outstanding at March 31, 1997 at a weighted average price of
approximately $2.06 per share, (ii) 1,000,000 shares of Common Stock
issuable upon the exercise of the TRW Warrant at a price of $10.00 per
share and (iii) 149,591 shares of Common Stock issuable upon the exercise
of the Lender Warrants at a weighted average price of approximately $6.48
per share. See "Management -- Stock Option Plans," "Certain Transactions"
and "Description of Capital Stock -- Warrants."
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<PAGE> 18
DILUTION
At December 31, 1996, the pro forma net tangible book value of the Company
was approximately $24.9 million or $2.01 per share. "Pro forma net tangible book
value" per share is equal to the Company's total tangible assets (before the
offering) less total liabilities divided by the total number of shares of Common
Stock outstanding on a pro forma basis, giving effect to the conversion of all
outstanding shares of Preferred Stock and the TRW Convertible Note. After giving
effect to the sale of the 2,500,000 shares of Common Stock offered by the
Company hereby at an assumed initial public offering price of $12.00 per share
and after deducting the underwriting discount and estimated offering expenses,
the pro forma net tangible book value of the Company at December 31, 1996 would
have been $52.2 million or $3.52 per share. This represents an immediate
increase in the pro forma net tangible book value of $1.51 per share to existing
shareholders and an immediate dilution of $8.48 per share to purchasers in this
offering. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share..................... $12.00
Pro forma tangible book value per share as of December 31,
1996................................................... $2.01
Increase per share attributable to new investors.......... 1.51
Pro forma net tangible book value per share after this
offering.................................................. 3.52
------
Dilution per share to new investors......................... $ 8.48
======
</TABLE>
The following table summarizes, as of December 31, 1996, after giving
effect to this offering and the conversion of all outstanding shares of
Preferred Stock and the TRW Convertible Note, the number of shares of Common
Stock purchased from the Company, the total consideration paid to the Company
and the average price per share paid by the existing shareholders and by the new
investors purchasing shares of Common Stock in this offering based on an assumed
initial public offering price of $12.00 per share, but before deducting the
underwriting discount and estimated offering expenses.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders...... 12,334,361 83% $41,217,000 58% $ 3.34
New investors.............. 2,500,000 17 30,000,000 42 12.00
---------- --- ----------- ---
Total............ 14,834,361 100% $71,217,000 100%
========== === =========== ===
</TABLE>
The foregoing tables assume no exercise of the Underwriters' over-allotment
option or outstanding stock options or warrants to purchase Common Stock. There
are (i) 1,026,776 shares of Common Stock issuable upon exercise of options
outstanding at March 31, 1997 exercisable at a weighted average price of
approximately $2.06 share, (ii) 1,000,000 shares of Common Stock issuable upon
exercise of the TRW Warrant exercisable at a price of $10.00 per share and (iii)
149,591 shares of Common Stock issuable upon exercise of the Lender Warrants
exercisable at a weighted average price of approximately $6.48 per share. To the
extent that any of these options or warrants are exercised in the future, there
will be substantial further dilution to new investors. See "Management -- Stock
Option Plans," "Certain Transactions" and "Description of Capital
Stock -- Warrants."
17
<PAGE> 19
SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Financial Statements and Notes thereto included
elsewhere in this Prospectus. The statement of operations data for the years
ended March 31, 1994, 1995 and 1996 and the nine months ended December 31, 1995
and 1996, and the selected balance sheet data as of March 31, 1994, March 31,
1995, March 31, 1996 and December 31, 1996, are derived from, and are qualified
by reference to, the Financial Statements and Notes thereto included elsewhere
in this Prospectus. The statement of operations data for the period of inception
to March 31, 1992 and the year ended March 31, 1993, and the selected balance
sheet data as of December 31, 1991 and March 31, 1993, are derived from the
historical financial statements of the Company, which are not included herein.
Operating results for the nine months ended December 31, 1996 are not
necessarily indicative of the results to be expected for the entire fiscal year
ended March 31, 1997.
<TABLE>
<CAPTION>
PERIOD OF
INCEPTION
(FEBRUARY 27,
1991) NINE MONTHS
TO YEAR ENDED MARCH 31,(1) ENDED DECEMBER 31,
MARCH 31, ------------------------------------- ---------------------
1992 1993 1994 1995 1996 1995 1996
------------- ------- ------- ------- ------- ----------- -------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Product sales...................... $ -- $ -- $ 574 $ 1,254 $ 8,212 $ 5,061 $19,081
Engineering revenue................ 44 256 412 434 1,303 758 573
----- ------- ------- ------- ------- ------- -------
Total revenues.............. 44 256 986 1,688 9,515 5,819 19,654
Cost and expenses:
Cost of goods sold................. 30 59 724 1,215 7,471 4,159 10,973
Research and development........... 64 1,216 1,553 2,836 4,245 2,825 4,379
Marketing and selling.............. 67 400 808 1,180 1,817 1,278 2,588
General and administrative......... 180 498 725 620 1,226 640 960
----- ------- ------- ------- ------- ------- -------
Total costs and expenses.... 341 2,173 3,810 5,851 14,759 8,902 18,900
----- ------- ------- ------- ------- ------- -------
(Loss) income from operations........ (297) (1,917) (2,824) (4,163) (5,244) (3,083) 754
Interest expense..................... (12) (11) (62) (27) (81) (54) (234)
Interest income...................... 12 16 40 68 137 106 343
----- ------- ------- ------- ------- ------- -------
(Loss) income before income taxes.... (297) (1,912) (2,846) (4,122) (5,188) (3,031) 863
Income tax expense................... -- -- -- -- -- -- 75
----- ------- ------- ------- ------- ------- -------
Net (loss) income.................... $(297) $(1,912) $(2,846) $(4,122) $(5,188) $(3,031) $ 788
===== ======= ======= ======= ======= ======= =======
Pro forma net (loss) income per
share(2)........................... $(.05) $ (.33) $ (.42) $ (.41) $ (.43) $ (.27) $ .07
Pro forma weighted average shares
outstanding(2)..................... 5,726 5,726 6,800 10,040 12,166 11,265 13,379
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, -----------------------------------
1991(3) 1993 1994 1995 1996 DECEMBER 31, 1996
------------ ------ ------ ------ ------- -----------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......... $ 14 $1,110 $3,341 $2,223 $ 6,638 $ 3,321
Working capital................... (195) 838 3,443 2,686 7,912 7,092
Cash restricted for capital
additions....................... -- -- -- -- -- 14,932
Total assets...................... 92 1,643 4,519 4,343 13,192 35,195
Long-term debt.................... -- -- -- 59 153 10,809
Shareholders' (deficiency)
equity.......................... (117) 1,049 (5,047) (9,169) (14,357) (10,357)
</TABLE>
- ---------------
(1) The fiscal year ended March 31, 1993 was a 53 week year, and each of the
fiscal years ended March 31, 1994, March 31, 1995 and March 31, 1996 was a
52 week year.
(2) Pro forma data give effect to the conversion of outstanding shares of
Preferred Stock and the TRW Convertible Note upon the consummation of this
offering.
(3) The Company changed its fiscal year-end from December 31 to a 52 or 53 week
fiscal year ending on the Saturday closest to March 31 of each year,
effective for the year ended March 31, 1993.
18
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the Company's Financial Statements and Notes
thereto included elsewhere in this Prospectus. Except for the historical
information contained herein, the discussion in this Prospectus contains certain
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions. The
cautionary statements made in this Prospectus should be read as being applicable
to all related forward-looking statements wherever they appear in this
Prospectus. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include those discussed in "Risk Factors," as well as those discussed elsewhere
herein.
OVERVIEW
The Company designs, develops and markets RFICs for wireless communications
applications. These applications include cellular and personal communication
services ("PCS"), cordless telephony, wireless local area networks ("wireless
LANs"), wireless local loop ("WLL"), industrial radios, wireless security and
remote meter reading. To date, a significant portion of the Company's revenues
has been attributable to the sale of RFICs used in cellular telephones and PCS
handsets. The Company offers products fabricated under three distinct process
technologies: GaAs HBT, GaAs MESFET and silicon bipolar transistor. For fiscal
1996 and the nine months ended December 31, 1996, approximately 58% and 86%,
respectively, of the Company's revenues were derived from the sale of GaAs HBT
products. The Company may continue to rely heavily on sales of GaAs HBT products
in future periods.
Prior to fiscal 1995, the Company was in the development stage. After
emergence from the development stage, the Company has experienced a significant
increase in product revenues. In February 1995, the Company and QUALCOMM entered
into a development contract for certain RFICs to be used by QUALCOMM in its CDMA
handsets. During fiscal 1996, the Company began shipping products developed
under that contract in commercial quantities, and revenues increased
significantly. Due primarily to the Company's inability to meet requested
delivery times and quantity requirements, QUALCOMM has determined to produce
internally certain components and to look to other sources for certain other
components to replace all products currently purchased from the Company.
Accordingly, the Company expects sales to QUALCOMM to cease in May 1997.
Although the Company is attempting to replace the sales previously made to
QUALCOMM with sales to other customers, no assurance can be given that it will
be able to do so. Further, the Company's ability to supply GaAs HBT components
remains subject to capacity constraints, and the relatively lengthy design cycle
for custom RFICs makes it difficult to quickly commence high volume sales to new
customers. As a result, the Company currently does not expect growth in
revenues, if any, to be significant over the next two fiscal quarters.
Product revenue is recognized when shipped, and all product sales are
denominated in U.S. dollars. The Company derives its revenues from the sale of
standard and custom-designed products. Custom-designed products are usually
developed for volume production orders from large OEMs and normally are
manufactured on an exclusive basis for the originating customer for a negotiated
period of time. Once exclusivity periods expire, the Company attempts to migrate
custom products rapidly into the standard product category in order to broaden
its customer base and leverage its design and product development expenditures.
The Company currently derives a majority of its revenues from the sale of
custom-designed products. However, the Company's strategy is to maintain a
balanced product mix between standard and custom-designed products so as to
reduce the Company's reliance on individual customers and product orders.
A relatively limited number of customers historically have accounted for a
significant portion of the Company's revenues, and the composition of the
Company's most significant customers has varied significantly from period to
period. For the nine months ended December 31, 1996, sales to QUALCOMM and
Samsung accounted for 38.9% and 20.3%, respectively, of revenues, and sales to
the Company's five most significant customers in the aggregate accounted for
76.2% of revenues. In fiscal 1996, sales to QUALCOMM and Cincinnati Microwave
accounted for 31.3% and 11.9% of revenues, respectively, and sales to the
19
<PAGE> 21
Company's five most significant customers in the aggregate accounted for 55% of
revenues. Further, only two of the Company's five most significant customers for
fiscal 1996 were among the Company's five most significant customers for the
nine months ended December 31, 1996. Because the markets for wireless devices
are characterized by the presence of a relatively small number of large OEMs
that place high-volume orders, the Company expects that sales of its products to
a limited number of customers will continue to account for a high percentage of
its revenues in the future and that the composition of the Company's most
significant customers will continue to change significantly from period to
period.
The Company currently uses independent foundries to manufacture and
assemble all of its RFICs. The Company generally contracts for the fabrication
of wafers and the assembly and packaging of circuits at negotiated prices
pursuant to purchase orders or short-term contracts. Substantially all of the
Company's integrated circuits are assembled by vendors located in Asia, and all
assembly contracts are denominated in U.S. dollars. All of the Company's final
products are tested in the Company's facilities in Greensboro, North Carolina.
The Company historically has experienced significant fluctuations in gross
profit margins. For the fiscal years ended March 31, 1995 and March 31, 1996 and
for the nine months ended December 31, 1996, the Company's gross profit margins
were approximately 28.0%, 21.5% and 44.2%, respectively. The Company believes
that its gross profit margins have been significantly affected by manufacturing,
assembly and test yields. In particular, in fiscal 1996, the Company experienced
poor manufacturing, assembly and test yields during the initial stage of
developing a CDMA chipset for QUALCOMM. The Company believes the poor yields
related to the development of such chipset were attributable to the fact that
such chipset was used in one of the first CDMA phones designed for commercial
production, which caused several unexpected changes in product specifications
during development and the use of very precise specification requirements for
final products. Further, QUALCOMM was the first large OEM to order from the
Company significant volumes of RFICs, and the related increase in production
volumes initially resulted in an unacceptable amount of product scrap. Although
the Company believes it has learned how to better control product yields for new
products, there can be no assurance that future operating results will not be
affected by low manufacturing, assembly and test yields. Further, the Company
sells products in intensely competitive markets, and the Company believes that
downward pressure on average selling prices will occur in the future.
RESULTS OF OPERATIONS
The following table sets forth the statement of operations data of the
Company expressed as a percentage of total revenues for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
------------------------- --------------
1994 1995 1996 1995 1996
------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues............................... 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of goods sold................... 73.4 72.0 78.5 71.5 55.8
Research and development............. 157.5 168.0 44.6 48.5 22.3
Marketing and selling................ 81.9 69.9 19.1 22.0 13.2
General and administrative........... 73.5 36.7 12.9 11.0 4.9
------ ------ ----- ----- -----
Total costs and expenses..... 386.3 346.6 155.1 153.0 96.2
(Loss) income from operations.......... (286.3) (246.6) (55.1) (53.0) 3.8
Other income (expense), net............ (2.2) 2.4 0.6 0.9 0.6
------ ------ ----- ----- -----
(Loss) income before income taxes...... (288.5) (244.2) (54.5) (52.1) 4.4
Income tax expense..................... 0.0 0.0 0.0 0.0 (0.4)
------ ------ ----- ----- -----
Net (loss) income...................... (288.5)% (244.2)% (54.5)% (52.1)% 4.0%
====== ====== ===== ===== =====
</TABLE>
20
<PAGE> 22
Nine Months Ended December 31, 1996 Compared to Nine Months Ended December 31,
1995
Revenues. Revenues increased 238% from $5.8 million for the nine months
ended December 31, 1995 to $19.7 million for the nine months ended December 31,
1996. The increase primarily reflected an overall increase in the volume of
products shipped to existing and new customers, primarily in the cellular and
PCS handset markets. The Company sells products in intensely competitive
markets, and the Company believes that downward pressure on average selling
prices will occur in the future. For the nine months ended December 31, 1995 and
December 31, 1996, a significant portion of the Company's revenues was
attributable to sales of RFICs used in cellular and PCS handsets, and the
Company expects this trend to continue in the future. In addition, for the nine
months ended December 31, 1996, approximately 86% of the Company's revenues was
attributable to the sale of GaAs HBT products, and the Company may remain
dependent upon GaAs HBT products to generate a substantial portion of its future
revenues. Engineering revenues accounted for 13.0% of revenues for the nine
months ended December 31, 1995 compared to 2.9% of revenues for the nine months
ended December 31, 1996. For the nine months ended December 31, 1996, sales to
QUALCOMM and Samsung accounted for 38.9% and 20.3%, respectively, of revenues.
Due primarily to the Company's inability to meet QUALCOMM's requested delivery
times and quantity requirements, QUALCOMM has determined to produce internally
certain components and to look to other sources for other components to replace
all products currently purchased from the Company. Accordingly, the Company
expects sales to QUALCOMM to cease in May 1997.
Gross profit. Gross profit margin increased from 28.5% for the nine months
ended December 31, 1995 to 44.2% for the nine months ended December 31, 1996.
The increase was primarily attributable to an increase in production volumes
during the nine months ended December 31, 1996, a reduction in average wafer
costs primarily attributable to quantity discounts, and improvements in
manufacturing, assembly and test yields, which reduced scrap and lowered the per
unit cost of goods sold. The Company also experienced favorable product sales
mix and pricing for the nine months ended December 31, 1996.
Research and development. Research and development expenses increased
57.1% from $2.8 million for the nine months ended December 31, 1995 to $4.4
million for the nine months ended December 31, 1996. The increase was primarily
attributable to increased salaries and benefits related to increased headcount
and spending on development mask sets, wafers and prototype assembly. As a
result of revenue growth, research and development expenses as a percentage of
revenues decreased from 48.5% for the nine months ended December 31, 1995 to
22.3% for the nine months ended December 31, 1996.
General and administrative. General and administrative expenses increased
50.3% from $640,000 for the nine months ended December 31, 1995 to $960,000 for
the nine months ended December 31, 1996. The increase was attributable primarily
to increased salaries and benefits related to headcount increases. General and
administrative expenses as a percentage of revenues decreased from 11.0% for the
nine months ended December 31, 1995 to 4.9% for the nine months ended December
31, 1996.
Marketing and selling. Marketing and selling expenses increased 100.0%
from $1.3 million for the nine months ended December 31, 1995 to $2.6 million
for the nine months ended December 31, 1996. The increase was primarily
attributable to increased headcount, commissions and promotional activities.
Marketing and selling expenses as a percentage of revenues decreased from 22.0%
for the nine months ended December 31, 1995 to 13.2% for the nine months ended
December 31, 1996.
Other income (expense), net. Other income (expense), net increased from
$52,000 for the nine months ended December 31, 1995 to $109,000 for the nine
months ended December 31, 1996. The increase was principally attributable to
higher interest income earned on higher average cash balances during the nine
months ended December 31, 1996.
Income tax expense. The effective tax rate for the nine months ended
December 31, 1996 was 8.7%, which is less than the federal and state statutory
rate of 40% due to the use of net operating loss carryforwards. The Company did
not provide for income taxes in the nine months ended December 31, 1995 as a
result of the Company's expectation that it would incur a loss for the complete
fiscal year.
21
<PAGE> 23
Fiscal 1996 Compared to Fiscal 1995
Revenues. Revenues increased 459% from $1.7 million for the year ended
March 31, 1995 to $9.5 million for the year ended March 31, 1996. The increase
in total revenues for the year ended March 31, 1996 was primarily due to an
increase in volume principally related to increased product shipments to OEMs in
the cellular and cordless telephones, PCS and industrial radio markets. For the
year ended March 31, 1996, sales to QUALCOMM and Cincinnati Microwave accounted
for 31.3% and 11.9%, respectively, of revenues. Engineering revenues as a
percentage of revenues were 13.7% for the year ended March 31, 1996 compared to
25.7% for the year ended March 31, 1995.
Gross profit. Gross profit margin decreased from 28.1% for the year ended
March 31, 1995 to 21.5% for the year ended March 31, 1996. This decrease was
primarily attributable to poor manufacturing, assembly and test yields primarily
associated with custom-designed products developed for QUALCOMM, which was the
first high volume OEM to order significant quantities of RFICs from the Company.
Research and development. Research and development expenses increased from
$2.8 million for the year ended March 31, 1995 to $4.2 million for the year
ended March 31, 1996. The increase was attributable primarily to an increase in
salaries related to increased headcount and an increase in expenditures on
development mask sets, wafers and prototype assembly related to increased
developmental activities and development contracts with QUALCOMM and other
customers. Research and development expenses decreased as a percentage of total
revenues from 168% for the year ended March 31, 1995 to 44.6% for the year ended
March 31, 1996.
General and administrative. General and administrative expenses increased
93.5% from $620,000 for the year ended March 31, 1995 to $1.2 million for the
year ended March 31, 1996. The increase was attributable primarily to increased
bad debt expense and salaries and benefits related to increased headcount. The
Company reserved $490,000 for bad debts during the year ended March 31, 1996
related to outstanding receivable balances from two specific customers, most of
which was subsequently recovered. General and administrative expenses as a
percentage of revenues decreased from 36.7% for the year ended March 31, 1995 to
12.9% for the year ended March 31, 1996.
Marketing and selling. Marketing and selling expenses increased 50.0% from
$1.2 million for the year ended March 31, 1995 to $1.8 million for the year
ended March 31, 1996. The increase was due primarily to increased salaries and
benefits related to increased headcount along with increased promotional
activities and commissions. Marketing and selling expenses as a percentage of
revenues decreased from 69.9% for the year ended March 31, 1995 to 19.1% for the
year ended March 31, 1996.
Other income (expense), net. Other income (expense), net increased from
$41,000 for the year ended March 31, 1995 to $56,000 for the year ended March
31, 1996. This increase was due primarily to higher interest income for the year
ended March 31, 1996.
Income tax expense. The Company did not provide for income tax expense in
fiscal 1995 or fiscal 1996 because the Company incurred losses for such fiscal
years.
Fiscal 1995 Compared to Fiscal 1994
Revenues. Revenues increased 71.2% from $1.0 million for the year ended
March 31, 1994 to $1.7 million for the year ended March 31, 1995. The Company
was in the development stage prior to the year ended March 31, 1995. Engineering
revenues as a percentage of total revenue decreased from 41.7% for the year
ended March 31, 1994 to 25.7% for the year ended March 31, 1995.
Gross profit. Gross profit margin increased slightly from 26.6% for the
year ended March 31, 1994 to 28% for the year ended March 31, 1995. The
Company's gross profit margins for both years reflected the relatively low
volume of units sold during both years.
Research and development. Research and development expenses increased from
$1.6 million for the year ended March 31, 1994 to $2.8 million for the year
ended March 31, 1995. The increase primarily reflected an increase in headcount
and increased expenditures on development mask sets, wafers and prototype
22
<PAGE> 24
assembly. Research and development expenses as a percentage of total revenues
increased from 158% for the year ended March 31, 1994 to 168% for the year ended
March 31, 1995.
General and administrative. General and administrative expenses decreased
14.5% from $725,000 for the year ended March 31, 1994 to $620,000 for the year
ended March 31, 1995. The decrease was attributable primarily to a reduction in
bad debt expense and legal fees during fiscal 1995. General and administrative
expenses as a percentage of revenues decreased from 73.5% for the year ended
March 31, 1994 to 36.7% for the year ended March 31, 1995.
Marketing and selling. Marketing and selling expenses increased 46.0% from
$808,000 for the year ended March 31, 1994 to $1.2 million for the year ended
March 31, 1995. The increase was due primarily to increased headcount,
promotional activities and commissions. Marketing and selling expenses as a
percentage of revenues decreased from 82.0% for the year ended March 31, 1994 to
69.9% for the year ended March 31, 1995.
Other income (expense), net. Other income (expense), net increased from
$(22,000) for the year ended March 31, 1994 to $41,000 for the year ended March
31, 1995. The increase was caused by higher interest income earned on higher
average cash balances.
Income tax expense. The Company did not provide for income tax expense in
fiscal 1994 or fiscal 1995 because the Company incurred a loss for such fiscal
years.
Quarterly Results of Operations
The following table presents unaudited quarterly results of operations in
dollar amounts and as a percentage of revenues for the periods indicated. The
information has been prepared by the Company on a basis consistent with the
Company's audited financial statements and includes all adjustments that
management considers necessary for a fair presentation of the information for
the periods presented. Results of operations for any fiscal quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
FISCAL 1996 QUARTER ENDED FISCAL 1997 QUARTER ENDED
--------------------------------------------------- ---------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1995 1995 1995 1996 1996 1996 1996
-------- ------------- ------------ --------- -------- ------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.......................... $ 1,001 $1,893 $ 2,925 $ 3,696 $ 3,611 $6,011 $10,032
Costs and expenses:
Cost of goods sold.............. 657 1,216 2,286 3,312 2,479 3,027 5,467
Research and development........ 899 857 1,069 1,420 1,294 1,421 1,664
Marketing and selling........... 334 376 568 539 608 791 1,189
General and administrative...... 161 183 295 587 256 209 495
------- ------ ------- ------- ------- ------ -------
Total costs and
expenses............... 2,051 2,632 4,218 5,858 4,637 5,448 8,815
------- ------ ------- ------- ------- ------ -------
(Loss) income from operations..... (1,050) (739) (1,293) (2,162) (1,026) 563 1,217
Other income (expense), net....... 21 16 15 4 38 41 30
------- ------ ------- ------- ------- ------ -------
(Loss) income before income
taxes........................... (1,029) (723) (1,278) (2,158) (988) 604 1,247
Income tax expense................ 0 0 0 0 0 0 75
------- ------ ------- ------- ------- ------ -------
Net (loss) income................. $(1,029) $ (723) $(1,278) $(2,158) $ (988) $ 604 $ 1,172
======= ====== ======= ======= ======= ====== =======
Pro forma net (loss) income per
share(1)........................ $ (.09) $ (.06) $ (.11) $ (.18) $ (.07) $ .05 $ .09
======= ====== ======= ======= ======= ====== =======
Pro forma weighted average shares
outstanding(1).................. 11,561 11,561 11,830 12,166 13,379 13,379 13,379
</TABLE>
- ---------------
(1) Pro forma data give effect to the conversion of outstanding shares of
Preferred Stock and the TRW Convertible Note.
23
<PAGE> 25
<TABLE>
<CAPTION>
AS A PERCENTAGE OF REVENUES
---------------------------------------------------------------------------------------------
FISCAL 1996 QUARTER ENDED FISCAL 1997 QUARTER ENDED
--------------------------------------------------- ---------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1995 1995 1995 1996 1996 1996 1996
-------- ------------- ------------ --------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Costs of goods sold............ 65.6 64.2 78.2 89.6 68.7 50.4 54.5
Research and development....... 89.8 45.3 36.5 38.4 35.8 23.6 16.6
Marketing and selling.......... 33.4 19.9 19.4 14.6 16.8 13.2 11.9
General and administrative..... 16.1 9.7 10.1 15.9 7.1 3.5 4.9
------ ----- ----- ----- ----- ----- -----
Total costs and
expenses.............. 204.9 139.1 144.2 158.5 128.4 90.6 87.9
------ ----- ----- ----- ----- ----- -----
(Loss) income from operations.... (104.9) (39.1) (44.2) (58.5) (28.4) 9.3 12.1
Other income (expense), net...... 2.1 0.8 0.5 0.1 1.1 0.7 0.3
------ ----- ----- ----- ----- ----- -----
(Loss) income before income
taxes.......................... (102.8) (38.3) (43.7) (58.4) (27.3) 10.0 12.4
Income tax expense............... 0.0 0.0 0.0 0.0 0.0 0.0 (0.7)
------ ----- ----- ----- ----- ----- -----
Net (loss) income................ (102.8)% (38.3)% (43.7)% (58.4)% (27.3)% 10.0% 11.7%
====== ===== ===== ===== ===== ===== =====
</TABLE>
Revenues increased each quarter in fiscal 1996 as a result of increased
unit product shipments. Revenues increased in each quarter of fiscal 1997, with
significant quarter to quarter increases in the second and third quarters
reflecting increased unit shipments to the cellular and PCS handset market
segments. Gross profit margins experienced wide fluctuations throughout the
seven quarters. Gross profit margin reached a low of 10.4% in the fourth quarter
of fiscal 1996 due to high material scrap caused by low production test yields
related to the Company's development contract with QUALCOMM. Gross profit margin
was the highest in the second quarter of fiscal 1997 because of favorable
product sales mix and pricing, improved manufacturing, assembly and test yields
and increased absorption of manufacturing overhead due to higher sales volume
and a reduction in average wafer costs. The Company's research and development
expense increased over the seven quarters to $1.7 million in the third quarter
of fiscal 1997. The Company's marketing and selling and general and
administrative expenses generally increased over the last period to $1.2 million
and $500,000, respectively, in the third quarter of fiscal 1997, reflecting
increased salaries and benefits related to increased headcount, commissions,
promotional activities and provision for bad debt expense.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's cash flow from operations has been insufficient
to satisfy the Company's cash requirements. To date, the Company has funded its
operations primarily through the private sale of equity and debt securities,
bank borrowings and equipment leases. Since fiscal 1994, the Company's primary
cash requirements have been to finance operating activities, to purchase
property and equipment and to repay capital lease obligations and bank
borrowings and interest.
The Company and Silicon Valley Bank have entered into a secured credit
facility that includes a $7 million working capital revolving line of credit and
a $2 million equipment line of credit. Both lines of credit have an expiration
date of December 19, 1997. Borrowings under the revolving line of credit can be
made from time to time in an amount not to exceed 80% of eligible accounts
receivable and bear interest at prime plus 0.75%, payable monthly. Borrowings
under the equipment line of credit are converted into term loans, repayable in
36 equal monthly installments from the date of advance, and bear interest at
prime plus 1.5%. The credit facility requires, among other things, that the
Company maintain certain amounts of tangible net worth and certain ratios with
regard to liquidity and debt to equity. At February 24, 1997, there was
approximately $700,000 outstanding under such facility. The Company intends to
repay the outstanding indebtedness under such facility with a portion of the
proceeds from this offering. See "Use of Proceeds."
In February 1997, the Company entered into an equipment lease agreement
with an equipment financing company, pursuant to which such financing company
agreed to finance the lease of equipment having an aggregate cost not in excess
of $10 million. The terms of such lease agreement provide for a lease term of 52
months and monthly lease payments of 2.41% of the cost of the equipment leased,
subject to adjustment by such financing company proportionately to the change in
the weekly average of interest rates of five-year U.S. treasury securities.
Pursuant to the lease agreement, the Company has issued to such financing
company a warrant for 41,322 shares of Common Stock and has agreed to issue to
such financing company, upon the lease under the agreement of
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<PAGE> 26
equipment having an aggregate cost of $5 million, a warrant to purchase an
additional 41,323 shares of Common Stock. Both warrants are exercisable at $9.00
per share and expire five years from their respective dates of issuance. The
Company anticipates using such lease agreement to finance the acquisition of
wafer fabricating, clean room and other testing and manufacturing equipment to
be used in its proposed fabrication facility.
In February 1997, the Company entered into agreements with a financing
company providing for the financing of the acquisition of equipment to be
assembled as a clean room facility at the Company's proposed wafer fabrication
facility and for the sale and lease-back of such equipment between the Company
and the financing company when the equipment has been installed. The equipment
subject to this arrangement has an aggregate cost of approximately $2.5 million.
The terms of the lease agreement provide for a term of 60 months from the date
the equipment is installed, and for monthly lease payments calculated by
applying a lease investment return factor of 9.25% to the aggregate amount of
the cost of the equipment and the interest accrued on such amount at an annual
rate of 9.25% prior to installation. The Company has the option to purchase the
equipment at the end of the lease term for the lesser of the fair market value
of the equipment at such time or 10% of the original cost of the equipment.
The Company entered into a lease agreement in October 1996 with the owner
of the real estate on which the Company's wafer fabrication facility is proposed
to be built that provides for the construction of the facility. The lease
agreement has a term of 15 years from the completion of the building with two
10-year renewal options. The initial rental payment under the lease is to be
calculated on a per-square-foot basis based on the per-square-foot cost of the
construction of the building. To the extent that such construction cost is any
amount up to $90.00 per square foot, the annual lease payment per square foot
will be 12.5% of such cost. All of such construction cost in excess of $90.00
per square foot, up to an aggregate cost of $155.00 per square foot, will be
amortized over the initial 15-year term of the lease at a rate of 12%.
Construction costs in excess of $155.00 per square foot are to be paid by the
Company directly to the contractors. The initial rent under the lease will
increase by 4.5% after three years, and every three years thereafter by a
percentage equal to 80% of the percentage increase in the Consumer Price Index
during the immediately preceding three years. The Company has agreed under the
lease to provide guarantees in secured cash or corporate guarantees for all
construction costs in excess of $80.00 per square foot up to $155.00 per square
foot. The Company currently anticipates that the fabrication facility will
comprise approximately 50,000 square feet, will be constructed at an average
cost of approximately $155.00 per square foot and will require the Company to
make guarantees in secured cash or corporate guarantees of approximately $3.8
million, which must be made at such time as the aggregate cost of such facility
exceeds $80.00 per square foot. The actual cost of the Company's fabrication
facility is subject to a number of factors outside of the Company's control, and
such cost may be in excess of the Company's estimates. See "Risk
Factors -- Construction and Operation of Fabrication Facility."
The Company will require substantial capital to construct its wafer
fabrication facility and to fund its operations and growth. The Company's wafer
fabrication facility is scheduled to be developed in two phases, the first of
which has a budgeted cost of $40 million and the second of which involves an
expansion of production capacity at a budgeted cost of $30 million. The Company
intends to use approximately $15 million of the net proceeds to the Company from
this offering to finance a portion of the cost of constructing the first phase
of the fabrication facility and to finance the remainder of such phase with cash
on hand and the previously obtained financing commitments described above. The
Company currently believes its fabrication facility will be operating at
commercial levels (i.e., capable of producing approximately 2,500 wafers per
year) in the second half of 1998. Further, the Company believes that upon
completion of the first phase of construction, its fabrication facility will
have a capacity of 10,000 wafers per year and that, upon completion of its
second phase of construction, such facility will have a capacity of 25,000
wafers per year. See "Risk Factors -- Construction and Operation of Fabrication
Facility." The Company's future capital requirements will depend on many
factors, including the actual cost of constructing the new fabrication facility,
whether demand for the Company's products justifies the phased expansion of its
facility, the timing and extent of spending to support product development
efforts and expansion of sales and marketing, the timing of introductions of new
products and market acceptance of the Company's products. The Company expects
that it may need to raise additional equity or debt financing during 1998 to
finance a portion of the cost of constructing the second phase of the
fabrication facility. However, there can be no assurance that additional
financing will not be required prior to such time. There can be no assurance
that additional equity or debt financing, if required, will be available on
acceptable terms or at all.
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<PAGE> 27
BUSINESS
INTRODUCTION
The Company designs, develops and markets proprietary radio frequency
integrated circuits ("RFICs") for wireless communications applications such as
cellular and PCS, cordless telephony, wireless LANs, WLL, industrial radios,
wireless security and remote meter reading. The Company offers a broad array of
products, including amplifiers, mixers, and modulators/demodulators that
represent a substantial majority of the RFICs required in wireless subscriber
equipment. The Company designs products using three distinct process
technologies: GaAs HBT, GaAs MESFET and silicon bipolar transistor. The Company
believes that for certain applications, GaAs HBT devices offer advantages in
terms of linearity, efficiency, reduced system complexity and size.
TRW is currently manufacturing all of the Company's GaAs HBT products and
has granted the Company a license to use its GaAs HBT process to design products
for commercial wireless applications. Through its relationship with TRW, the
Company has become a leading commercial supplier of GaAs HBT RFICs. The
Company's GaAs HBT power amplifiers and small signal devices have been designed
into advanced subscriber equipment manufactured by leading OEMs such as
QUALCOMM, Nokia, Hyundai Electronics Industries Co. Ltd. ("Hyundai"), Samsung,
Motorola and LG Information and Communications, Ltd. ("LG"). The Company also
offers GaAs MESFET and silicon components through a delivery strategy called
Optimum Technology Matching(R) to complement its GaAs HBT products. Optimum
Technology Matching(R) allows the Company to offer RFIC solutions, on a
component by component basis, that best fulfill OEMs' performance, cost and
time-to-market requirements.
INDUSTRY BACKGROUND
The wireless communications industry has grown rapidly over the past decade
as cellular, paging, PCS and other emerging wireless communications services
have become widely available and increasingly affordable. Technological
advances, changes in telecommunications regulations and the allocation and
licensing of additional radio spectrum have helped fuel this growth worldwide
and have led not only to the development of competing wireless communications
services, but also to the development of new and emerging wireless applications,
including second generation digital cordless telephony, wireless LANs, WLL,
wireless security and remote meter reading. As wireless usage grows, wireless
service providers continue to improve the quality and functionality of the
services they offer and seek to offer greater bandwidth for increased capacity.
To expand capacity from first generation cellular communications networks,
certain national governments have made available less congested frequency bands
for new wireless communications services. In the United States, the Federal
Communications Commission (the "FCC") has allocated and auctioned 10 MHz and 30
MHz portions of spectrum in the 1850 to 1990 MHz range for PCS, and allocated
broad band spectrum in the 2.4 GHz range for wireless LANs. Capacity and
functionality also are being addressed by the wireless industry's movement from
wireless networks that use analog signal modulation techniques to wireless
networks that use digital signal modulation techniques. As compared to analog
technologies, digital technologies generally provide improved signal quality,
facilitate the transmission of both voice and data and improve capacity by
allowing the transmission of more information in a smaller amount of frequency
space. These digital technologies place a premium on linear power amplification,
which can translate into higher quality signals.
The wireless communications markets are characterized by a proliferation of
different air interface signal transmission standards in different parts of the
world, including analog standards, such as Advanced Mobile Phone Service
("AMPS") and Total Access Communications Systems ("TACS"), digital standards,
such as Time Division Multiple Access ("TDMA") and CDMA, and certain hybrid
standards. For PCS, the FCC has approved seven different air interface
standards. The handsets designed for each air interface standard generally
require unique RF and baseband integrated circuit solutions that must be
designed to meet the demands of subscriber equipment users for greater
functionality, smaller and lighter equipment, longer battery
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<PAGE> 28
life and better security, all at reduced costs. As a result of these technical
challenges and end user demands, it has become increasingly difficult for OEMs
of subscriber equipment to develop and supply all the required components in a
timely and cost-effective manner. This has caused some OEMs to rely increasingly
on third party value-added technology providers that have the component and
systems level expertise to design and the production capacity to supply these
solutions. In addition, new entrants to the wireless subscriber equipment
market, such as large consumer electronics companies, tend to be less vertically
integrated than established OEMs, and thus must rely even more on third party
suppliers. This technology outsourcing trend is particularly evident in the RF
segment of the equipment due to the scarcity of RFIC engineers and the design
complexity of the technology.
RF Overview
A typical subscriber device for wireless personal communications, such as a
handset, contains digital, baseband and RF components. Digital components
control the overall circuitry and encrypt the voice or other data intended for
transmission and reception, while baseband components are used to process
signals into or from their original electrical form (low frequency analog voice
or data). RF components, such as amplifiers, mixers, attenuators, switches,
modulators, demodulators, oscillators and frequency synthesizers, convert,
switch, process and amplify the high frequency signals that carry the
information to be transmitted or received.
RF technology presents different engineering challenges than standard
semiconductor design. In general, digital and baseband semiconductor design
engineers create standard semiconductor circuit designs by combining "cells"
that previously have been evaluated and characterized. Because cells have
predictable performance, the design engineer can use computers to automate the
design process, which helps accelerate the development of these components. Each
RF component, however, has distinctly different characteristics that influence
overall system performance in complex ways. Instead of having stable inputs and
outputs, the RF circuit characteristics can drift based on process variations,
temperature, power supply and other variables. As a result, performance
characteristics are unique for each device, and the RF engineer must evaluate
and develop new designs on a continuous basis for each system performance level
and air interface standard. In addition to being skilled in semiconductor
circuit design, the RF circuit designer must have a thorough understanding of
signal processing principles, must understand the totality of the system for
which the device is intended and must be able to create designs that function
within the unique parameters of different wireless system architectures. As RF
technology has moved from discrete components to integrated circuit solutions,
the scarcity of engineers with both integrated circuit design and RF expertise
has become more pronounced.
RF Device Technology
In early generations of wireless communications equipment, individually
packaged discrete components were mounted on circuit boards to form complex
circuits used to transmit and receive RF signals. Size, reliability and cost
concerns ultimately led to a move from discrete devices to silicon-based
integrated circuits. The use of silicon integrated circuits in high frequency
wireless technologies, however, has been limited because of decreased operating
performance generally at frequencies higher than approximately 1 GHz. In
particular, at high frequencies silicon integrated circuits consume more power,
have relatively high noise and distortion parameters and create excess heat.
Within the last decade, GaAs semiconductor technology has emerged as an
effective alternative or complement to silicon technology in many high
performance RF applications. GaAs has inherent physical properties that allow
electrons to move up to five times faster than in silicon, which permits the
manufacture of GaAs devices that operate at much higher speeds than silicon
devices or at the same speeds with lower power consumption. This is particularly
important in battery powered portable applications such as handsets. Moreover,
the semi-insulating GaAs substrate significantly reduces some of the unwanted
parasitic effects of the conductive silicon substrate that cause its performance
to degrade at high frequencies.
GaAs integrated circuits were first implemented using a type of transistor
known as MESFET. While GaAs MESFET integrated circuits have become accepted for
many high frequency applications, these devices have certain limitations. In
particular, for power amplifiers used in digital systems, it is important to
have a
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<PAGE> 29
linear signal (i.e., one that is not altered or distorted when amplified). It is
difficult for GaAs MESFET devices to meet high linearity performance criteria
without sacrificing other performance criteria. In addition, GaAs MESFET power
amplifiers generally require both a positive and negative power supply for power
stages, which requires the inclusion of additional components or circuitry and a
corresponding increase in device size and complexity. Moreover, the lateral
structure of GaAs MESFET devices hinders the ability to shrink the device size
to enhance manufacturing yields and reduce costs. A different type of GaAs
transistor known as an HBT, which has been used in military and space
applications over the past decade, has emerged recently in commercial RF
applications.
THE RF MICRO DEVICES SOLUTION
The Company is a leading supplier of GaAs HBT RFICs for commercial wireless
applications. The Company's GaAs HBT products include power amplifiers and small
signal devices that have been designed into advanced subscriber handsets
manufactured by leading OEMs such as QUALCOMM, Nokia, Hyundai, Samsung, Motorola
and LG. In addition to the advantages that GaAs provides over silicon in terms
of speed, efficiency and the ability to operate at high frequencies, the Company
believes that GaAs HBT components offer the following benefits over GaAs MESFET
devices in comparable applications:
- Efficiency -- Efficiency is a measure of RF power output as a
percentage of battery power consumed by the device. The Company believes
its GaAs HBT power amplifiers are more efficient and use less power to
transmit the same output power than comparable GaAs MESFET devices.
Increased efficiency can translate into improved battery life and increased
talk time.
- Linearity -- Linearity is a measure of the distortion of a signal as
a result of the amplification of the signal. The Company believes GaAs HBT
products have higher breakdown voltages and smaller and more constant
base-collector capacitance than comparable GaAs MESFET devices, which
results in better linearity. Improved linearity can translate into a higher
quality signal, which is important for wireless networks using digital air
interface standards such as TDMA and CDMA.
- Complexity -- GaAs HBT transistors are bipolar devices that require
only a single polarity power supply, while GaAs MESFET transistors
generally require both a positive and negative power supply, which results
in the need to include a negative voltage generator and other additional
components or circuitry. As a result, GaAs HBT system architectures are
simpler and easier to design, which can translate into reduced component
costs and smaller equipment.
- Size -- GaAs MESFET devices have a lateral or horizontal design
structure while GaAs HBT devices have a more vertical structure. The
Company believes that GaAs HBT circuits can be made smaller than GaAs
MESFET devices, enabling more die per wafer, which can increase
manufacturing yields and translate into reduced costs.
In addition to its expertise in GaAs HBT process technology, the Company's
design engineers, test engineers and marketing personnel are experienced in
designing and delivering RFICs based on silicon bipolar and GaAs MESFET
technologies. As a result, the Company is able to offer a broad array of
standard and custom-designed RF solutions through a delivery strategy called
Optimum Technology Matching(R). Optimum Technology Matching(R) allows the
Company to offer OEM customers RFIC solutions on a component-by-component basis
that best fulfill the OEMs' performance, cost and time-to-market requirements.
Across these three semiconductor technologies, the Company offers more than 60
products that have a wide range of applications.
The Company's circuit design staff is continually developing RFIC design
solutions for new and emerging wireless applications. The Company's research and
development activities include not only new circuit designs, but also the
development and refinement of proprietary design tools and models to facilitate
new product development. Moreover, the Company is continually evaluating test RF
circuits under emerging semiconductor process technologies to augment its
Optimum Technology Matching(R) program and to meet its customers' future
wireless equipment needs.
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STRATEGY
The Company's objective is to be the leading worldwide supplier of RFICs
for a broad range of commercial wireless applications. To meet this objective,
the Company has developed a focused strategy, the key elements of which include:
Focus on Wireless Markets. Since the Company's formation in 1991, it
has focused its efforts almost exclusively on the design, development and
sale of RFICs to participants in the commercial wireless markets. The
Company has developed and sold integrated circuits for a broad range of
applications within these markets, including cellular and PCS, cordless
telephony, industrial radios, wireless LANs, WLL, wireless security and
wireless utility meter reading. The Company's customers include some of the
leading wireless OEMs, including Nokia, Motorola, QUALCOMM, Samsung and LG.
The Company continuously pursues opportunities to use its RF circuit design
and engineering capabilities and Optimum Technology Matching(R) expertise
to provide cost-effective integrated circuit solutions for emerging high
volume wireless applications.
Offer a Wide Range of RF Products. The Company supplies its customers
with a broad range of standard and custom-designed RFICs in order to
position itself as a "one-stop" solution for its customers' RFIC needs. The
Company offers a full line of products that include power amplifiers, low
noise amplifiers/mixers, quadrature modulators/demodulators and automatic
gain control amplifiers. For cellular and PCS applications, the Company
offers products addressing virtually all of the analog and digital air
interface standards. The Company's design engineering staff has developed
proprietary design and fabrication modeling techniques and tools to enable
the Company to deliver state-of-the-art integrated circuit designs that
meet its customers' stringent technical specifications.
Leverage GaAs HBT Capabilities. The Company believes that its GaAs
HBT expertise allows it to deliver high efficiency, high performance
components such as linear power amplifiers and low noise amplifiers to the
wireless communications markets. As the Company improves its design and
manufacturing of GaAs HBT components, it will seek to incorporate GaAs HBT
technology in other RF components in an effort to improve the price
performance characteristics of its products. Through its Optimum Technology
Matching(R) strategy, the Company is often able to leverage GaAs HBT design
wins into additional sales for its silicon and GaAs MESFET components.
Expand Manufacturing Capacity. In June 1996, the Company entered into
a strategic relationship with TRW in order to provide GaAs HBT components.
As a part of this relationship, TRW is expanding its GaAs HBT manufacturing
capacity. In addition, the Company is constructing an approximately 50,000
square foot fabrication facility in which the Company intends to fabricate
its own GaAs HBT wafers using TRW's proprietary GaAs HBT and related wafer
fabrication technologies. This facility currently is scheduled to reach
commercial production levels in the second half of 1998. See "Risk
Factors -- Construction and Operation of Fabrication Facility" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." The Company believes that
operating its own GaAs HBT wafer fabrication facility will improve its
ability to respond to customer demand for GaAs HBT products and will
provide it with greater opportunities to enhance product and process
quality and reliability.
Maintain Balanced Product Mix. The Company strives to maintain a
balance between custom and standard products. Custom-designed products are
usually developed for volume production orders from large OEMs. Custom
products normally are manufactured on an exclusive basis for the
originating customer for a negotiated period of time. Once exclusivity
periods expire, the Company attempts to migrate custom products rapidly
into the standard product category in order to broaden its customer base
and leverage its design and product development expenditures.
MARKETS
The Company designs, develops and markets its products to both domestic and
international OEMs for commercial applications in the wireless markets,
including cellular and PCS handsets, cordless telephony,
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industrial radios, WLAN equipment, WLL handsets, wireless security systems and
wireless utility meter reading systems.
Cellular Telephony and Personal Communication Services
In cellular and PCS applications, calls are placed through hand held
subscriber devices by establishing a connection with a base station via RF
channels. While the initial PCS services are comparable to cellular telephony,
as PCS becomes more widely deployed, it is expected that a subscriber will be
able to use a single small, lightweight handset and a single phone number for
all calls in the home, office or elsewhere with relatively seamless routing.
Based on information published by Dataquest, there were 85.5 million cellular
subscribers worldwide at the end of 1995 and this number was projected to grow
to 363.8 million by 2000.
Cordless Telephony
Cordless telephones are moving from first generation analog phones
operating at low (46-49 MHz) frequencies to digital cordless phones operating at
higher frequencies. In the United States, new phones operating in the 902-928
MHz frequency range use spread spectrum modulation to provide improved range and
voice quality, less interference and greater security. In Western Europe, the
Digital European Cordless Telephone, which operates in the 1880-1900 MHz
frequency range, has been successfully introduced, and, in Japan, the Personal
HandyPhone System ("PHS") was introduced in July 1995. PHS operates at the 1895-
1907 MHz frequency range and acts as a cordless telephone while at home, a
wireless PBX extension at the office, and a low mobility cellular-like phone
elsewhere.
Wireless Local Loop Systems
A WLL system is a fixed location wireless communications system in which
the end user is connected to the local telephone company's central switch via a
wireless connection. WLL systems employ simplified cellular or PCS technology.
The absence of high speed mobility, roaming or intercell handoff requirements
make the infrastructure and operating costs of WLL systems significantly lower
than traditional wired and cellular systems. WLL systems can be rapidly
deployed, even in difficult terrain areas, and are easily scalable.
Wireless Networks
Wireless networking involves the transmission and reception of data such as
e-mail, faxes and computer files by desktop and portable computers via wireless
RF links rather than wired lines. Network coverage ranges from wireless LANs,
which might be found within a business or single building, to metropolitan area
networks, which would be limited to a defined metropolitan or geographic area,
to wide area networks, which connect individuals and work groups over larger
geographic areas.
Industrial Radios
Industrial digital radios are trunked radio networks that transmit voice
communications from one location to another (point-to-point) and from one
location to many locations (point-to-multipoint). Industrial radios are
primarily used by law enforcement officers and in other public safety
applications.
Other Markets
The Company also supplies custom components for other applications in
wireless markets, such as wireless security systems and wireless utility meter
reading systems, and is pursuing other emerging wireless markets, including
enhanced two-way paging, wireless environmental monitoring devices and wireless
handheld devices used for point-of-sale, bar coding and other applications. The
Company also pursues opportunities to leverage the technological advantages of
its RF components by identifying applications in other markets. For example, the
Company has applied its RF power amplifier design expertise to develop high
performance power line amplifiers for the cable television ("CATV") market and
markets various GaAs HBT and MESFET components for satellite and microwave
communications applications. In addition, certain of its
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components, such as gain blocks and attenuators, are used for instruments and in
other non-wireless applications.
TECHNOLOGY
The following diagram illustrates a typical wireless system:
CHART
In the receive mode, a signal strikes the antenna and is applied to a low
noise amplifier (LNA). The LNA amplifies the strength of the incoming signal by
a factor of approximately 10 to 1,000 times and applies it to the mixer. Without
distorting the information contained, the mixer transforms the carrier frequency
of the signal from its original high value, termed an RF frequency (869-894 MHz
for cellular systems and 1930-1990 MHz for PCS systems), to a lower frequency
(usually at 200 MHz or less) called an "intermediate frequency" ("IF"). The IF
amplifier then amplifies this signal further while reducing much of its
amplitude variation before it is applied to the quadrature demodulator where the
digital information is recovered from the signal. This digital information is
supplied to the baseband portion of the handset where it is processed to recover
the original voice or data.
In the transmit mode, voice or other data that the user desires to transmit
is processed into digital information in the baseband section of the handset.
This information is applied to the quadrature modulator, where the digital
information is combined with an intermediate frequency carrier signal. This
modulated IF signal is applied to the upconverter where it is raised to an RF
frequency (824-849 MHz for cellular and 1850-1910 MHz for PCS). The linear power
amplifier then amplifies this low strength signal significantly to levels of one
watt or more to allow the signal to cover substantial distances as it leaves the
antenna. The linear power amplifier must produce this high-level signal with a
minimum of distortion, particularly when processing signals employing complex
digital modulation standards such as CDMA.
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PRODUCTS AND APPLICATIONS
The Company offers a broad range of standard and custom-designed RFICs.
Custom-designed products are usually developed for volume production orders from
large OEMs. Custom orders are normally manufactured on an exclusive basis for a
negotiated period. Once exclusivity periods expire, the Company attempts to
convert custom products into standard products to broaden its customer base and
leverage its design and product expenditures. At January 31, 1997, the Company
offered 63 products, and 40 additional products were in various stages of
development. Set forth below is a list of the Company's current products by
category, the number of products in each category, the semiconductor process
technology used to fabricate such products and the types of OEM devices into
which such products are incorporated.
<TABLE>
<CAPTION>
NO. OF
PRODUCT CATEGORY PRODUCTS FABRICATION TECHNOLOGY END USER DEVICES
<S> <C> <C> <C>
Power Amplifiers 11 - Silicon - Cellular and PCS handsets
- GaAs MESFET - Cordless phones
- GaAs HBT - Industrial radios
- CATV line amplifiers
Quadrature
Modulators/Demodulators 15 - Silicon - Cellular and PCS handsets
- GaAs MESFET - Cellular and PCS base stations
- GaAs HBT - Cordless phones
- Wireless LAN cards
Low Noise Amplifiers/Mixers 10 - Silicon - Cellular and PCS handsets
- GaAs MESFET - Cordless phones
- GaAs HBT - Wireless security systems
IF Components 10 - Silicon - Cellular and PCS handsets
- Cordless phones
- Industrial radios
Gain Blocks 10 - Silicon - Cellular and PCS handsets
- GaAs MESFET - Cordless phones
- GaAs HBT - Instruments
Transceivers 4 - Silicon - Wireless meter reading
- Cordless phones
Attenuators 3 - GaAs MESFET - Cellular and PCS handsets
- Cellular and PCS base stations
- Instruments
</TABLE>
Power Amplifiers
Power amplifiers provide signal amplification in the transmitter section of
a wireless system in order to boost a signal through the antenna. Power
amplifiers operate at different frequencies, power levels and air interface
standards and generally are classified either as linear amplifiers, which add a
minimum amount of distortion to the shape of the input signal, or non-linear
amplifiers, which are used in analog devices. Power amplifiers are often the
most critical RF component for a number of reasons. They frequently are the most
expensive component and are difficult to design and implement. In addition,
power amplifiers normally use the greatest amount of battery power in a handset,
which impacts talk time, and they generally dissipate the greatest amount of
heat. The Company's GaAs HBT power amplifiers offer low distortion, small size,
high efficiency and improved linearity, and they are able to operate from a
single polarity power source.
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Quadrature Modulators/Demodulators
Quadrature modulators are devices in the transmitter section of a wireless
system that combine digital information with an RF signal by varying the phase
and amplitude of the signal so that the resulting signal can be transmitted.
Quadrature demodulators reverse this process in the receiver section by taking
received RF signals and recovering the embedded digital information for further
processing. The Company believes its GaAs HBT process technology produces
quadrature modulators/demodulators with superior amplitude and phase balance.
Low Noise Amplifiers/Mixers
A low noise amplifier (LNA) is a device in the receiver section of a
wireless system that receives signals from an antenna at extremely low microvolt
levels and amplifies such signals by a factor of approximately 10 to 1,000 times
with the addition of as little "white noise" as possible. In general, the less
noise added by a LNA, the weaker the signal it can process. LNAs are commonly
integrated into circuits with mixers (also referred to as "down-mixers" or "down
converters"), and this combination generally is referred to as a "receiver front
end." Mixers accept the filtered output from the LNA, which is typically at a
high frequency and difficult to process, and mix it with a local oscillator
signal to produce a lower frequency (IF) signal, which is easier to process.
IF Components
In a typical handset, high frequency RF signals are converted into lower
frequency IF signals by the LNA/Mixer and then to baseband in the receive
functions. In the transmit function, baseband inputs (e.g., voice) are converted
from analog to digital form and processed through the IF range to the higher RF
frequency before transmission through the antenna. RFMD's IF devices include
digitally controlled IF amplifiers, which amplify baseband signals after they
have been converted from analog to digital form, and IF amplifiers with
automatic gain control and received signal strength indicators, which are used
for IF-to-baseband conversion in the receive mode.
Gain Blocks
Gain blocks are simple general purpose amplifiers that boost signals over a
broad frequency range. They are used for amplifier applications whenever noise
is not a concern and whenever a signal's strength has been diminished by
processing through a filter or other component.
Transceivers
Transceivers are highly integrated circuits that combine transmitters with
receivers into a single device. Because this degree of integration generally
results in some performance compromises, single chip transceivers tend to be
used in cost-sensitive applications where performance is less critical.
Attenuators
An attenuator is a device that reduces the level of an input signal by
controllable amounts. RFMD's attenuators are programmable through use of an
external analog or digital control signal to reduce signals to desired levels
with minimal noise and signal loss when the device is not active. Like gain
blocks, attenuators have many applications both within and outside the wireless
markets.
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CUSTOMERS
The following table identifies, by market, customers of the Company that
have generated revenues for the Company of greater than $50,000 during the nine
months ended December 31, 1996. Such customers are listed in alphabetical order.
<TABLE>
<S> <C>
CELLULAR HANDSETS BASE STATIONS
- ------------------ --------------
LG Information & Communications, Ltd. Hughes Network System (a subsidiary of
Matsushita Communication Industrial Co., Hughes
Ltd. Aircraft Company)
Maxon Electronics Co., Ltd. Lockheed Sanders Inc.
Nokia Mobile Phones Ltd. Motorola, Inc.
QUALCOMM Incorporated NEC Corporation
Samsung Electronics Co., Ltd. Spectrian Corp.
WIRELESS DATA
- ---------------
AT&T Corp
International Business Machines Corporation
Research in Motion Limited
Rockwell International Corp.
OTHER WIRELESS APPLICATIONS
- ------------------------------
Cincinnati Microwave, Inc. (cordless
telephones)
Digital Security Controls Ltd.
(wireless security systems)
Mitsubishi Consumer Electronics
(satellite terminals)
Motorola, Inc. (CATV; industrial radios)
Sensus Technologies, Inc. (wireless meter
reading)
Telrad Telecommunication and Electronic
Ind. Ltd.
(WLL handsets)
Viewsonics, Inc. (CATV)
</TABLE>
For the nine months ended December 31, 1996, sales to QUALCOMM and Samsung
were $7.6 million and $3.9 million, respectively, representing approximately
38.9% and 20.3%, respectively, of the Company's revenues. Because of the
Company's inability to meet delivery terms and quantity requirements, QUALCOMM
has determined to produce internally certain components and to look to other
sources for other components to replace all products currently purchased from
the Company. Accordingly, the Company expects that sales to QUALCOMM will cease
in May 1997. See "Risk Factors -- Variability of Operating Results; Dependence
on a Limited Number of Customers; GaAs HBT Capacity Constraints." The Company
expects to be a leading supplier of GaAs HBT RFICs after giving effect to the
expected loss of sales to QUALCOMM. For information with respect to export sales
by geographic area, see Note 2 of Notes to Financial Statements.
The Company, TRW and Nokia have agreed in principle to cooperate to develop
and supply Nokia with RFICs that are manufactured using TRW's GaAs HBT
processes. The arrangement contemplates that the Company and Nokia will
negotiate separate agreements to address the development and supply of each
component. Pursuant to the arrangement, the Company has agreed to provide Nokia
with access to certain RFIC technologies and to its GaAs HBT foundry if and when
such facility becomes operational, and Nokia has agreed to provide the Company
with rights to bid for and supply Nokia's requirements for certain RFICs. The
arrangement can be terminated without penalty by TRW, the Company or Nokia for
any reason. The arrangement does not obligate Nokia to purchase any products
from the Company, and there can be no assurance that Nokia will become or
subsequently remain a significant customer of the Company or that this
relationship will continue. See "Risk Factors -- Relationship with Nokia."
34
<PAGE> 36
SALES AND MARKETING
The Company sells its products worldwide directly to customers as well as
through a network of 27 domestic sales representative firms and 26 foreign sales
representative firms. The Company selects its domestic and foreign
representatives based on technical skills and sales experience, as well as the
presence of complementary product lines and the customer base served. The
Company provides ongoing training to its representatives to keep them
knowledgeable of the Company's products. The Company maintains an internal
marketing organization that is responsible for developing sales and advertising
literature, such as product announcements, catalogs, brochures and magazine
articles in trade and other publications, and preparing technical presentations
for industry conferences.
The Company believes that maintaining a close relationship with customers
and providing customers with ongoing technical support is essential to customer
satisfaction in the wireless communications industry. The Company's design and
application staff interacts with customers during all stages of design and
production, provides customers with current product application notes and
engineering data, maintains regular contact with customer engineers and assists
in the resolution of technical problems. The Company assigns to its largest
customers a contract account manager who maintains regular contact with the
customer to determine its product needs and concerns. Members of senior
management also are involved in managing relationships with significant
customers. The Company believes that maintaining close contact with customers
improves their level of satisfaction and enables the Company to anticipate their
future product needs.
MANUFACTURING, PACKAGING AND TESTING
The Company's manufacturing cycle consists of semiconductor wafer
fabrication, assembly and packaging and final product testing. With the
exception of product testing, the Company outsources all stages of production.
The Company uses independent foundries located in the United States to
manufacture its products. The Company uses two independent foundries to supply
its silicon-based product requirements and two independent foundries to supply
its GaAs MESFET devices. The Company purchases all GaAs HBT wafers from TRW. See
"-- Strategic Relationship with TRW." Although TRW is in the process of
expanding its fabrication facility to increase its capacity to fabricate GaAs
HBT wafers, the Company has experienced capacity limitations on its ability to
supply GaAs HBT components. To address these concerns, the Company is seeking to
establish an additional source for such products and is constructing a
fabrication facility at which it plans to fabricate such products. The Company's
reliance on independent foundries involves a number of risks, including the
possibility of material disruptions in the supply of key RFICs and the lack of
control over delivery schedules, manufacturing yields, quality and fabrication
costs. See "Risk Factors -- Dependence on TRW" and "-- Dependence on Third
Parties."
The Company intends to use a portion of the net proceeds from this offering
to construct an approximately 50,000 square foot fabrication facility adjacent
to its existing facility in Greensboro, North Carolina to fabricate four-inch
GaAs HBT wafers using technologies licensed from TRW. The facility will be
constructed in two phases, the first of which is budgeted at approximately $40
million and involves construction of the building shell, installation and
certification of an approximately 10,300 square foot clean room and the purchase
or lease and installation of the required fabrication equipment. The first phase
will continue until the GaAs HBT process technology transfer from TRW is
completed and specified commercial production yields are attained, which is
anticipated to occur in the second half of 1998. The second phase is budgeted at
approximately $30 million and involves an approximately 6,000 square foot
expansion to the clean room and the purchase or lease and installation of an
additional production equipment. The commencement and completion of the second
phase of the fabrication facility are dependent on a number of factors,
including the timing of completion of the first construction phase, the
availability of necessary capital, whether the Company successfully completes
the transfer of TRW's GaAs HBT and MBE processes, the demand for GaAs HBT
products and a number of other factors both within and outside the control of
the Company. See "Risk Factors -- Construction and Operation of Fabrication
Facility," "-- Adoption of GaAs HBT Components," "-- Need for Additional
Capital" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
35
<PAGE> 37
The Company maintains an inventory of certain standard products based on
its internal forecasts of expected demand for such products. For custom-designed
products, designs of the Company's products are verified by both the Company and
the customer before orders for production wafers are placed. Upon receipt of
orders from an OEM, the Company schedules production based on order size,
customer delivery requirements, production schedules and other production
considerations. The Company's GaAs HBT products are subject to supply
constraints as discussed under "Risk Factors -- Variability of Operating
Results; Dependence on a Limited Number of Customers; GaAs HBT Capacity
Constraints" and "-- Dependence on TRW."
The Company currently uses five vendors located in Asia and one vendor
located in the United States to package and assemble its products. All of such
vendors are certified to applicable ISO 9000 series specifications, which means
that their operations have in each case been determined by independent examiners
to comply with certain internationally developed quality control standards. The
Company qualifies and monitors assembly contractors based on cost and quality.
Such contractors typically provide the Company with per-unit pricing. The
Company has encountered packaging quality problems with certain of such vendors,
particularly with regard to GaAs products, which generally are more brittle than
silicon-based products. The Company believes that until it can obtain and train
additional vendors to package its GaAs products, it will have to continue to
monitor closely its vendors as production volumes increase. See "Risk Factors --
Dependence on Third Parties" and "-- International Sales and Operations."
The Company tests 100% of its products for compliance with both DC and RF
parameters at its facility in Greensboro, North Carolina.
STRATEGIC RELATIONSHIP WITH TRW
In June 1996, the Company and TRW entered into a broad strategic
relationship based on several agreements which evidence an investment by TRW in
RFMD, a technology license from TRW to the Company (the "License Agreement") and
a supply arrangement between the parties (the "Supply Agreement"). As a part of
such alliance, TRW provided the Company with $15 million of equity and debt
financing and became a significant shareholder in the Company. See "Principal
and Selling Shareholders" and "Certain Transactions -- TRW." The key goal of the
Company in entering into this alliance was to enable the Company to construct a
four-inch wafer fabrication facility to manufacture products using GaAs HBT
technologies developed by TRW and licensed to the Company.
Pursuant to the License Agreement, TRW has granted to the Company fully
paid up, royalty-free, worldwide licenses with respect to certain of TRW's
existing and future GaAs HBT patent rights and MBE process patent rights, in
each case with accompanying know-how and technical information, to design,
develop, manufacture, market, service and repair certain existing products of
the Company and any GaAs HBT product in which the emitter of the GaAs HBT has a
width of one to three microns, in either case provided such products are for
commercial wireless communications applications and operate on signals having a
frequency of less than 10 GHz. The license with respect to the GaAs HBT rights
currently is effective, and the MBE license becomes effective as of the date
that the Company's wafer fabrication facility becomes operational. Subject to
TRW's right to use the licensed technology to fulfill existing contractual
obligations and to provide to customers on an ongoing basis certain specified
foundry services, both licenses are exclusive as to all persons including TRW,
but may be made non-exclusive at the option of TRW if the Company fails to meet
certain revenue goals. See "Risk Factors -- Dependence on TRW" and "Certain
Transactions -- TRW -- License Agreement."
TRW also granted non-exclusive licenses to the Company to use certain of
its existing GaAs HBT rights and MBE rights for the development and sale of
certain of the Company's existing products for applications other than
commercial wireless communications or that operate on signals having a frequency
of 10 GHz or more. In addition, TRW agreed to provide certain technical
assistance to the Company in connection with the design, construction and
operation of the Company's planned wafer fabrication facility. The License
Agreement provides that TRW will offer to the Company, on the same terms as are
offered to third parties, certain future non-HBT related technologies that it
develops for a period of 10 years following the date on
36
<PAGE> 38
which the Company's wafer fabrication facility becomes operational. The Company
has agreed to share with TRW any modifications or improvements that it makes in
the technology or the products developed therefrom, and to grant TRW a
non-exclusive, royalty-free license to use such modifications or improvements in
applications outside the Company's field of use. The licenses granted pursuant
to the License Agreement are granted without representation or warranty as to
validity or noninfringement and may be terminated by TRW if the Company's wafer
fabrication facility is not operational by December 31, 1998. In addition, upon
any termination of the License Agreement for default, whether due to the default
of the Company or otherwise, the Company's rights to TRW's technologies shall
cease. See "Risk Factors -- Dependence on TRW" and "Certain
Transactions -- TRW -- License Agreement."
Under the terms of the Supply Agreement, the Company has agreed to purchase
from TRW, and TRW has agreed to sell to the Company, certain minimum quantities
of three-inch GaAs HBT processed wafers and four-inch GaAs epitaxial wafer
starting material until December 31, 2000, which quantities decline
significantly from current levels beginning in 1999. The Company currently is
purchasing from TRW a number of wafers that approximates the minimum number of
wafers required to be delivered by TRW to the Company under the Supply
Agreement. However, the Company believes that in future periods it may purchase
from TRW a quantity of wafers in excess of the minimum quantity of wafers
required to be supplied by TRW under such contract. See "Risk
Factors -- Dependence on TRW" and "Certain Transactions -- TRW -- Supply
Agreement."
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are focused primarily on the
development of new integrated circuit products. At January 31, 1997, there were
44 persons in the Company's research and development organization. The Company's
research and development efforts also are directed at improving manufacturing
processes and yields. In fiscal 1994, 1995 and 1996 and for the nine months
ended December 31, 1996, the Company incurred approximately $1.6 million, $2.8
million, $4.2 million and $4.4 million, respectively, of research and
development expenses. The Company does not separately account for
Company-sponsored and customer-sponsored research and development expenses.
The market for RFICs is characterized by rapid changes in product designs
and the emergence of new semiconductor technologies used to fabricate higher
performance devices. Because the demand of OEMs for continual improvements in
product performance is expected to increase, the Company believes that its
future success depends in part on its ability to design RFICs under emerging
wafer fabrication technologies that meet the cost and performance parameters of
its customers. See "Risk Factors -- Rapid Technological Change; Dependence on
Development and Growth of Wireless Markets."
COMPETITION
Competition in the markets for the Company's products is intense. The
Company faces competition from several companies primarily engaged in the
business of designing, manufacturing and selling silicon and GaAs MESFET RFICs,
as well as suppliers of discrete products such as transistors, capacitors and
resistors. The Company may face future competition from companies that have or
may develop GaAs HBT or other fabrication processes. In addition, the Company's
current and potential competitors include OEMs that have or may develop the
ability to produce RFICs or discrete products internally for their requirements.
The Company's primary competitors include ANADIGICS, Motorola, NEC, Philips,
Rockwell and TriQuint.
The Company believes that competition within the markets for its products
is driven primarily by the ability to design and deliver high performance and
price competitive products in sufficient quantities and in a timely manner.
Competition is also affected by the quality of customer service and technical
support and the ability to design customized products that address each
customer's particular requirements and cost limitations.
Many of the Company's current and potential competitors have entrenched
market positions, established patents, copyrights, trade names, trademarks and
intellectual property rights and substantial technological capabilities.
Further, most of the Company's current and potential competitors have
significantly greater
37
<PAGE> 39
financial, technical, manufacturing and marketing resources than the Company.
Increased competition could adversely affect the Company's revenue and
profitability by causing it to reduce prices or by reducing demand for the
Company's products. See "Risk Factors -- Competition."
INTELLECTUAL PROPERTY
It is the Company's practice to seek U.S. patent and copyright protection
on its products and developments, where appropriate, and to protect its
proprietary technology under U.S. and foreign laws affording protection for
trade secrets and for integrated circuit designs. The Company owns one U.S.
patent and has one pending U.S. patent application. The U.S. patent was issued
on March 4, 1997 and will expire in 2015.
The Company relies primarily upon trade secrets, technical know-how and
other unpatented proprietary information relating to its product development and
manufacturing activities. To protect its trade secrets, technical know-how and
other proprietary information, the Company's employees are required to enter
into agreements providing for maintenance of confidentiality and the assignment
of rights to inventions made by them while in the employ of the Company. The
Company also has entered into non-disclosure agreements to protect its
confidential information delivered to third parties in conjunction with possible
corporate collaborations and for other purposes. However, there can be no
assurance that these types of agreements will effectively prevent unauthorized
disclosure of the Company's confidential information, that these agreements will
not be breached, that the Company would have adequate remedies for any breach or
that the Company's trade secrets and proprietary know-how will not otherwise
become known or independently discovered by others. See "Risk
Factors -- Intellectual Property Claims."
While the Company has not been involved in any patent or other intellectual
property rights litigation, there can be no assurance that third parties will
not assert claims against the Company with respect to existing and future
products. In the event of litigation to determine the validity of any third
party's claims, such litigation could result in significant expense to the
Company, and divert the efforts of the Company's technical and management
personnel, whether or not such litigation is determined in favor of the Company.
The semiconductor industry is subject to frequent litigation regarding patent
and other intellectual property rights. Leading companies and organizations in
the wireless industry have numerous patents that protect their intellectual
property rights in these areas. In the event of an adverse result of any such
litigation, the Company could be required to expend significant resources to
develop non-infringing technology or to obtain licenses to the technology which
is the subject of the litigation. There can be no assurance that the Company
would be successful in such development or that any such license would be
available on commercially reasonable terms.
BACKLOG
At December 31, 1996, the Company's backlog was approximately $20.0
million. At December 31, 1995, the Company's backlog was approximately $10.9
million. The Company includes in its backlog all accepted product purchase
orders for which delivery has been specified within one year. Product orders in
the Company's backlog are subject to changes in delivery schedules or to
cancellation at the option of the purchaser without significant penalty. The
Company's backlog may vary significantly from time to time depending upon the
level of capacity available to satisfy unfilled orders. Accordingly, although
useful for scheduling production, backlog as of any particular date may not be a
reliable indicator of sales for any future period.
EMPLOYEES
At January 31, 1997, the Company had 112 full-time employees. The Company
believes that its future prospects will depend, in part, on its ability to
continue to attract and retain skilled technical, marketing and management
personnel. Competition for such personnel is intense, and the number of persons
with relevant experience, particularly in engineering, software design and
marketing, is limited. None of the Company's employees is represented by a labor
union, and the Company has never experienced any work stoppage. The
38
<PAGE> 40
Company believes that its employee relations are good. See "Risk
Factors -- Management of Growth" and "-- Dependence Upon Key Personnel."
FACILITIES
The Company's principal administrative facility is located in a building
comprising approximately 25,000 square feet in Greensboro, North Carolina. The
Company leases such building under a lease agreement that expires at the end of
2002, the term of which may be extended for an additional three years. The
Company has the option to request an expansion of this facility, in which case
the term of the lease would be extended to seven years from the date of
completion of such expansion. The Company has leased real estate adjacent to its
principal facility for the construction by a third party real estate developer
of a wafer fabrication facility that will consist of approximately 50,000 square
feet initially. The Company intends to use a portion of the net proceeds from
this offering to finance a portion of the cost of constructing the first phase
of this facility. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." The
lease for the fabrication facility has a term of 15 years from the date of
completion of the initial stage, which is anticipated to occur in the second
half of 1998, with two 10-year renewal options. The Company also leases
approximately 17,500 square feet of commercial space in Greensboro, North
Carolina that it uses for office space and storage. Such facility is leased
under three leases that each expire at the end of 1999.
LEGAL AND ENVIRONMENTAL MATTERS
The Company is not a party to any legal proceeding.
If, and at such time as, the Company's planned wafer fabrication facility
becomes operational, the Company will be subject to a variety of extensive and
changing federal, state and local governmental laws, regulations and ordinances
related to the use, storage, discharge and disposal of toxic, volatile or
otherwise hazardous chemicals used in the RFIC manufacturing process. Any
failure to comply with such requirements then in effect or subsequently adopted
could result in the imposition of fines on the Company, the suspension of
production or a cessation of operations. In addition, such requirements could
restrict the Company's ability to expand its facilities or require the Company
to acquire costly equipment or incur other significant expenses to comply with
environmental regulations or clean up discharges. The Company believes that
costs arising from existing environmental laws will not have a material adverse
effect on the Company's financial position or results of operations. There can
be no assurance, however, that the environmental laws will not become more
stringent in the future or that the Company will not incur significant costs in
the future in order to comply with such laws.
39
<PAGE> 41
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
David A. Norbury..................... 46 President, Chief Executive Officer and Director
William J. Pratt..................... 54 Chairman of the Board, Chief Technical Officer
and Director
Powell T. Seymour.................... 54 Vice President of Operations and Secretary
Jerry D. Neal........................ 52 Vice President of Sales and Marketing
William A. Priddy, Jr................ 36 Vice President of Finance and Treasurer
Arthur E. Geissberger................ 43 Vice President of Wafer Fabrication Operations
Robert C. Fleming.................... 40 Director
Dr. Albert E. Paladino............... 64 Director
Erik H. van der Kaay................. 56 Director
Walter H. Wilkinson, Jr.............. 51 Director
Terri D. Zinkiewicz.................. 42 Director
</TABLE>
DAVID A. NORBURY has been President and Chief Executive Officer and a
director of the Company since September 1992. Mr. Norbury was employed as
President and Chief Executive Officer of Polylithics, Inc., a developer of
semiconductor technology based in Santa Clara, California, from August 1989 to
March 1991.
WILLIAM J. PRATT, a founder of the Company, was President of the Company
from February 1991 to September 1992 and has been Chairman and Chief Technical
Officer since September 1992. He has also been a director of the Company since
its inception. Prior to such time, Mr. Pratt was employed for 13 years with
Analog Devices, Inc. ("ADI"), an integrated circuit manufacturer in Greensboro,
North Carolina, as Engineering Manager and General Manager.
POWELL T. SEYMOUR, a founder of the Company, has been Vice President of
Operations and Secretary of the Company since its inception. Prior to such time,
Mr. Seymour was employed for 11 years with ADI as Manufacturing Engineer and
Manufacturing Engineer Manager. Mr. Seymour served as a director of the Company
from its inception until July 1993.
JERRY D. NEAL, a founder of the Company, has been its Vice President of
Sales and Marketing since May 1991. Prior to such time, Mr. Neal was employed
for 10 years with ADI as Marketing Engineer, Marketing Manager and Business
Development Manager. Mr. Neal served as a director of the Company from February
1992 to July 1993.
WILLIAM A. PRIDDY, JR. was Controller of the Company from December 1991 to
December 1993 and became Treasurer in December 1993 and Vice President of
Finance in December 1994. Prior to joining the Company, Mr. Priddy was employed
for five years with ADI as Financial Analyst, Marketing Analyst and Marketing
Services Manager.
ARTHUR E. GEISSBERGER has been Vice President of Wafer Fabrication
Operations since July 1996. From February 1991 to July 1996, Mr. Geissberger was
employed with Alpha Industries, Inc., a manufacturer of microwave and
millimeter-wave frequency components and subsystems based in Methuen,
Massachusetts, as GaAs Wafer Fabrication Manager and Manager of Foundry
Operations.
ROBERT C. FLEMING became a director of the Company in November 1993. Mr.
Fleming founded Prism Venture Partners I L.P., a venture capital firm based in
Wellesley, Massachusetts, in May 1995 and has been a general partner of that
firm since that time. From July 1993 to April 1995, he was a general partner
with Norwest Venture Capital, a Minneapolis, Minnesota-based venture capital
firm. From 1989 to June 1993, he
40
<PAGE> 42
was a general partner of Orien Ventures II L.P., a venture capital firm
affiliated with The Vista Group of Del Mar, California.
DR. ALBERT E. PALADINO became a director of the Company in March 1992. Dr.
Paladino has been a general partner of Advanced Technology Ventures, a Boston,
Massachusetts-based venture capital firm focused on investments in early stage
high technology companies, since 1981. He is a director of TranSwitch
Corporation, a designer of high speed VLSI communications devices based in
Shelton, Connecticut.
ERIK H. VAN DER KAAY became a director of the Company in July 1996. Mr. van
der Kaay has been Executive Vice President of Allen Telecom Inc. ("Allen
Telecom") (formerly The Allen Group Inc.), a telecommunications company based in
Cleveland, Ohio, since February 1997. He was Vice President of Allen Telecom
from February 1993 to February 1997, and President and Chief Executive Officer
of Allen Telecom Group, Inc., a wholly owned subsidiary of Allen Telecom that
has since been merged into Allen Telecom, from August 1992 to February 1997.
From June 1990 to August 1992, he was President of The Antenna Specialists
Company, a manufacturer of mobile telecommunications antennae that is now a
division of Allen Telecom. He is a director of SSE Telecom, Inc., a manufacturer
of satellite telecommunications equipment based in Vienna, Virginia.
WALTER H. WILKINSON, JR. became a director of the Company in March 1992.
Mr. Wilkinson is a general partner of Kitty Hawk Capital, a venture capital firm
based in Charlotte, North Carolina that he founded in 1980.
TERRI D. ZINKIEWICZ became a director of the Company in February 1997. Ms.
Zinkiewicz has been employed with TRW in various capacities during the past 16
years, most recently as Director of Finance and Business of the Electronic
Systems and Technology Division of the Space and Electronics Group.
Pursuant to the Company's bylaws, the Board of Directors consists of seven
to nine members, as determined by the Board from time to time. Directors are
elected annually to serve for one-year terms and until their successors are duly
elected and qualified. Executive officers of the Company are elected annually by
the Board of Directors and serve until their successors are elected and
qualified. There are no family relationships among any of the directors or
officers of the Company.
The Company, Messrs. Pratt, Seymour and Neal (the "Management
Shareholders"), certain affiliates of the Management Shareholders who hold
shares of Common Stock and all of the current holders of Preferred Stock (the
"Investor Shareholders") are parties to a shareholders' agreement dated June 6,
1996 (the "Shareholders' Agreement"). The Shareholders' Agreement provides that
the Board of Directors shall consist of nine members, and that the Management
Shareholders and their affiliates and the Investor Shareholders will vote their
shares in order to elect to the Board of Directors the following: (i) the chief
executive officer of the Company; (ii) three members designated by the Investor
Shareholders, each of whom must be an employee, officer or partner of an
Investor Shareholder, (iii) one member designated by TRW; (iv) one member
designated by the Management Shareholders, who must be a Management Shareholder;
(v) two members designated by the Investor Shareholders, who may not otherwise
be affiliated with the Investor Shareholders; and (vi) one member designated by
the Management Shareholders, who may not otherwise be affiliated with the
Company. The Shareholders' Agreement will terminate upon the completion of this
offering.
BOARD COMMITTEES
The Board of Directors has two standing committees, a Compensation
Committee and an Audit Committee. The Compensation Committee has the authority
to (i) establish and implement the cash and noncash compensation of each
officer, salaried employee and agent of or consultant to the Company (subject to
any employment or other agreement such officer, employee, agent or consultant
may have with the Company) on an annual, semi-annual or other periodic basis;
and (ii) establish and implement every personnel policy, collective bargaining
agreement, health or dental insurance plan, retirement plan, profit sharing
plan, deferred compensation plan, stock option or other stock-based benefit
plan, bonus plan, incentive or any other employee benefit plan or agreement
provided by the Company to its employees, officers, directors
41
<PAGE> 43
or consultants. See "-- Stock Option Plans." The members of the Compensation
Committee are Messrs. van der Kaay, Paladino and Wilkinson, none of whom is an
employee of the Company.
The Audit Committee has the authority to (i) nominate an independent public
accounting firm to serve as the Company's external auditor for approval by the
whole Board of Directors and recommend the compensation of the external auditors
to the whole Board of Directors for its approval, (ii) discuss with the
Company's external auditors the scope and timing of their examination of the
financial records of the Company, with particular attention to those areas where
either the Committee or the external auditors believe special attention should
be directed, (iii) implement, and solicit the advice of external auditors on,
such internal accounting controls, procedures and systems, including an internal
auditor department, as may help to ensure accountability and the preparation of
complete and correct financial statements, (iv) direct, monitor and discuss with
the Company's internal auditors the scope of their examinations, the
effectiveness of internal controls, the revision or establishment of new
controls and the findings of their audits and their recommendations with respect
thereto, (v) direct the internal and external auditors to perform such
supplemental reviews or audits as it in its discretion deems appropriate and
(vi) review the external auditor's annual findings and recommendations to
management and advise the whole Board of Directors with respect thereto. The
members of the Audit Committee are Ms. Zinkiewicz and Messrs. Fleming and
Wilkinson, none of whom is an employee of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the formation of the Compensation Committee in March 1994, the
Board of Directors made all determinations with respect to executive officer
compensation. No interlocking relationships exist between the Company's Board of
Directors or Compensation Committee and the board of directors or compensation
committee of any other company. During the fiscal year ended March 31, 1996, Mr.
Pratt served on the Compensation Committee. Mr. Pratt has been Chairman and
Chief Technical Officer of the Company since September 1992. Mr. van der Kaay
also served on the Compensation Committee during such fiscal year. Mr. van der
Kaay is Executive Vice President of Allen Telecom, from which the Company
obtained a total of $1.5 million in bridge financing in 1995. Each of the
Company's directors, or an affiliate thereof, has purchased securities of the
Company, except for Mr. Fleming. Mr. Fleming was formerly associated with
Norwest Equity Partners IV and Norwest Equity Partners V, both of which own
securities of the Company. See "Certain Transactions" and "Principal and Selling
Shareholders."
COMPENSATION OF DIRECTORS
Upon consummation of this offering, each director who is not an employee of
the Company will receive $6,000 per year for service as a member of the Board of
Directors and $2,000 per year for service on each committee of the Board of
Directors on which he or she serves. In addition, all directors are reimbursed
for expenses incurred by them in their capacity as directors. Other than the
reimbursement of expenses, directors who are employees of the Company do not
receive additional compensation for service.
The Company has adopted the Nonemployee Directors' Option Plan (the
"Directors' Option Plan"). Pursuant to the Directors' Option Plan, each director
who is not an employee of the Company at the time of consummation of this
offering, and each nonemployee director of the Company who is first elected to
the Board of Directors thereafter, will receive options to purchase 10,000
shares of Common Stock of the Company. In addition, each nonemployee director of
the Company will receive an annual award of options to purchase 5,000 shares of
Common Stock upon the anniversary of his or her initial grant so long as he or
she remains a member of the Board of Directors. See "-- Stock Option
Plans -- Directors' Option Plan."
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<PAGE> 44
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid during the Company's fiscal year ended March 31, 1996 to the Company's
President and Chief Executive Officer and the four most highly compensated
executive officers other than the President and Chief Executive Officer
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------
AWARDS
---------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
FISCAL ------------------- OPTIONS/SARS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (NO. OF SHARES)
--------------------------- ------ -------- ------- ---------------
<S> <C> <C> <C> <C>
David A. Norbury................................ 1996 $152,771 $35,950 41,818
Chief Executive Officer and President
William J. Pratt................................ 1996 $134,460 $32,250 21,818
Chairman and Chief Technical Officer
Jerry D. Neal................................... 1996 $106,231 $27,000 36,818
Vice President of Sales and Marketing
Powell T. Seymour............................... 1996 $ 89,654 $24,000 11,818
Vice President of Operations and Secretary
William A. Priddy, Jr........................... 1996 $ 71,558 $19,500 11,818
Vice President of Finance and Treasurer
</TABLE>
At March 31, 1997, the base salary in effect for each of the Named
Executive Officers was as follows: Mr. Norbury -- $175,000; Mr.
Pratt -- $155,000; Mr. Neal -- $135,000; Mr. Seymour -- $115,000; and Mr.
Priddy -- $95,000. The base salary in effect at such time for Arthur E.
Geissberger, Vice President of Wafer Fabrication Operations, was $130,000. The
Compensation Committee has adopted a discretionary bonus program pursuant to
which bonuses may be awarded to officers of the Company from time to time in
amounts reflecting the Compensation Committee's subjective evaluation of such
officers' contributions to the Company. In October 1996, the Compensation
Committee awarded bonuses payable on December 1, 1996 to the Named Executive
Officers as follows: Mr. Norbury -- $64,000; Mr. Pratt -- $49,350; Mr. Neal --
$36,000; Mr. Seymour -- $30,000; and Mr. Priddy -- $22,500.
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<PAGE> 45
OPTION GRANTS DURING FISCAL 1996
The following table sets forth for each of the Named Executive Officers
certain information concerning stock options granted during the year ended March
31, 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES
SECURITIES PERCENT OF TOTAL OF STOCK PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM(1)
OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION ----------------------------
NAME GRANTED FISCAL 1996 SHARE DATE 5% 10%
- ---- ---------- ---------------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
David A. Norbury............. 1,818(2) 0.7% $0.28 8/1/05 $ 320 $ 811
Chief Executive 40,000(3) 16.0% $0.91 12/1/05 22,892 58,012
Officer and President
William J. Pratt............. 1,818(2) 0.7% $0.28 8/1/05 320 811
Chairman and Chief 20,000(3) 8.0% $0.91 12/1/05 11,445 29,006
Technical Officer
Powell T. Seymour............ 1,818(2) 0.7% $0.28 8/1/05 320 811
Vice President of 10,000(3) 4.0% $0.91 12/1/05 5,723 14,503
Operations and Secretary
Jerry D. Neal................ 1,818(2) 0.7% $0.28 8/1/05 320 811
Vice President 35,000(3) 14.0% $0.91 12/1/05 20,030 50,761
of Sales and Marketing
William A. Priddy, Jr........ 1,818(2) 0.7% $0.28 8/1/05 320 811
Vice President of 10,000(3) 4.0% $0.91 12/1/05 5,723 14,503
Finance and Treasurer
</TABLE>
- ---------------
(1) The potential realizable value is calculated based on the term of the option
at its time of grant (10 years) and is calculated by assuming that the
stock price on the date of grant as determined by the Board of Directors
appreciates at the indicated annual rate compounded annually for the entire
term of the option and that the option is exercised and sold on the last
day of its term for the appreciated price. The 5% and 10% assumed rates of
appreciation are derived from the rules of the Securities and Exchange
Commission (the "Commission") and do not represent the Company's estimate
or projection of the future Common Stock price.
(2) Such options vest and become exercisable in five equal installments on the
first five anniversaries of the date of grant (August 1, 1995).
(3) Such options vest and become exercisable in five equal installments on the
first five anniversaries of the date of grant (December 1, 1995).
In December 1996, the Compensation Committee granted the following options
to the Named Executive Officers: David A. Norbury -- 50,000 shares; William J.
Pratt -- 50,000 shares; Powell T. Seymour -- 20,000 shares; Jerry D.
Neal -- 30,000 shares; and William A. Priddy, Jr. -- 27,000 shares. All such
options vest and become exercisable in five equal installments on each of the
five anniversaries of the date of grant, are exercisable at $6.50 per share and
expire on December 3, 2006.
STOCK OPTION PLANS
1992 Stock Option Plan
The Company's 1992 Stock Option Plan (the "1992 Option Plan") was adopted
by the shareholders of the Company in February 1992. The 1992 Option Plan
provides for the grant of options to purchase Common Stock to key employees,
non-employee directors and advisors and consultants in the service of the
Company. The 1992 Option Plan permits the granting of both incentive stock
options (options that meet the requirements of Section 422A of the Internal
Revenue Code of 1986, as amended (the "Code")) ("Incentive Options") and
nonqualified stock options (options that do not meet such requirements)
("Nonqualified
44
<PAGE> 46
Options"). The aggregate number of shares of Common Stock that may be issued
pursuant to options granted under the 1992 Option Plan may not exceed 1,426,000
shares, subject to adjustment upon the occurrence of certain events affecting
the Company's capitalization.
The 1992 Option Plan is administered by the Compensation Committee of the
Board of Directors (see "-- Board Committees" and "-- Compensation Committee
Interlocks and Insider Participation"), which is authorized, subject to the
provisions of the 1992 Option Plan, to determine to whom and at what time
options may be granted, the designation of each option as either an Incentive
Option or a Nonqualified Option, the per share exercise price, the duration of
each option, the number of shares subject to each option, the rate and manner of
exercise and the timing and form of payment.
An Incentive Option may not have an exercise price less than the fair
market value of the Common Stock on the date of the grant or an exercise period
that exceeds ten years from the date of grant, may not be granted to any person
who holds more than 10% of the total combined voting power of all classes of
capital stock of the Company (unless the terms of such Incentive Option meet
certain additional criteria) and is subject to certain other limitations that
allow the optionee to qualify for favorable tax treatment. Nonqualified Options
may have an exercise price less than the fair market value of the underlying
Common Stock on the date of grant and may have an exercise period of more than
ten years from the date of grant. Other than as described below, no option
granted under the 1992 Option Plan may be exercisable during the six months
immediately following the date of grant.
Except as may be provided in an individual option agreement, if the
employment or service of a person to whom an option has been granted under the
1992 Option Plan is terminated for any reason, the optionee or his or her
personal representative may exercise such option to the extent that he or she
was entitled to exercise it as of the date of termination only during the 30-day
period following such termination and in no event after the expiration of ten
years from the date such option was granted. No option granted under the 1992
Option Plan may be transferred by the optionee.
The 1992 Option Plan includes provisions designed to protect the rights of
optionholders upon the occurrence of certain events affecting the capital stock
of the Company, and provides for the acceleration of the exercisability of all
options granted thereunder in the event of the acquisition or a sale of
substantially all the assets of the Company or a business combination in which
the Company's shareholders would receive less than 50% of the resulting
corporation's voting capital stock.
As of March 31, 1997, the Company had granted options to employees
(including certain officers; see "-- Option Grants During Fiscal 1996" and
"Principal and Selling Shareholders") for 1,060,556 shares of Common Stock under
the 1992 Option Plan, of which options for 18,080 shares have been exercised and
options for 15,700 shares have been forfeited. The exercise prices of
outstanding options granted under the 1992 Option Plan range from $0.15 to $9.00
per share, with a weighted average of $2.06 per share. The Company intends to
terminate the 1992 Option Plan effective upon the consummation of this offering,
after which no additional options will be awarded under the 1992 Option Plan.
Such action will not affect options outstanding under the 1992 Option Plan.
1997 Key Employees' Stock Option Plan
The Company has adopted the 1997 Key Employees' Stock Option Plan (the
"1997 Option Plan"), which provides for the grant of options to purchase Common
Stock to key employees and independent contractors in the service of the
Company. The 1997 Option Plan permits the granting of both Incentive Options and
Nonqualified Options. The aggregate number of shares of Common Stock that may be
issued pursuant to options granted under the 1997 Option Plan may not exceed
1,300,000 shares, subject to adjustment in the event of certain events affecting
the Company's capitalization.
The 1997 Option Plan is administered by the Compensation Committee of the
Board of Directors (see "-- Board Committees"), which is authorized, subject to
the provisions of the 1997 Option Plan, to determine to whom and at what time
options may be granted, the designation of the option as either an Incentive
Option
45
<PAGE> 47
or a Nonqualified Option, the per share exercise price, the duration of each
option, the number of shares subject to each option, the rate and manner of
exercise and the timing and form of payment.
An Incentive Option may not have an exercise price less than the fair
market value of the Common Stock on the date of the grant or an exercise period
that exceeds 10 years from the date of grant, and is subject to certain other
limitations that allow the optionee to qualify for favorable tax treatment.
Nonqualified Options may have an exercise price less than the fair market value
of the underlying Common Stock on the date of grant but, like Incentive Options,
are limited to an exercise period of no longer than 10 years.
Except to the extent, if any, as may be permitted by the Code, Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") or
any successor statute or rule, an option granted under the 1997 Option Plan will
not be transferable (including by pledge or hypothecation) other than by will or
the laws of intestate succession, and such an option will be exercisable during
the optionee's lifetime only by the optionee. If an optionee is subject to
Section 16 of the Exchange Act, shares acquired upon the exercise of an option
will not, without the consent of the Compensation Committee, be transferable
(including by pledge or hypothecation) until the expiration of six months after
the date the option was granted. In addition, the Company may impose such
restrictions on any shares acquired upon exercise of options granted under the
1997 Option Plan as it may deem advisable, including, without limitation,
transfer and other restrictions necessary to ensure compliance with the
Securities Act and any blue sky or securities laws applicable to such shares.
As a general matter, no option granted under the 1997 Option Plan to an
optionee who was an employee of the Company or a related corporation at the time
of the grant may be exercised unless the optionee is, at the time of exercise,
an employee of the Company or any of its subsidiaries and has been an employee
continuously since the date the option was granted, subject to certain
post-termination provisions in the case of Incentive Options.
Directors' Option Plan
The Company has adopted the Directors' Option Plan, the purpose of which is
to compensate nonemployee directors for their service on the Board of Directors,
enable such directors to increase their holdings of Common Stock and allow the
Company to attract and retain qualified nonmanagement directors. Under the
Directors' Option Plan, directors who are not employees of the Company are
entitled to receive options to acquire shares of Common Stock in accordance with
the terms of the plan. An aggregate of 200,000 shares of Common Stock have been
reserved for issuance under the Directors' Option Plan, subject to adjustment
for certain events affecting the Company's capitalization. There currently are
five directors of the Company eligible to participate in the Directors' Option
Plan.
The Directors' Option Plan is administered by the Compensation Committee of
the Board of Directors. Subject to the provisions of the plan, the Compensation
Committee has full and final authority, in its discretion, to establish, amend
and rescind rules and regulations for the administration of the plan, to
construe and interpret the plan, the rules and regulations for the plan and the
agreements evidencing options and to make all other determinations deemed
necessary or advisable for administering the plan. However, no director or any
other person has any discretion with respect to the granting of options pursuant
to the plan.
Under the Directors' Option Plan, each director who is not an employee of
the Company will be entitled to receive an initial award in the form of an
option to purchase 10,000 shares of Common Stock of the Company at the time of
consummation of this offering. Such option may be exercised upon consummation of
this offering at the initial public offering price and will expire to the extent
not exercised prior to the tenth anniversary of the date on which this offering
is consummated. In addition, each nonemployee director of the Company who is
first elected to the Board of Directors after consummation of this offering will
be granted an initial award (an "Initial Award") on the date of such election of
options to purchase 10,000 shares of Common Stock of the Company. Further, each
nonemployee director of the Company will be granted an award (an "Annual Award")
to purchase 5,000 shares of Common Stock of the Company on each anniversary of
his or her initial grant so long as he or she remains a member of the Board of
Directors.
46
<PAGE> 48
Initial Awards and Annual Awards will be exercisable on a per share basis
at the fair market value per share of the Common Stock on the date of grant. For
purposes of the Directors' Option Plan, "fair market value" means the closing
sale price of the Common Stock as reported on the Nasdaq National Market on the
date of grant.
Initial Awards and Annual Awards will vest in equal annual installments
over the three-year period following the date of grant and will expire on the
tenth anniversary of the date of grant. Except as described below, no options
covered by Initial Awards and Annual Awards may be exercised unless the optionee
is, on the date of exercise, a director and has been a director continuously
since the date of grant.
Options granted under the Directors' Option Plan will be nonqualified stock
options subject to federal income taxation under Section 83 of the Code. In
general, under Section 83 of the Code, an optionee will not be subject to
federal income tax upon the grant of an option. The exercise of an option,
however, will result in tax consequences to the optionee and to the Company.
Employee Stock Purchase Plan
The Company has adopted the Employee Stock Purchase Plan (the "Stock
Purchase Plan"), which is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Code. All regular full-time employees of the
Company (including officers) and all other employees whose customary employment
is for more than a specified number of months in any calendar year or more than
a specified number of hours per week, who in either case have been employed by
the Company on the commencement date of the first purchase period under the
Stock Purchase Plan or for at least three months, may participate in the Stock
Purchase Plan. Directors who are not employees will not be eligible. An
aggregate of 500,000 shares of Common Stock have been reserved for offering
under the Stock Purchase Plan and are available for purchase thereunder, subject
to anti-dilution adjustments in the event of certain changes in the capital
structure of the Company.
To participate in the Stock Purchase Plan, an employee must authorize the
Company in writing to deduct an amount (not less than 1% nor more than 15% of a
participant's base compensation) from his or her pay during six-month periods to
be specified in the Stock Purchase Plan (each a "Purchase Period"). On the first
day of each Purchase Period, the Company will grant to each participating
employee an option to purchase up to a specified number of shares of Common
Stock. The exercise price for the option for each Purchase Period will be the
lesser of 85% of the fair market value of the Common Stock on the first or last
business day of the Purchase Period. The fair market value will be the closing
price of the Common Stock as quoted on the Nasdaq National Market. If an
employee is not a participant on the last day of the Purchase Period, such
employee will not be entitled to exercise his or her option, and the amount of
his or her accumulated payroll deduction will be refunded to the employee. An
employee's rights under the Stock Purchase Plan will terminate upon his or her
voluntary withdrawal from the plan at any time or upon termination of
employment.
The Company makes no cash contributions to the Stock Purchase Plan, but
bears the expenses of its administration. The Stock Purchase Plan is
administered by the Compensation Committee, which has authority to establish the
number and duration of the Purchase Periods during the term of the Stock
Purchase Plan, and to make rulings and interpretations thereunder.
CERTAIN TRANSACTIONS
SALES OF PREFERRED STOCK
Since the incorporation of the Company in 1991, the Company has issued, in
private placement transactions, shares of Preferred Stock as follows: 975,000
shares of Class A-1 Preferred Stock at $1.538 per share in cash and in
satisfaction of outstanding debt; 1,034,091 shares of Class A-2 Preferred Stock
at $1.692 per share in cash; 3,300,000 shares of Class B Preferred Stock at
$2.75 per share in cash and in satisfaction of outstanding debt; and 2,645,229
shares of Class C Preferred Stock at $6.048 per share in cash and in
satisfaction of outstanding debt. In addition, the Company has issued to TRW
2,683,930 shares of Common
47
<PAGE> 49
Stock on the terms and conditions described below in exchange for TRW's
execution and performance of the License Agreement, and the TRW Convertible Note
and the TRW Warrant, which together provide for the issuance, under certain
conditions, of up to an aggregate amount of 2,111,111 shares of equity
securities at an average price of $9.474 per share. See "-- TRW." The Company
has also issued warrants to Allen Telecom for the purchase of up to 54,546
shares of Common Stock at $2.75 per share and 12,400 shares of Common Stock at
$6.048 per share. See "-- Other Transactions." The outstanding shares of
Preferred Stock will convert into an aggregate of 7,954,320 shares of Common
Stock upon the consummation of this offering. The holders of such converted
shares of Common Stock are entitled to certain registration rights with respect
to the Common Stock issued or issuable upon conversion thereof. See "Description
of Capital Stock -- Registration Rights." The following table sets forth the
classes of Preferred Stock and number of shares purchased by the Company's
directors, executive officers and five percent shareholders and their respective
affiliates:
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS B CLASS C
INVESTOR PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
- -------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
TRW(1).................................. 0 0 0 826,446
Allen Telecom(2)........................ 162,500 219,621 394,086 178,071
Erik H. van der Kaay(2)................. 0 0 10,345 2,324
Robert A. Paul(2)....................... 0 0 20,690 4,648
Philip W. Colburn(2).................... 0 0 20,690 4,648
Robert A. Youdelman(2).................. 0 0 10,345 2,324
Advanced Technology Ventures, III,
L.P.(3)............................... 260,000 275,758 280,795 126,760
Brantley Ventures Partners II, L.P. .... 276,250 340,265 291,934 0
Norwest Equity Partners, IV............. 0 0 620,690 0
Norwest Equity Partners, V.............. 0 0 0 139,446
Kitty Hawk Capital Limited Partnership
II(4)................................. 276,250 198,447 230,993 49,603
NationsBanc Capital Corporation......... 0 0 0 744,048
</TABLE>
- ---------------
(1) Terri D. Zinkiewicz, who is a director of the Company, is Director of
Finance and Business of the Electronic Systems and Technology Division of
TRW's Space & Electronics Group.
(2) Mr. van der Kaay, who is a director of the Company, is Executive Vice
President of Allen Telecom, and Messrs. Paul, Colburn and Youdelman are
President and Chief Executive Officer, Chairman of the Board of Directors
and Executive Vice President and Chief Financial Officer, respectively, of
Allen Telecom.
(3) Dr. Albert E. Paladino, who is a director of the Company, is a general
partner of ATV Associates III, L.P., which is a general partner of Advanced
Technology Ventures III, L.P.
(4) Walter H. Wilkinson, Jr., who is a director of the Company, is a general
partner of Kitty Hawk Partners Limited Partnership, which is a general
partner of Kitty Hawk Capital Limited Partnership II.
TRW
On June 6, 1996, the Company initiated a strategic alliance with TRW and
entered into agreements pursuant to which the Company issued to TRW (i) 826,446
shares of Class C Preferred Stock in exchange for $5,000,000 in cash (which
shares will convert on a one-for-one basis into Common Stock upon the closing of
this offering); (ii) 2,683,930 shares of Common Stock in exchange for TRW's
execution and performance of the License Agreement, all of which shares are
subject to certain voting and transfer restrictions as described below; (iii)
the TRW Convertible Note in the maximum principal amount of $10,000,000,
convertible into up to 1,111,111 shares of Common Stock; and (iv) the TRW
Warrant for the purchase, under certain circumstances, of up to 1,000,000 shares
of Common Stock at $10.00 per share. The Company also entered into the Supply
Agreement, which provides for the purchase by the Company from TRW of certain
minimum quantities of GaAs HBT wafers and GaAs epitaxial wafers during the years
1996 to 2000, and TRW has agreed to refrain from taking certain actions
regarding control of the Company during the five years following this offering.
See "Risk Factors -- Dependence on TRW" and "Business -- Strategic Relationship
with TRW."
48
<PAGE> 50
License Agreement
Pursuant to the License Agreement, TRW granted to the Company fully paid
up, royalty-free worldwide licenses with respect to certain of TRW's existing
and future GaAs HBT patent rights and MBE process patent rights, in each case
with accompanying know-how and technical information, to design, develop,
manufacture, market, service and repair certain existing products of the Company
and any product with an emitter with a width of one to three microns, in either
case provided such products are for commercial wireless communication
applications and operate on signals having a frequency of less than 10 GHz. The
license with respect to the GaAs HBT patent rights was effective immediately,
and the MBE patent right license becomes effective as of the date that the
Company's GaAs HBT wafer fabrication facility becomes operational. Both licenses
are exclusive as to all persons including TRW, except that TRW has reserved the
right to fulfill existing contractual obligations and to provide to customers on
an ongoing basis certain specified foundry services. At the option of TRW, the
license will become non-exclusive if the Company fails to meet the following
revenue goals, as measured in accordance with GAAP, following the date on which
the Company's GaAs HBT wafer fabrication facility becomes operational: during
the first year, $30 million; during the second year, $65 million; and during the
third year, $125 million. See "Risk Factors -- Dependence on TRW."
TRW also granted certain non-exclusive licenses to the Company and agreed
to provide certain technical assistance to the Company in connection with the
design, construction and operation of the Company's GaAs HBT wafer fabrication
facility. The License Agreement provides that TRW will offer to the Company, on
the same terms as are offered to third parties, certain non-GaAs HBT process
technologies that it develops in the future for a period of ten years following
the date on which the Company's GaAs HBT wafer fabrication facility becomes
operational. The Company has agreed to share with TRW any modifications or
improvements and to grant TRW a non-exclusive, royalty-free license to use such
modifications or improvements outside the Company's field of use.
The licenses granted pursuant to the License Agreement may be terminated by
TRW if the Company's wafer fabrication facility is not operational by December
31, 1998, unless the parties agree upon a later date. See "Risk
Factors -- Dependence on TRW."
Restricted Stock Agreement
The Company and TRW have entered into a restricted stock agreement with
respect to the 2,683,930 shares of Common Stock issued to TRW in consideration
of the License Agreement. Pursuant to this agreement, TRW has granted to David
A. Norbury, the President of the Company, or any successor President, an
irrevocable proxy to vote these shares in favor of any measure approved by the
Board of Directors of the Company. Any attempt by TRW to revoke this proxy would
result in all of the shares becoming redeemable, at the option of the Company,
for an aggregate purchase price of $1.00. The agreement also provides that the
shares may not be transferred by TRW to any third party without the Company's
written consent, and that any attempt at such a transfer would result in the
shares becoming redeemable as described above. Such a right of redemption will
also arise with respect to half of the 2,683,930 shares subject to the agreement
if the circumstances that would permit termination of the License Agreement
exist, namely if the Company's wafer fabrication facility is not operational by
December 31, 1998, unless the parties agree upon a later date. The agreement
does not affect TRW's right to receive any cash dividends that may be declared
and payable with respect to the Common Stock. The agreement will terminate 30
days following the agreed-upon date by which the facility must have become
operational.
TRW Convertible Note
Under the terms of the TRW Convertible Note, the Company has borrowed $10
million from TRW. Unless otherwise agreed to in writing by TRW, such funds must
be used exclusively for the planning and construction and the operational,
working capital and related requirements of the Company's wafer fabrication
facility. The unpaid principal amount under the TRW Convertible Note bears
simple interest at the rate of 6% per annum and, subject to the prior conversion
of the TRW Convertible Note, all principal and accrued interest thereon is
payable in full in a lump sum on June 6, 2003. The indebtedness evidenced by the
TRW
49
<PAGE> 51
Convertible Note is subordinated to certain other indebtedness of the Company.
The Company may at its option prepay amounts owed under the TRW Convertible Note
without premium or penalty, unless TRW has initiated the conversion of the TRW
Convertible Note as described in the following paragraph.
The TRW Convertible Note may be converted at any time before December 31,
1998 into up to 1,111,111 shares of Common Stock at a price of $9.00 per share.
The TRW Convertible Note must be converted immediately prior to the closing of
an underwritten public offering of Common Stock in which gross proceeds to the
Company are at least $15 million and in which the offering price to the public
is at least $12.00 per share and implies a pre-financing fully diluted valuation
of the Company of at least $75 million. Based on the $10 million outstanding
principal amount, and assuming an initial public offering price of $12.00 per
share, the TRW Convertible Note will be converted into 1,111,111 shares of
Common Stock immediately prior to the closing of this offering. If this offering
does not meet all of the criteria described above, however, there will be no
mandatory conversion, and the TRW Convertible Note will continue to represent
debt of the Company.
As part of the TRW Convertible Note financing arrangement, the Company
issued to TRW a warrant (the "Deficit Warrant") for the purchase of up to
1,111,111 shares of Common Stock at a price of $9.00 per share. The Deficit
Warrant is exercisable only to the extent that the TRW Convertible Note is not
converted into Common Stock. If the TRW Convertible Note is converted into
Common Stock in conjunction with this offering, the Deficit Warrant will
terminate at such time without being exercised. If the TRW Convertible Note is
not converted in full, the Deficit Warrant will remain outstanding and will not
terminate until the earlier of the full conversion of the TRW Convertible Note
or December 31, 1998.
TRW Warrant
The TRW Warrant provides for the purchase of up to 1,000,000 shares of
Common Stock at a price of $10.00 per share. The TRW Warrant first becomes
exercisable on the date that the Company's wafer fabrication facility becomes
operational, and thereafter must be exercised before the first to occur of (i)
the second anniversary of such date and (ii) 90 days after the Company has
provided notice to TRW that the current market price of the Common Stock is, and
has been for at least 20 consecutive trading days, greater than $12.00 per
share. If the Company's wafer fabrication facility does not become operational
by December 31, 1998, the TRW Warrant will terminate and be of no further force
or effect.
Supply Agreement
Under the terms of the Supply Agreement, the Company has agreed to purchase
from TRW, and TRW has agreed to sell to the Company, certain minimum quantities
of three-inch GaAs HBT processed wafers and four-inch GaAs epitaxial wafer
starting material until December 31, 2000. See "Risk Factors -- Dependence on
TRW" and "Business -- Strategic Relationship with TRW."
Standstill Agreement
TRW has agreed with the Company and the current holders of Preferred Stock
that, before the fifth anniversary of the closing of this offering, it will not,
and will cause its affiliates not to, (i) acquire, offer to acquire or agree to
acquire, directly or indirectly, any voting securities or rights or options to
acquire any assets of the Company or any voting securities of the Company in
excess of the lesser of (a) 40% of the Company's equity securities or (b) the
actual maximum percentage of the Company's equity securities owned by TRW
(assuming conversion by TRW of all of its convertible securities and the
exercise of any warrants or options held by TRW), calculated on a fully diluted
basis; (ii) make any public announcement with respect to, or submit any proposal
for, any extraordinary transaction involving the Company or its securities or
assets; (iii) make, or in any way participate in, any solicitation of proxies to
vote, or seek to advise or influence any person or entity with respect to the
voting of, any voting securities of the Company; (iv) form, join or in any way
participate in a "group" within the meaning of the Exchange Act with respect to
any voting securities of the Company; and (v) solicit or encourage any person to
propose a business combination or similar transaction with, or a change in
control of, the Company. Notwithstanding the foregoing, if any party makes a
bona fide offer to purchase all of the outstanding shares of the Company, TRW
will be entitled during the 30-day period
50
<PAGE> 52
following notification of such offer to make a counterproposal for all
outstanding shares of the Company on the same or better terms and conditions as
provided in the offer.
OTHER TRANSACTIONS
On August 4, 1995, the Company entered into a note and warrant purchase
agreement with a subsidiary of Allen Telecom, which is a shareholder of the
Company and of which Erik H. van der Kaay, who is a director of the Company, is
Executive Vice President. See "Management -- Directors and Executive Officers"
and "Principal and Selling Shareholders." This agreement provided for the
borrowing by the Company of up to $2,000,000 and for the issuance to such
subsidiary of warrants to purchase up to 109,091 shares of Common Stock at a
price of $2.75 per share. On August 7, 1995, the Company borrowed $1,000,000
from such subsidiary pursuant to this agreement, which amount earned interest at
a rate equal to the prime rate of interest as reported in the Wall Street
Journal plus one percent, and issued a warrant for the purchase of up to 54,546
shares of Common Stock for $2.75 per share. On November 10, 1995, the Company
borrowed an additional $500,000 pursuant to this agreement, at the same rate of
interest, and issued a warrant for the purchase of 27,272 shares of Common Stock
for $2.75 per share. Pursuant to the terms of this second warrant, and by virtue
of the closing of the sale of 1,818,783 shares of Class C Preferred Stock on
November 22, 1995, the number of shares purchasable under this warrant was
reduced to 12,400 and the purchase price was increased to $6.048 per share. The
Company satisfied its obligations to pay principal and interest on amounts
borrowed under this agreement on November 22, 1995, when it repaid $454,279 in
cash and issued an aggregate of 178,071 shares of Class C Preferred Stock to the
Allen Telecom subsidiary, which shares are now owned directly by Allen Telecom.
Allen Telecom continues to hold warrants for the purchase of an aggregate of
66,946 shares of Common Stock; the warrant to purchase up to 54,546 shares for
$2.75 per share expires on August 6, 2000 and the warrant to purchase 12,400
shares for $6.048 per share expires on November 9, 2000.
The Company and all of the current holders of Preferred Stock are party to
an agreement pursuant to which such holders have certain rights to require the
Company to register the sale of equity securities of the Company held by them,
or to include such securities in a registration initiated by the Company. See
"Description of Capital Stock -- Registration Rights."
The Company has granted options to purchase Common Stock under the 1992
Option Plan to certain executive officers. See "Management -- Option Grants
During Fiscal 1996," "-- Stock Option Plans -- 1992 Stock Option Plan" and
"Principal and Selling Shareholders."
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<PAGE> 53
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information with respect to the beneficial
ownership of Common Stock as of March 31, 1997, and as adjusted to reflect the
sale of shares of Common Stock offered by the Company and the Selling
Shareholders hereby (assuming no exercise of the Underwriters' over-allotment
option), by (i) each person known by the Company to own beneficially five
percent or more of the Company's outstanding shares of Common Stock, (ii) each
director of the Company, (iii) the Named Executive Officers and (iv) all current
directors and executive officers as a group. Beneficial ownership is determined
in accordance with the rules of the Commission. In computing the number of
shares beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options or warrants held by that
person that are currently exercisable or that are or may become exercisable
within 60 days of the date hereof are deemed outstanding. Such shares, however,
are not deemed outstanding for the purposes of computing the percentage
ownership of any other person. Except as indicated in the footnotes to this
table and pursuant to applicable community property laws, each shareholder named
in the table has sole voting and investment power with respect to the shares set
forth opposite such shareholder's name.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
--------------------- ---------------------
NUMBER OF SHARES NUMBER OF
SHARES PERCENT OFFERED SHARES PERCENT
---------- -------- ------- ---------- --------
<S> <C> <C> <C> <C> <C>
TRW(1)......................................... 4,621,487 37.4 -- 4,621,487 31.1
Robert G. Paul(2).............................. 1,046,562 8.4 -- 1,046,562 7.0
Allen Telecom(3)............................... 1,021,224 8.2 -- 1,021,224 6.8
Advanced Technology Ventures III, L.P.(4)...... 943,313 7.6 -- 943,313 6.4
Dr. Albert E. Paladino(5)...................... 943,313 7.6 -- 943,313 6.4
Brantley Ventures Partners II, L.P.(6)......... 908,449 7.4 -- 908,449 6.1
Norwest Equity Partners IV(7).................. 760,136 6.2 -- 760,136 5.1
Norwest Equity Partners V(8)................... 760,136 6.2 -- 760,136 5.1
Kitty Hawk Capital Limited Partnership II(9)... 755,293 6.1 -- 755,293 5.1
Walter H. Wilkinson, Jr.(10)................... 755,293 6.1 -- 755,293 5.1
NationsBanc Capital Corporation(11)............ 744,048 6.0 -- 744,048 5.0
William J. Pratt(12)........................... 384,206 3.1 20,000 364,206 2.5
Powell T. Seymour(13).......................... 146,531 1.2 7,000 139,531 *
Jerry D. Neal(14).............................. 101,088 * 10,000 91,088 *
David A. Norbury(15)........................... 81,399 * -- 81,399 *
William A. Priddy, Jr.(16)..................... 24,836 * -- 24,836 *
Erik H. van der Kaay(17)....................... 12,669 * -- 12,669 *
Directors and executive officers as a group (11
persons)(18)................................. 2,449,335 19.6 37,000 2,412,335 16.1
</TABLE>
- ---------------
* Indicates less than one percent
(1) Includes (i) 1,111,111 shares of Common Stock issuable upon the conversion
of a $10,000,000 principal amount promissory note to be converted
immediately prior to the completion of this offering and (ii) 2,683,930
shares of Common Stock as to which TRW has granted an irrevocable proxy to
the President of the Company to vote such shares in favor of any measure
approved by the Board of Directors of the Company. Does not include
1,000,000 shares of Common Stock issuable upon the exercise of the TRW
Warrant, which is exercisable after such time as the Company's wafer
fabrication facility becomes operational. See "Certain
Transactions -- TRW." Terri D. Zinkiewicz, who is a director of the
Company, is Director of Finance and Business of the Electronic Systems and
Technology Division of TRW's Space & Electronics Group. Ms. Zinkiewicz does
not hold any voting or investment power over such shares. TRW's address is
1900 Richmond Road, Cleveland, Ohio 44124.
(2) Includes 1,021,224 shares of Common Stock held by Allen Telecom. Mr. Paul
is President and Chief Executive Officer of Allen Telecom. Mr. Paul
disclaims beneficial ownership of such shares.
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<PAGE> 54
(3) Includes (i) 54,546 shares of Common Stock issuable upon the exercise of a
warrant exercisable through August 6, 2000 and (ii) 12,400 shares of Common
Stock issuable upon the exercise of a warrant exercisable through November
9, 2000. See "Certain Transactions -- Other Transactions." Does not include
(i) 12,669 shares of Common Stock held by Erik H. van der Kaay, who is
Executive Vice President of Allen Telecom and a director of the Company,
(ii) 25,338 shares of Common Stock held by Robert G. Paul, who is President
and Chief Executive Officer of Allen Telecom, (iii) 25,338 shares of Common
Stock held by Phillip W. Colburn, who is Chairman of the Board of Directors
of Allen Telecom, and (iv) 12,609 shares of Common Stock held by Robert A.
Youdelman, who is Executive Vice President and Chief Financial Officer of
Allen Telecom. The address of Allen Telecom is 25101 Chagrin Boulevard,
Beachwood, Ohio 44122.
(4) The address of Advanced Technology Ventures III, L.P. is 281 Winter Street,
Waltham, Massachusetts 02154.
(5) Includes 943,313 shares of Common Stock held by Advanced Technology
Ventures III, L.P. Dr. Paladino, who is a director of the Company, is a
general partner of ATV Associates III, L.P., which is a general partner of
Advanced Technology Ventures III, L.P. Dr. Paladino shares voting and
investment power over such shares with Jos C. Henkens and Pieter J.
Schiller, each of whom is also a general partner of ATV Associates III,
L.P. Dr. Paladino disclaims beneficial ownership of such shares.
(6) The address of Brantley Ventures Partners II, L.P. is Suite 1150, Tower
East, 20600 Chagrin Boulevard, Cleveland, Ohio 44122.
(7) Includes 139,446 shares of Common Stock held by Norwest Equity Partners V,
which is under common control with Norwest Equity Partners IV. Robert C.
Fleming, who is a director of the Company, was formerly a general partner
of Itasca Partners, which is the general partner of Norwest Equity Partners
IV. Mr. Fleming no longer holds any voting or investment power over such
shares. The address of Norwest Equity Partners IV is Wellesley Office Park,
40 William Street, Suite 305, Wellesley, Massachusetts 02181.
(8) Includes 620,690 shares of Common Stock held by Norwest Equity Partners IV,
which is under common control with Norwest Equity Partners V. Robert C.
Fleming, who is a director of the Company, was formerly a general partner
of Itasca Partners II, which is the general partner of Norwest Equity
Partners V. Mr. Fleming no longer holds any voting or investment power over
such shares. The address of Norwest Equity Partners V is Wellesley Office
Park, 40 William Street, Suite 305, Wellesley, Massachusetts 02181.
(9) The address of Kitty Hawk Capital Limited Partnership II is Suite 202, 2700
Coltsgate Road, Charlotte, North Carolina 28211.
(10) Includes 755,293 shares of Common Stock held by Kitty Hawk Capital Limited
Partnership II. Mr. Wilkinson, who is a director of the Company, is a
general partner of Kitty Hawk Partners Limited Partnership, which is a
general partner of Kitty Hawk Capital Limited Partnership II. Mr. Wilkinson
shares voting and investment power over such shares with W. Chris Hegele,
who is also a general partner of Kitty Hawk Partners Limited Partnership.
(11) The address of NationsBanc Capital Corporation is 901 Main Street, 66th
Floor, Dallas, Texas 75202.
(12) Includes 14,206 shares of Common Stock issuable upon the exercise of
options granted under the 1992 Option Plan. See "Management -- Stock Option
Plans -- 1992 Stock Option Plan."
(13) Includes (i) 2,000 shares of Common Stock held by each of Leah B. Seymour
and Christopher M. Seymour, who are children of Mr. Seymour and (ii) 10,531
shares of Common Stock issuable upon the exercise of options granted under
the 1992 Option Plan. See "Management -- Stock Option Plans -- 1992 Stock
Option Plan." Does not include 2,000 shares of Common Stock held by each of
Wendy L. Hicks and James M. Mecum, Jr., who are children of Mr. Seymour.
(14) Includes 41,088 shares of Common Stock issuable upon the exercise of
options granted under the 1992 Option Plan. See "Management -- Stock Option
Plans -- 1992 Stock Option Plan." Does not include 2,500 shares of Common
Stock held by each of Jerry D. Neal, II, James A. Pendergrass, Judith M.
Neal and Annette L. Neal-Smith, who are children of Mr. Neal.
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<PAGE> 55
(15) Includes 81,399 shares of Common Stock issuable upon the exercise of
options granted under the 1992 Option Plan. See "Management -- Stock Option
Plans -- 1992 Stock Option Plan." Does not include 2,683,930 shares of
Common Stock held by TRW as to which TRW has granted an irrevocable proxy
to Mr. Norbury, as President of the Company, to vote such shares in favor
of any measure approved by the Board of Directors of the Company. See
"Certain Transactions -- TRW."
(16) Includes 24,836 shares of Common Stock issuable upon the exercise of
options granted under the 1992 Option Plan. See "Management -- Stock Option
Plans -- 1992 Stock Option Plan."
(17) Does not include 1,021,224 shares of Common Stock held by Allen Telecom, of
which Mr. van der Kaay is Executive Vice President. Mr. van der Kaay does
not hold any voting or investment power over such shares.
(18) Includes (i) 943,313 shares of Common Stock held by Advanced Technology
Ventures III, L.P., of which Dr. Paladino is a general partner of the
general partner; (ii) 755,293 shares of Common Stock held by Kitty Hawk
Capital Limited Partnership II, of which Mr. Wilkinson is a general partner
of the general partner; and (iii) 167,060 shares of Common Stock issuable
upon the exercise of options granted under the 1992 Option Plan. See
"Management -- Stock Option Plans -- 1992 Stock Option Plan."
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<PAGE> 56
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering, the authorized capital stock of the
Company will consist of 50,000,000 shares of Common Stock, no par value, and
5,000,000 shares of Preferred Stock, of which 14,852,441 shares of Common Stock
and no shares of Preferred Stock will be issued and outstanding. Upon completion
of this offering, and assuming the conversion of the TRW Convertible Note and no
exercise of outstanding options or warrants, the Company will have 2,176,367
shares of Common Stock reserved for issuance pursuant to outstanding options and
warrants, including a warrant that the Company may issue in the event certain
financing is provided. All outstanding shares of Common Stock are, and the
shares of Common Stock offered hereby will be, when issued, duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock of the
Company. As of March 31, 1997, there were 14 record holders of Common Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters on which the holders of Common Stock are entitled to vote and do not
have cumulative voting rights in the election of directors. Holders of Common
Stock are entitled to receive dividends when, as and if declared by the
Company's Board of Directors out of funds legally available therefor. In the
event of the liquidation, dissolution or winding up of the Company, holders of
Common Stock will be entitled to share ratably in the assets, if any, available
for distribution after payment of all creditors and the liquidation preferences
on any outstanding shares of Preferred Stock. Holders of Common Stock have no
preemptive rights to subscribe for any additional securities of any class which
the Company may issue, nor any conversion, redemption or sinking fund rights.
The rights and privileges of holders of Common Stock are subject to the
preferences of any shares of Preferred Stock that the Company may issue in the
future.
PREFERRED STOCK
The Company may issue shares of Preferred Stock in one or more classes or
series within a class as may be determined by the Company's Board of Directors,
who may establish, from time to time, the number of shares to be included in
each class or series, may fix the designation, powers, preferences and rights of
the shares of each such class or series and any qualifications, limitations or
restrictions thereof, and may increase or decrease the number of shares of any
such class or series without any further vote or action by the shareholders. Any
Preferred Stock so issued by the Board of Directors may rank senior to the
Common Stock with respect to the payment of dividends or amounts upon
liquidation, dissolution or winding up of the Company, or both. In addition, any
such shares of Preferred Stock may have class or series voting rights. Moreover,
under certain circumstances, the issuance of Preferred Stock or the existence of
the unissued Preferred Stock may tend to discourage or render more difficult a
merger or other change in control of the Company.
As of March 31, 1997, the Company had issued and outstanding 975,000 shares
of Class A-1 Preferred Stock, 1,034,091 shares of Class A-2 Preferred Stock,
3,300,000 shares of Class B Preferred Stock and 2,645,229 shares of Class C
Preferred Stock. Effective upon consummation of this offering, all outstanding
shares of Preferred Stock will be converted automatically into Common Stock on a
one-for-one basis pursuant to their terms. No shares of Preferred Stock will be
outstanding after this offering. No dividends have been or will be paid on
outstanding shares of Preferred Stock.
WARRANTS
The Company has outstanding the TRW Warrant, which will become exercisable
at such time as the Company's wafer fabrication facility becomes operational
into up to 1,000,000 shares of Common Stock at an exercise price of $10.00 per
share. The TRW Warrant will terminate (i) upon the earlier of (a) the second
anniversary of the date it becomes exercisable or (b) 90 days after the Common
Stock has traded for at least 20 consecutive trading days at a price greater
than $12.00 per share or (ii) if the Company's wafer fabrication facility does
not become operational by December 31, 1998 or such other date as may be agreed
upon. In addition, in connection with certain financing transactions, the
Company has issued or agreed to issue the
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<PAGE> 57
Lender Warrants, which comprise (i) two warrants granted to Allen Telecom to
purchase up to 54,546 shares for $2.75 and up to 12,400 shares for $6.048 per
share, which expire on August 6, 2000 and November 9, 2000, respectively (See
"Certain Transactions -- Other Transactions"), (ii) a warrant granted to a
lender to purchase up to 41,322 shares of Common Stock for $9.00 per share that
expires on February 25, 2002, and (iii) a warrant that the Company has agreed to
issue to such lender in the event certain financing is provided, which warrant
would be exercisable into up to 41,323 shares of Common Stock for $9.00 per
share and have a term of five years. See "Certain Transactions -- TRW -- TRW
Convertible Note."
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BYLAWS
General
A number of provisions of the Company's articles of incorporation and
bylaws deal with matters of corporate governance and the rights of shareholders.
Certain of these provisions may be deemed to have an anti-takeover effect and
may delay or prevent takeover attempts not first approved by the Board of
Directors (including takeovers that certain shareholders may deem to be in their
best interests). These provisions also could delay or frustrate the removal of
incumbent directors or the assumption of control by shareholders. The Company
believes that these provisions are appropriate to protect the interests of the
Company and all of its shareholders.
Certain Business Combinations
The Company's articles of incorporation require that any business
combination, as defined in the articles, to be entered into by the Company with
a person or entity beneficially owning 15% or more of the Company's outstanding
voting shares (an "Interested Shareholder") be approved by the affirmative vote
of the holders of at least 60% of the outstanding voting shares, other than
shares held by such Interested Shareholder, or, alternatively, by a majority of
certain members of the Board of Directors not affiliated with such Interested
Shareholder. The business combinations that are subject to these provisions
include a merger or share exchange with an Interested Shareholder, certain sales
to an Interested Shareholder of assets of the Company and certain issuances or
transfers to an Interested Shareholder by the Company or any of its subsidiaries
of equity securities of the Company or such subsidiary. These provisions will
make a takeover of the Company more difficult and may have the effect of
diminishing the possibility of certain types of "front-end loaded" acquisitions
of the Company or other unsolicited attempts to acquire the Company.
Advance Notice Requirements for Shareholder Proposals and Director Nominations
The Company's bylaws provide that a special meeting of shareholders may be
called only by the Board of Directors and certain designated officers of the
Company. Special meetings may not be called by the shareholders. The Company's
bylaws establish advance notice procedures for shareholder proposals and the
nomination, other than by or under the direction of the Board of Directors or a
committee thereof, of candidates for election as directors. These procedures
provide that the notice of shareholder proposals and shareholder nominations for
the election of directors must be in writing, contain certain specified
information and be received by the Secretary of the Company (i) in the case of
an annual meeting that is called for a date that is within 30 days before or
after the anniversary date of the immediately preceding annual meeting of
shareholders, not less than 60 days nor more than 90 days prior to such
anniversary date, and (ii) in the case of an annual meeting that is called for a
date that is not within 30 days before or after the anniversary date of the
immediately preceding annual meeting or, in the case of a special meeting of
shareholders, not later than the close of business on the tenth day following
the day on which notice of the date of the meeting was mailed or public
disclosure of the date of the meeting was made, whichever occurs first. These
provisions may preclude some shareholders from bringing matters before the
shareholders at any annual or special meeting, including making nominations for
directors.
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<PAGE> 58
Amendment of Articles and Bylaws
Subject to the North Carolina Business Corporation Act, the Company's
articles of incorporation may be amended by the affirmative vote of a majority
of the outstanding shares entitled to vote thereon. Notwithstanding the
foregoing, the amendment or repeal of certain provisions of the articles
relating to the shares which the Company shall have authority to issue, the
approval of certain business combinations as described above and certain other
matters require the affirmative vote of the holders of 60% of the Company's
voting securities, other than securities held by an Interested Shareholder. The
articles further provide that certain provisions of the bylaws relating to the
size and composition of the Board of Directors and meetings of shareholders may
be amended by the shareholders, except in certain specified circumstances, only
by the affirmative vote of the holders of 60% of the outstanding shares of
voting securities, other than securities held by an Interested Shareholder.
Moreover, the articles provide that the Board of Directors may repeal, amend or
adopt any bylaw adopted, amended or repealed by the shareholders. These
provisions will make it more difficult for shareholders to amend the articles or
bylaws.
Anti-takeover Legislation
Pursuant to the Company's articles of incorporation, the Company has
elected not to be governed by the North Carolina Control Share Act, which
restricts the right of certain shareholders who acquire specified amounts of the
Common Stock from voting those shares without certain approval by other
shareholders of the Company, and the North Carolina Shareholder Protection Act,
which imposes certain requirements for approval of transactions between the
Company and a shareholder beneficially owning in excess of 20% of the Common
Stock.
REGISTRATION RIGHTS
Pursuant to an agreement between the Company and the current holders of
Preferred Stock (the "Investor Holders"), the Investor Holders are entitled to
certain rights as described below with respect to the registration under the
Securities Act of the sale of up to 12,898,952 shares of Common Stock (the
"Registrable Securities"). Such number represents 7,954,320 shares issuable upon
conversion of Preferred Stock, 2,683,930 shares of Common Stock held by TRW
(except that none of these shares will be Registrable Securities until released
from the terms of the restricted stock agreement between the Company and TRW;
see "Certain Transactions -- TRW"), 1,111,111 shares of Common Stock issuable in
connection with the conversion of the TRW Convertible Note and up to 1,149,591
shares of Common Stock issuable upon the exercise of the TRW Warrant and the
Lender Warrants. See "Certain Transactions -- TRW" and "-- Other Transactions."
Subject to certain exceptions, if the Company proposes to register the sale
of any Common Stock for its own account or the account of others, the Investor
Holders are entitled to notice of such registration and to include the
Registrable Securities therein at the Company's expense. The Company has
obtained waivers of the foregoing rights from the Investor Holders in connection
with this offering. After June 6, 1997, the Investor Holders of at least 60% of
the Registrable Securities may require the Company to file a registration
statement at the Company's expense with respect to the Registrable Securities
held by such Investor Holders and such other Registrable Securities as other
Investor Holders may wish to include. The Company must use its diligent best
efforts to effect such a registration. Moreover, after the Company becomes
eligible for the use of a registration statement on Form S-3, the Investor
Holders will have the right to request the Company, at its expense, to effect an
unlimited number of registrations on Form S-3 (but no more than one registration
every six months) for any sale of Registrable Securities having a proposed
aggregate offering price (before deduction of underwriting discounts and
expenses of sale) of at least $500,000. The Company must use its best efforts to
effect such registrations.
The foregoing registration rights are subject to certain conditions and
limitations, including (i) the right of the Company not to effect a requested
registration during the 90 days following this offering and (ii) the right of
the underwriters of an offering undertaken at the Company's initiative to limit
the number of Registrable Securities in the offering, unless other holders of
the Company's securities are permitted to
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<PAGE> 59
include their securities in the offering. The Investor Holders are subject to
additional limitations with respect to the exercise of registration rights by
virtue of certain contractual provisions. See "Underwriting."
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is First
Union National Bank.
LISTING
The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "RFMD."
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock of
the Company. Future sales of substantial amounts of Common Stock in the public
market could adversely affect market prices prevailing from time to time.
Furthermore, because only a limited number of shares will be available for sale
shortly after this offering because of certain contractual and legal
restrictions on resale as described below, sales of substantial amounts of
Common Stock of the Company in the public market after the restrictions lapse
could adversely affect the prevailing market price and the ability of the
Company to raise equity capital in the future.
Upon completion of this offering, the Company will have outstanding an
aggregate of 14,852,441 shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option and no exercise of outstanding options and
warrants to purchase Common Stock. Of these shares, the 2,537,000 shares sold in
this offering will be freely tradeable without restriction or further
registration under the Securities Act (except for any shares purchased by
"affiliates," as that term is defined in Rule 144 under the Securities Act
("Affiliate")). Of the remaining shares of Common Stock, the Company believes
that 7,915,465 shares (the "Affiliate Shares") will be held by Affiliates and
4,399,976 shares (the "Nonaffiliate Shares") will be held by nonaffiliates of
the Company. All of such shares of Common Stock are "restricted securities" as
that term is defined in Rule 144 under the Securities Act ("Restricted Shares").
Restricted Shares may be sold in the public market only if registered or if they
qualify for an exemption from registration under Rules 144 (including Rule
144(k)) or 701 promulgated under the Securities Act, which rules are summarized
below. As a result of the current provisions of Rules 144 (including Rule
144(k)) and 701, the Company believes Restricted Shares will be available for
sale in the public market as follows: (i) no Restricted Shares will be eligible
for immediate sale on the effective date of this offering; (ii) 9,631,151
Restricted Shares will be eligible for sale upon expiration of lock-up
agreements 180 days after the date of this Prospectus; and (iii) 2,683,930
Affiliate Shares will become eligible for sale at such time as they are released
from the terms of the Restricted Stock Agreement. See "Certain
Transactions -- TRW -- Restricted Stock Agreement."
Upon completion of this offering, the holders of certain shares of Common
Stock, or their transferees, will be entitled to certain rights with respect to
the registration of such shares under the Securities Act. See "Description of
Capital Stock -- Registration Rights." Registration of such shares under the
Securities Act would result in such shares becoming freely tradeable without
restriction under the Securities Act (except for shares purchased by Affiliates)
immediately upon the effectiveness of such registration.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least two years (including
the holding period of any prior owner except an Affiliate) would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of: (i) one percent of the number of shares of Common Stock then
outstanding (which will equal approximately 148,344 shares immediately after
this offering); or (ii) the average weekly trading volume of the Common Stock on
the Nasdaq National Market during the four calendar weeks preceding the filing
of a notice on Form 144 with respect to such sale. Pursuant to a recently
approved amendment to Rule 144, the two-year holding period described in the
preceding sentence will be reduced to one year in all instances effective April
29, 1997. Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements and to the availability of current
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<PAGE> 60
public information about the Company. Under Rule 144(k), a person who is not
deemed to have been an Affiliate of the Company at any time during the 90 days
preceding a sale, and who has beneficially owned the shares proposed to be sold
for at least three years (including the holding period of any prior owner except
an Affiliate), is entitled to sell such shares without complying with the manner
of sale, public information, volume limitation or notice provisions of Rule 144;
therefore, unless otherwise restricted, "144(k) shares" may therefore be sold
immediately upon the completion of this offering. Pursuant to the recently
approved amendment to Rule 144, the three-year holding period described in the
preceding sentence will be reduced to two years in all instances effective April
29, 1997. In general, under Rule 701 of the Securities Act as currently in
effect, any employee, consultant or advisor of the Company who purchased shares
from the Company in connection with a compensatory stock or option plan or other
written agreement is eligible to resell such shares 90 days after the effective
date of this offering in reliance on Rule 144, but without compliance with
certain restrictions, including the holding period, contained in Rule 144.
All of the Common Shares held by existing shareholders or acquired in the
future by such shareholders or by any director or executive officer of the
Company are subject to lock-up agreements with the Underwriters and may not be
sold or otherwise transferred until 180 days after the date of this Prospectus
without the consent of Montgomery Securities, on behalf of the Underwriters.
Montgomery Securities, on behalf of the Underwriters, may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to these lock-up agreements.
The Company intends to file registration statements under the Securities
Act covering shares of Common Stock reserved for issuance under the 1992 Option
Plan, the 1997 Option Plan, the Directors' Option Plan and the Stock Purchase
Plan. Based on the number of options outstanding and shares reserved for
issuance or anticipated to be reserved as issuance under these plans, such
registration statements would cover approximately 3,426,000 shares, including up
to 463,567 shares that were or may be issued upon the exercise of stock options
during 1997. See "Management -- Stock Option Plans." Such registration
statements are expected to be filed and become effective as soon as practicable
after the effective date of this offering. Accordingly, shares registered under
such registration statements will, subject to Rule 144 volume limitations
applicable to Affiliates, be available for sale in the open market, unless such
shares are subject to vesting restrictions with the Company or the lock-up
agreements described above. As of March 31, 1997, options to purchase 1,026,776
shares of Common Stock were issued and outstanding under the 1992 Option Plan
and options covering 18,080 shares of Common Stock had been exercised. See
"Management -- Compensation of Directors" and "-- Stock Option Plans."
59
<PAGE> 61
UNDERWRITING
The Underwriters named below, represented by Montgomery Securities,
Hambrecht & Quist LLC and Oppenheimer & Co., Inc. (the "Representatives"), have
severally agreed, subject to the terms and conditions set forth in the
Underwriting Agreement, to purchase from the Company and the Selling
Shareholders the number of shares of Common Stock indicated below opposite their
respective names at the initial public offering price less the underwriting
discount set forth on the cover page of this Prospectus. The Underwriting
Agreement provides that the obligations of the Underwriters are subject to
certain conditions precedent and that the Underwriters are committed to purchase
all of the shares if they purchase any.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ----------
<S> <C>
Montgomery Securities.......................................
Hambrecht & Quist LLC.......................................
Oppenheimer & Co., Inc. ....................................
----------
Total.............................................
==========
</TABLE>
The Representatives have advised the Company and the Selling Shareholders
that the Underwriters initially propose to offer the shares of Common Stock to
the public on the terms set forth on the cover page of this Prospectus. The
Underwriters may allow to selected dealers a concession of not more than
$ per share, and the Underwriters may allow, and such dealers may
reallow, a concession of not more than $ per share to certain other
dealers. After the initial public offering, the offering price and other selling
terms may be changed by the Representatives. The Common Stock is offered subject
to receipt and acceptance by the Underwriters, and to certain other conditions,
including the right to reject orders in whole or in part.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a maximum
of 388,550 additional shares of Common Stock to cover over-allotments, if any,
at the same price per share as the initial 2,537,000 shares to be purchased by
the Underwriters. To the extent that the Underwriters exercise this option, each
of the Underwriters will be committed to purchase such additional shares in
approximately the same proportion as set forth in the above table. The
Underwriters may purchase such shares only to cover over-allotments made in
connection with this offering.
60
<PAGE> 62
At the request of the Company, the Underwriters have reserved approximately
120,000 of the shares of Common Stock offered by the Company hereby for sale at
the initial public offering price to directors, officers, employees and certain
individuals associated with the Company, its directors, its officers or its
employees. The number of shares of Common Stock available to the public will be
reduced to the extent such persons purchase such reserved shares. Any reserved
shares that are not so purchased will be offered by the Underwriters to the
general public on the same basis as the other shares offered hereby.
The Underwriting Agreement provides that the Company and the Selling
Shareholders will indemnify the Underwriters and their employees and controlling
persons against certain liabilities, including civil liabilities under the
Securities Act, or will contribute to payments the Underwriters may be required
to make in respect thereof.
All of the shares of Common Stock currently held by existing shareholders
or acquired in the future by such shareholders or by any director or executive
officer of the Company are subject to lock-up agreements with the Underwriters
and may not be sold or otherwise transferred until 180 days after the date of
this Prospectus without the consent of Montgomery Securities, on behalf of the
Underwriters. Montgomery Securities, on behalf of the Underwriters, may, in its
sole discretion and at any time without notice, release all or any portion of
the securities subject to these lock-up agreements.
Prior to this offering, there has been no public market for the shares of
Common Stock of the Company. Consequently, the initial public offering price
will be determined by negotiations between the Company and the Representatives.
Among the factors to be considered in such negotiations are the history of, and
prospects for, the Company and the industry in which it competes, an assessment
of the Company's management, its past and present operations and financial
performance, the prospects for future earnings of the Company, the present state
of the Company's development, the general condition of the securities markets at
the time of the offering, and the market price for publicly traded common stock
of comparable companies in recent periods.
Certain persons participating in this offering may engage in transactions,
including the entry of stabilizing bids, syndicate covering transactions or the
imposition of penalty bids, which may involve the purchase of Common Stock on
the Nasdaq National Market or otherwise. A stabilizing bid means the placing of
any bid or the effecting of any purchase for the purpose of pegging, fixing or
maintaining the price of the Common Stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. A penalty bid means an arrangement that permits the Underwriters
to reclaim a selling concession from a syndicate member in connection with the
offering when shares of Common Stock sold by the syndicate member are purchased
in syndicate covering transactions. Such transactions may stabilize or maintain
the market price of the Common Stock at a level above that which otherwise might
prevail in the open market and, if commenced, may be discontinued at any time.
The Representatives have informed the Company that the Underwriters do not
expect to make sales of shares of Common Stock offered hereby to accounts over
which they exercise discretionary authority in excess of five percent of the
number of shares of Common Stock offered hereby.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Shareholders by Womble Carlyle Sandridge & Rice, PLLC,
Winston-Salem, North Carolina. Certain legal matters in connection with this
offering will be passed upon for the Underwriters by Hale and Dorr LLP,
Washington, D.C.
61
<PAGE> 63
EXPERTS
The Financial Statements of the Company as of and for the fiscal years
ended March 31, 1994, 1995 and 1996, and as of and for the nine months ended
December 31, 1996, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein and in the Registration Statement, and
are included in reliance upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement on Form
S-1 (the "Registration Statement") (which term shall encompass all amendments,
exhibits and schedules thereto) under the Securities Act with respect to the
shares of Common Stock offered hereby. This Prospectus, which constitutes part
of the Registration Statement, does not contain all the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission, and to which reference is
hereby made. For further information with respect to the Company and the Common
Stock, reference is hereby made to the Registration Statement. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Registration Statement can be inspected and
copied at the Public Reference Section of the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at Seven World Trade Center, 13th Floor, New York, New York 10048, and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of the Registration Statement can be obtained from the Public Reference
Section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, the Commission maintains a World Wide
Web site on the Internet at http://www.sec.gov that contains reports, proxy and
information statements and other documents filed electronically with the
Commission, including the Registration Statement.
The Company intends to furnish its shareholders with annual reports
containing financial statements audited by its independent public accountants
and quarterly reports containing unaudited financial information for the first
three quarters of each fiscal year.
62
<PAGE> 64
RF MICRO DEVICES, INC.
AUDITED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1994, MARCH 31, 1995, MARCH 31, 1996,
AND NINE MONTH PERIOD ENDED DECEMBER 31, 1996
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-2
Audited Financial Statements
Balance Sheets............................................ F-3
Statements of Operations.................................. F-4
Statements of Redeemable Convertible Preferred Stock and
Shareholders' Deficiency............................... F-5
Statements of Cash Flows.................................. F-6
Notes to Financial Statements............................. F-7
</TABLE>
F-1
<PAGE> 65
REPORT OF INDEPENDENT AUDITORS
Board of Directors
RF Micro Devices, Inc.
We have audited the balance sheets of RF Micro Devices, Inc. as of March
31, 1994, March 31, 1995, March 31, 1996, and December 31, 1996 and the related
statements of operations, redeemable convertible preferred stock and
shareholders' deficiency and cash flows for each of the three years in the
period ended March 31, 1996 and the nine months ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RF Micro Devices, Inc. at
March 31, 1994, March 31, 1995, March 31, 1996, and December 31, 1996 and the
results of its operations and its cash flows for each of the three years in the
period ended March 31, 1996 and the nine months ended December 31, 1996 in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Raleigh, North Carolina
January 24, 1997
F-2
<PAGE> 66
RF MICRO DEVICES, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
LIABILITIES AND
MARCH 31, SHAREHOLDERS' EQUITY
------------------------------- DECEMBER 31, DECEMBER 31, 1996
1994 1995 1996 1996 (NOTE 2)
-------- -------- --------- ------------ ----------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $ 3,341 $ 2,223 $ 6,638 $ 3,321
Accounts receivable, less allowance for
doubtful accounts of $489,000 at March
31, 1996 and $510,000 at December 31,
1996.................................... 298 353 2,299 4,024
Inventories (Note 3)...................... 431 1,232 3,014 6,194
Other current assets...................... 6 6 32 39
------- -------- -------- --------
Total current assets............... 4,076 3,814 11,983 13,578
Property and equipment (Note 4):
Machinery and equipment................... 460 605 1,193 2,624
Furniture, fixtures and improvements...... 20 20 139 604
Computer equipment and software........... 116 196 314 604
------- -------- -------- --------
596 821 1,646 3,832
Less accumulated depreciation............. (153) (292) (537) (857)
------- -------- -------- --------
443 529 1,109 2,975
Construction in progress.................. -- -- -- 403
------- -------- -------- --------
443 529 1,109 3,378
Cash restricted for capital additions....... -- -- -- 14,932
Other assets................................ -- -- 100 105
Technology license (Note 13)................ -- -- -- 3,202
------- -------- -------- --------
Total assets....................... $ 4,519 $ 4,343 $ 13,192 $ 35,195
======= ======== ======== ========
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY) EQUITY
Current liabilities:
Accounts payable.......................... $ 305 $ 751 $ 3,276 $ 5,137
Accrued liabilities....................... 198 254 302 549
Income tax payable........................ -- -- -- 15
Line of credit (Note 5)................... 15 -- 350 350
Current maturities of long-term debt (Note
5)...................................... -- 27 81 185
Current obligations under capital leases
(Note 4)................................ 115 96 62 250
------- -------- -------- --------
Total current liabilities.......... 633 1,128 4,071 6,486 $ 6,486
Long-term debt, less current maturities
(Note 5).................................. -- 47 77 158 158
Obligations under capital leases, less
current maturities (Note 4)............... 108 12 76 499 499
Note and accrued interest payable to
shareholder (Note 6)...................... -- -- -- 10,152 --
------- -------- -------- -------- --------
741 1,187 4,224 17,295 7,143
Redeemable convertible preferred stock (Note
9)........................................ 8,825 12,325 23,325 28,257 --
Shareholders' (deficiency) equity:
Convertible preferred stock, no par value;
1,200,000 shares authorized; no shares
issued and outstanding.................. -- -- -- -- --
Common stock, no par value; 15,000,000
shares authorized, 50,000,000 shares
authorized pro forma; 3,268,930 shares
issued and outstanding, 12,334,361
issued and outstanding pro forma........ 8 8 8 2,960 41,217
Additional paid in capital................ -- -- -- 550 702
Deferred compensation..................... -- -- -- (290) (290)
Accumulated deficit....................... (5,055) (9,177) (14,365) (13,577) (13,577)
------- -------- -------- -------- --------
Total shareholders' (deficiency)
equity........................... (5,047) (9,169) (14,357) (10,357) 28,052
------- -------- -------- -------- --------
Total liabilities and shareholders'
(deficiency) equity.............. $ 4,519 $ 4,343 $ 13,192 $ 35,195 $ 35,195
======= ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 67
RF MICRO DEVICES, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTH PERIOD ENDED
YEARS ENDED MARCH 31, DECEMBER 31,
------------------------------------ ------------------------
1994 1995 1996 1995 1996
---------- ---------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales....................... $ 574 $ 1,254 $ 8,212 $ 5,061 $19,081
Engineering revenue................. 412 434 1,303 758 573
-------- -------- -------- -------- --------
Total Revenue 986 1,688 9,515 5,819 19,654
Costs and expenses:
Cost of goods sold.................. 724 1,215 7,471 4,159 10,973
Research and development............ 1,553 2,836 4,245 2,825 4,379
Marketing and selling............... 808 1,180 1,817 1,278 2,588
General and administrative.......... 725 620 1,226 640 960
-------- -------- -------- -------- --------
Total Costs and Expenses 3,810 5,851 14,759 8,902 18,900
-------- -------- -------- -------- --------
(Loss) income from operations......... (2,824) (4,163) (5,244) (3,083) 754
Interest expense...................... (62) (27) (81) (54) (234)
Interest income....................... 40 68 137 106 343
-------- -------- -------- -------- --------
(Loss) income before income taxes..... (2,846) (4,122) (5,188) (3,031) 863
Income tax expense.................... -- -- -- -- 75
-------- -------- -------- -------- --------
Net (loss) income..................... $(2,846) $(4,122) $(5,188) $(3,031) $ 788
======== ======== ======== ======== ========
Pro forma (loss) income per share..... $ (0.43) $ (0.27) $ 0.07
======== ======== ========
Weighted average number of shares used
in pro forma per share
calculations........................ 12,166,240 11,264,692 13,379,318
---------- -------- ----------
---------- ----------- ----------
</TABLE>
See accompanying notes.
F-4
<PAGE> 68
RF MICRO DEVICES, INC.
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND SHAREHOLDERS' DEFICIENCY
(IN THOUSANDS)
<TABLE>
<CAPTION>
REDEEMABLE CONVERTIBLE PREFERRED STOCK
-------------------------------------------------------
CLASS A-1 CLASS A-2 CLASS B CLASS C
PREFERRED PREFERRED PREFERRED PREFERRED
STOCK STOCK STOCK STOCK TOTAL
--------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Balance, April 1, 1993............. $1,500 $1,750 $ -- $ -- $ 3,250
Issuance of Class B preferred
stock.......................... -- -- 5,575 -- 5,575
Net loss for the year ended March
31, 1994....................... -- -- -- -- --
------ ------ ------ ------- -------
Balance, March 31, 1994............ 1,500 1,750 5,575 -- 8,825
Issuance of Class B preferred
stock.......................... -- -- 3,500 -- 3,500
Net loss for the year ended March
31, 1995....................... -- -- -- -- --
------ ------ ------ ------- -------
Balance, March 31, 1995............ 1,500 1,750 9,075 -- 12,325
Issuance of Class C preferred
stock.......................... -- -- -- 11,000 11,000
Net loss for the year ended March
31, 1996....................... -- -- -- -- --
------ ------ ------ ------- -------
Balance, March 31, 1996............ 1,500 1,750 9,075 11,000 23,325
Issuance of common stock......... -- -- -- -- --
Issuance of warrant.............. -- -- -- -- --
Issuance of Class C preferred
stock.......................... -- -- -- 4,932 4,932
Deferred compensation related to
grant of stock options......... -- -- -- -- --
Amortization of deferred
compensation................... -- -- -- -- --
Net income for the nine month
period ended December 31,
1996........................... -- -- -- -- --
------ ------ ------ ------- -------
Balance, December 31, 1996......... $1,500 $1,750 $9,075 $15,932 $28,257
====== ====== ====== ======= =======
<CAPTION>
SHAREHOLDERS' DEFICIENCY
------------------------------------------------------------
ADDITIONAL
COMMON PAID IN DEFERRED ACCUMULATED
STOCK CAPITAL COMPENSATION DEFICIT TOTAL
------- ---------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Balance, April 1, 1993............. $ 8 $ -- $ -- $ (2,209) $ (2,201)
Issuance of Class B preferred
stock.......................... -- -- -- -- --
Net loss for the year ended March
31, 1994....................... -- -- -- (2,846) (2,846)
------ ---- ----- -------- --------
Balance, March 31, 1994............ 8 -- -- (5,055) (5,047)
Issuance of Class B preferred
stock.......................... -- -- -- -- --
Net loss for the year ended March
31, 1995....................... -- -- -- (4,122) (4,122)
------ ---- ----- -------- --------
Balance, March 31, 1995............ 8 -- -- (9,177) (9,169)
Issuance of Class C preferred
stock.......................... -- -- -- -- --
Net loss for the year ended March
31, 1996....................... -- -- -- (5,188) (5,188)
------ ---- ----- -------- --------
Balance, March 31, 1996............ 8 -- -- (14,365) (14,357)
Issuance of common stock......... 2,952 -- -- -- --
Issuance of warrant.............. -- 250 -- -- --
Issuance of Class C preferred
stock.......................... -- -- -- -- --
Deferred compensation related to
grant of stock options......... -- 300 (300) -- --
Amortization of deferred
compensation................... -- -- 10 -- 10
Net income for the nine month
period ended December 31,
1996........................... -- -- -- 788 788
------ ---- ----- -------- --------
Balance, December 31, 1996......... $2,960 $550 $(290) $(13,577) $(10,357)
====== ==== ===== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 69
RF MICRO DEVICES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTH
PERIOD ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
--------------------------- ----------------------
1994 1995 1996 1995 1996
------- ------- ------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income.............................. $(2,846) $(4,122) $(5,188) $(3,031) $ 788
Adjustments to reconcile net (loss) income to
net cash used in operating activities:
Depreciation.............................. 101 139 245 166 320
Accrued interest converted to preferred
stock................................... -- -- 31 -- --
Amortization of deferred compensation..... -- -- -- -- 10
Changes in operating assets and
liabilities:
Accounts receivable.................. (215) (56) (1,947) (1,678) (1,725)
Inventories.......................... (336) (801) (1,781) (1,883) (3,180)
Other assets......................... 5 -- (125) (50) (12)
Accounts payable..................... 78 446 2,525 1,062 1,861
Accrued liabilities.................. 113 56 48 722 399
Income tax payable................... (61) -- -- 2 15
Deferred revenue..................... -- -- -- 200 --
------- ------- ------- ------- --------
Net cash used in operating activities.......... (3,161) (4,338) (6,192) (4,490) (1,524)
INVESTING ACTIVITIES
Purchases of property and equipment............ (84) (225) (686) (643) (1,763)
------- ------- ------- ------- --------
Net cash used in investing activities.......... (84) (225) (686) (643) (1,763)
FINANCING ACTIVITIES
Proceeds from bridge financing................. 1,000 -- 1,500 -- --
Repayment of capital lease obligations......... (92) (114) (109) -- (214)
Proceeds from issuance of redeemable preferred
stock........................................ 4,575 3,500 9,469 11,000 4,932
(Decrease) increase in line of credit.......... (7) (15) 350 349 --
Proceeds from note payable to shareholder...... -- -- -- 10,000
Increase in long-term debt..................... -- 74 128 135 272
Increase in cash restricted for capital
additions.................................... -- -- -- -- (14,932)
Principal payments on long-term debt........... -- -- (45) -- (88)
------- ------- ------- ------- --------
Net cash provided by (used in) financing
activities................................... 5,476 3,445 11,293 11,484 (30)
------- ------- ------- ------- --------
Net (decrease) increase in cash................ 2,231 (1,118) 4,415 6,351 (3,317)
Cash and cash equivalents at beginning of
period....................................... 1,110 3,341 2,223 2,223 6,638
------- ------- ------- ------- --------
Cash and cash equivalents at end of period..... $ 3,341 $ 2,223 $ 6,638 $ 8,574 $ 3,321
======= ======= ======= ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for interest....... $ 62 $ 27 $ 81 $ -- $ 112
======= ======= ======= ======= ========
Cash paid during the period for income taxes... $ -- $ -- $ -- $ -- $ 60
======= ======= ======= ======= ========
NONCASH INVESTING AND FINANCING ACTIVITIES
Capital lease obligations incurred for new
equipment.................................... $ 117 $ -- $ 139 $ -- $ 826
Conversion of bridge financing notes payable to
preferred stock.............................. $ 1,000 $ -- $ 1,500 $ -- $ --
Issuance of common stock and warrant in
consideration for technology license......... $ -- $ -- $ -- $ -- $ 3,202
</TABLE>
See accompanying notes.
F-6
<PAGE> 70
RF MICRO DEVICES, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF COMPANY BUSINESS
The Company designs, develops and markets proprietary analog radio
frequency and immediate frequency integrated circuits ("RFICs") for wireless
applications. These applications include cellular and cordless telephones, PCS
handsets, wireless local area data networks, wireless local loop handsets,
wireless security systems and remote meter reading systems. The Company ceased
being a development stage enterprise during the year ended March 31, 1995.
The Company offers products fabricated under three distinct process
technologies: silicon bipolar transistor, gallium arsenide metal semiconductor
field effect transistor and gallium arsenide heterojunction bipolar transistor
("GaAs HBT"). In June 1996, the Company and TRW Inc. ("TRW") entered into a
license arrangement under which TRW exclusively licensed its GaAs HBT and
related wafer fabrication technologies to the Company for commercial wireless
applications operating at frequencies less than 10 GHz. The Company's GaAs HBT
integrated circuits are manufactured for the Company by TRW through a
proprietary process developed by TRW. In order to exploit this licensed
technology, a third party developer is currently constructing a GaAs HBT
four-inch wafer fabrication facility adjacent to the Company's executive offices
in Greensboro, North Carolina, which the Company will lease upon completion.
This facility is currently scheduled to be operating at commercial levels in the
second half of 1998. Until then, the Company will purchase all or substantially
all of its GaAs HBT parts from TRW.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash equivalents consist of demand deposit accounts, money market funds and
temporary, highly liquid investments with original maturities of three months or
less.
Cash Restricted for Capital Additions
Proceeds from the sale of Class C preferred stock to TRW (Note 13) and
proceeds from the $10 million note payable agreement with TRW (Note 6) are to be
used exclusively in funding the planning, construction and the operational,
working capital and related requirements of the wafer fabrication facility.
Unused proceeds from these instruments are classified as restricted cash on the
balance sheet.
Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is provided using the straight-line method over the estimated useful
lives, ranging from 5 to 7 years, of the related assets.
Inventories
Inventories are stated at the lower of cost or market determined using the
average cost method. The Company's business is subject to the risk of
technological and design changes. The Company provides for potentially obsolete
or slow moving inventory based on management's analysis of inventory levels and
future sales forecasts at the end of each accounting period.
Accounting Periods
The Company uses a 52 or 53 week fiscal year ending on the Saturday closest
to March 31 of each year. Each of the fiscal years ended April 2, 1994, April 1,
1995 and March 30, 1996 was a 52 week year. The periods ended December 28, 1996
and December 30, 1995 were 39 week periods. For purposes of financial statement
presentation, each fiscal year is described as having ended on March 31 and each
nine month period as having ended on December 31.
F-7
<PAGE> 71
RF MICRO DEVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
Revenue from product sales is recognized when products are shipped. The
Company also enters into engineering agreements with certain customers relating
to the development of customer specific applications. Revenue is recognized for
engineering contracts when contract milestones are met.
The Company's products generally carry a one or two year warranty against
defects depending on the specific type of product. The Company provides for
estimated warranty costs in the period the related sales are made.
Pro Forma Presentation of Liabilities and Shareholders' Equity (Unaudited)
The Company has issued and outstanding four classes of redeemable
convertible preferred stock and a convertible note payable which, subject to
conditions that are expected to be satisfied, automatically convert into common
stock with the closing of an initial public offering of the Company's common
stock. The pro forma presentation in the accompanying balance sheet gives effect
to the conversion of the preferred stock and note payable on the assumption that
the Company will become a public entity and the conditions for conversion, as
described in Notes 6 and 9, will be satisfied.
Risks and Uncertainties
Pursuant to the strategic alliance with TRW (Note 13), TRW has granted to
the Company certain licenses to produce certain GaAs HBT products. The Company
plans to lease from a third party real estate developer a wafer fabrication
facility and begin manufacturing its own GaAs HBT products covered by such
licenses. These licenses may be terminated by TRW if the fabrication facility is
not operational by December 31, 1998. A decision by TRW to terminate the license
agreements or make them non-exclusive would have a material adverse effect on
the Company's operations.
Until the Company is able to internally produce GaAs HBT products, it will
continue to purchase all such products from TRW. Sales of GaAs HBT products
represented 86% of the Company's total revenue for the nine month period ended
December 31, 1996. Failure by TRW to continue to supply adequate quantities of
product to the Company or the inability to successfully transfer the GaAs HBT
technology to the Company in a timely manner would have a material adverse
effect on the Company.
The demand for certain of the Company's products has currently exceeded
supply capacity and consequently the Company has been unable to meet requested
delivery times and quantity requirements. One of the Company's most significant
customers, a company which is a subsidiary of one of the Company's corporate
shareholders, has decided to obtain these products from sources other than the
Company. This customer's purchases represented 0%, 15%, 31% and 39% of the
Company's revenue for the years ended March 31, 1994, 1995 and 1996 and the nine
month period ended December 31, 1996. Continuation of capacity limitations may
cause existing or potential customers to develop other sources of supply.
Interim Financial Information (Unaudited)
The statements of operations and cash flows for the nine month period ended
December 31, 1995 are unaudited and reflect all adjustments (consisting of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation of results of operations and cash flows.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ materially from those estimates.
F-8
<PAGE> 72
RF MICRO DEVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Sales and Accounts Receivable
The Company operates in a single industry and is engaged in the design and
sale of integrated circuits. Revenues from significant customers, those
representing 10% or more of total sales for the respective periods, are
summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDING MARCH 31, NINE MONTHS
----------------------- ENDED
1994 1995 1996 DECEMBER 31, 1996
----- ----- ----- -----------------
<S> <C> <C> <C> <C>
Customer 1..................................... 22% 12% -- --
Customer 2..................................... 21% -- -- --
Customer 3..................................... 17% -- 19% --
Customer 4..................................... 10% 11% -- --
Customer 5..................................... -- 15% 31% 40%
Customer 6..................................... -- -- -- 20%
</TABLE>
Additionally, 57%, 17%, 40% and 61% of the Company's accounts receivable
were due from such customers at March 31, 1994, 1995 and 1996 and December 31,
1996, respectively.
Sales to customers by geographic area are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDING MARCH 31, NINE MONTHS
----------------------- ENDED
1994 1995 1996 DECEMBER 31, 1996
----- ----- ----- -----------------
<S> <C> <C> <C> <C>
USA............................................ 56% 73% 76% 64%
Asia........................................... 26% 15% 12% 30%
Canada......................................... 17% 8% 10% 2%
Europe......................................... 1% 4% 2% 4%
</TABLE>
The Company's principal financial instrument subject to potential
concentration of credit risk is accounts receivable which are unsecured. The
Company's exposure to credit loss in the event that payment from a customer is
not received for revenue recognized equals the net outstanding accounts
receivable balance from that customer.
The Company provides an allowance for doubtful accounts equal to estimated
losses expected to be incurred in the collection of accounts receivable.
Research and Development
The Company charges all research and development costs to expense as
incurred.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under
SFAS 109, the liability method is used in accounting for income taxes and
deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax bases of assets and liabilities.
Stock Based Compensation
The Company accounts for stock options in accordance with APB Opinion No.
25, "Accounting for Stock Issued to Employees." Under APB No. 25, no
compensation expense is recognized for stock options issued to employees at fair
value. For stock options granted at exercise prices below the deemed fair value,
the Company records deferred compensation expense for the difference between the
exercise price of the shares
F-9
<PAGE> 73
RF MICRO DEVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
and the deemed fair market value. The deferred compensation expense is amortized
ratably over the vesting period of the individual options.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS 123"), which
provides an alternative to APB No. 25 in accounting for stock based compensation
issued to employees. SFAS 123 provides for a fair value based method of
accounting for employee stock options and similar equity instruments. However,
companies that continue to account for stock based compensation arrangements
under APB No. 25 are required by SFAS 123 to disclose the pro forma effect on
net (loss) income and (loss) earnings per share as if the fair value based
method prescribed by SFAS 123 had been applied. The disclosure requirements are
effective for fiscal years beginning after December 31, 1995, or upon initial
adoption of the statement, if earlier. The Company plans to continue to account
for stock based compensation using the provisions of APB 25 and has adopted the
disclosure requirements of SFAS 123 in the nine month period ended December 31,
1996 (see Note 10).
Impact of Recently Issued Accounting Standards
In March 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121"), which requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. SFAS 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. SFAS 121 is effective for
fiscal years beginning after December 15, 1995. The Company's adoption of SFAS
121 during 1996 did not have a material effect on the Company's financial
statements.
3. INVENTORIES
The components of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
---------------------- DECEMBER 31,
1994 1995 1996 1996
---- ------ ------ ------------
<S> <C> <C> <C> <C>
Raw materials.................................... $ 90 $ 412 $1,118 $1,979
Work in process.................................. 103 324 782 2,400
Finished goods................................... 238 496 1,195 2,515
---- ------ ------ ------
431 1,232 3,094 6,894
Inventory allowances............................. -- -- (81) (700)
---- ------ ------ ------
Total inventory........................ $431 $1,232 $3,014 $6,194
==== ====== ====== ======
</TABLE>
4. LEASES
The Company leases certain equipment under capital and operating leases.
The Company's leased equipment, included in property and equipment, is as
follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
-------------------- DECEMBER 31,
1994 1995 1996 1996
---- ----- ----- ------------
<S> <C> <C> <C> <C>
Machinery and equipment........................... $320 $ 321 $ 460 $1,286
Accumulated amortization.......................... (73) (139) (216) (306)
---- ----- ----- ------
$247 $ 182 $ 244 $ 980
==== ===== ===== ======
</TABLE>
Capital lease amortization totaling approximately $60,000, $66,000, $77,000
and $90,000 is included in depreciation expense for the years ended March 31,
1994, 1995, and 1996 and the nine month period ended December 31, 1996.
F-10
<PAGE> 74
RF MICRO DEVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Minimum future lease payments under capital and operating leases as of
December 31, 1996 are (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<S> <C> <C>
1997........................................................ $ 333 $ 951
1998........................................................ 327 768
1999........................................................ 240 601
2000........................................................ -- 270
2001........................................................ -- 258
Thereafter.................................................. -- 215
----- ------
Total minimum payments...................................... 900 $3,063
======
Less interest............................................... (151)
-----
Present value of net minimum payments....................... 749
Less current portion........................................ (250)
-----
Long-term portion........................................... $ 499
=====
</TABLE>
Rent expense under operating leases, including building and equipment was
approximately $71,000, $167,000, $255,000 and $537,000 for the years ended March
31, 1994, 1995, and 1996 and the nine month period ended December 31, 1996.
5. LINES OF CREDIT AND LONG-TERM DEBT
During the nine month period ended December 31, 1996, the Company increased
its revolving working capital line of credit to an amount equal to 80% of
eligible accounts receivable up to a maximum of $7 million. The line commitment
expires on December 19, 1997 at which time the balance is due and payable. At
March 31, 1994, 1995, 1996 and December 31, 1996, the outstanding balance was
$15,000, $0, $350,000 and $350,000. This line bears interest at the prime rate
plus 0.75% (9.00% at March 31, 1996 and 9.25% at December 31, 1996) and is
collateralized by all the Company's assets. The effective interest rate on
outstanding borrowings under the line of credit for the year ended March 31,
1996 and the nine months ended December 31, 1996 was approximately 8.90% and
9.20%, respectively. The agreement contains provisions to allow the Company to
utilize the line for letters of credit and foreign exchange contracts, none of
which are outstanding for any of the periods presented.
During the nine month period ended December 31, 1996, the Company increased
its equipment line of credit to $2 million. Borrowings on this line are
converted to term loans, repayable in 36 equal monthly installments at the time
the draw is made. At March 31, 1994, 1995, 1996 and December 31, 1996, the
outstanding balance on the equipment line notes was approximately $0, $74,000,
$158,000 and $343,000. These borrowings bear interest at the prime rate plus
1.50% (10.50% at March 31, 1996 and 10.75% at December 31, 1996) and are
collateralized by all the Company's assets. The effective interest rate on these
term loans for the year ended March 31, 1996 and the nine months ended December
31, 1996 was approximately 10.25% and 10.65%, respectively.
Future year maturities under the equipment term loans at December 31, 1996
are as follows (in thousands):
<TABLE>
<S> <C>
1997........................................................ $185
1998........................................................ 130
1999........................................................ 27
----
$342
====
</TABLE>
F-11
<PAGE> 75
RF MICRO DEVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The loan agreements contain restrictions which, among other things, require
maintenance of certain financial ratios, liquidity and net worth and prohibit
the payment of dividends.
6. NOTE PAYABLE TO SHAREHOLDER
The note payable to shareholder consists of a $10 million subordinated
convertible note issued on June 6, 1996 to a corporate shareholder of the
Company (see Note 13). The note bears interest at 6% and all principal and
accrued interest is payable in full on June 6, 2003. The Company incurred
interest expense of $152,000 related to this note during the nine month period
ended December 31, 1996. Payment of interest will be forfeited if and when the
note is converted into the Company's capital stock.
At the holder's option, all or any portion of the then outstanding
principal of the note is convertible at a conversion price of $9.00 per share.
The conversion price is subject to change in the event certain equity
transactions, as defined in the agreement, occur. If conversion occurs prior to
the closing of a public offering which results in gross proceeds of not less
than $15 million and a post-IPO market capitalization of at least $75 million,
the outstanding principal will be converted into newly created preferred stock
of the Company. If conversion occurs after a public offering meeting the
criteria specified above, the conversion shall be made into the Company's common
stock. Mandatory conversion into shares of the Company's common stock will
occur, at $9.00 per share, in full immediately prior to the closing of a public
offering in which the per share price is at least $12.00. The Company has
reserved a sufficient number of shares of its authorized but unissued stock to
permit conversion.
In connection with the issuance of the $10 million subordinated convertible
note, the Company issued a warrant to purchase at any time through December 31,
1998 up to 1,111,111 shares of stock, less the number, if any, that have been
acquired through conversion of the related $10 million note. Should the related
note convert into 1,111,111 shares of stock, the warrant shall become null and
void. The warrant has an exercise price of $9.00 per share, which is subject to
change in the event certain equity transactions, as defined in the agreement,
occur.
F-12
<PAGE> 76
RF MICRO DEVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
--------------------------- DECEMBER 31,
1994 1995 1996 1996
------- ------- ------- ------------
<S> <C> <C> <C> <C>
DEFERRED TAX LIABILITIES:
Accumulated depreciation............................... $ 41 $ 53 $ 81 $ 110
DEFERRED TAX ASSETS:
Net operating loss carryforwards....................... 1,640 2,408 3,599 1,972
Research and experimental credit carryforwards......... 173 409 660 642
Research and development costs......................... 283 1,211 1,451 2,578
Allowance for bad debts................................ -- -- 191 225
Inventory valuation.................................... -- -- -- 303
Alternative minimum tax credit carryforwards........... -- -- -- 75
Other.................................................. 59 69 91 64
------- ------- ------- -------
Total deferred tax assets......................... 2,155 4,097 5,992 5,859
Deferred tax asset valuation allowance................. (2,114) (4,044) (5,911) (5,749)
------- ------- ------- -------
Net deferred tax assets........................... (41) (53) (81) (110)
------- ------- ------- -------
Net deferred taxes................................ $ -- $ -- $ -- $ --
======= ======= ======= =======
</TABLE>
A reconciliation of the provision for income taxes, which consist only of
federal alternative minimum tax, to income tax expense computed by applying the
statutory federal income tax rate to pretax earnings at December 31, 1996 is as
follows (in thousands):
<TABLE>
<CAPTION>
AMOUNT %
------ ---
<S> <C> <C>
Income tax expense at statutory federal rate................ $ 293 34%
Increase (decrease) resulting from:
Utilization of loss carryforwards......................... (293) (34)
Alternative minimum tax................................... 75 9
------ ---
$ 75 9%
====== ===
</TABLE>
At December 31, 1996, the Company had net operating loss carryforwards and
research and experimental credit carryforwards of approximately $5 million and
$642,000, respectively, for income tax purposes. The tax benefits of these items
are reflected in the accompanying table of deferred tax assets and liabilities.
If not used, these carryforwards begin to expire in 2010. U.S. tax rules impose
limitations on the use of net operating losses following certain changes in
ownership. If such change occurs, the limitation could reduce the amount of
these benefits that would be available to offset future taxable income each
year, starting with the year of ownership change.
8. 401(K) PLAN
Each employee is eligible to participate in the Company's fully qualified
401(k) plan after three months of service. An employee may invest a maximum of
15% of pretax earnings in the plan. Employer contributions to the plan are made
at the discretion of the Company and its Board of Directors. An employee is
fully vested in the employer contribution portion of the plan after completion
of 5 continuous years of service. The Company did not make any contributions to
the plan during the years ended March 31, 1994, 1995, and 1996 and the nine
month period ended December 31, 1996.
F-13
<PAGE> 77
RF MICRO DEVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. REDEEMABLE CONVERTIBLE VOTING PREFERRED STOCK
The Company's mandatorily redeemable preferred stock consists of Class A-1
redeemable convertible preferred stock, no par value, 1,000,000 shares
authorized, 975,000 shares issued and outstanding; Class A-2 redeemable
convertible preferred stock, no par value, 1,100,000 shares authorized,
1,034,091 shares issued and outstanding; Class B redeemable convertible
preferred stock, no par value, 3,700,000 shares authorized, 3,300,000 shares
issued and outstanding and Class C redeemable convertible preferred stock, no
par value, 2,700,000 shares authorized, 2,645,229 shares issued and outstanding.
Contemporaneously with the closing of an underwritten public offering
resulting in gross proceeds of at least $15 million at a price per share which
implies a post-IPO market capitalization of the Company of at least $75 million,
each share of preferred stock shall automatically convert to common stock. The
preferred stock, which includes liquidation preferences, is convertible,
initially at the rate of one share of common stock for each share of preferred
stock. The conversion rate and value are subject to adjustment in the event of
certain changes, as defined in the articles of incorporation. Each share of
preferred stock is entitled to the number of votes per share equal to the number
of shares of common stock into which each share of preferred stock is
convertible. The preferred stock was recorded at the value received on the date
of issuance and includes redemption privileges if, on or after November 23,
2000, a public offering has not been completed. The redemption price is the
original issuance price of the preferred shares.
The Company has reserved a sufficient number of its authorized shares of
common stock for the purpose of effecting the future conversion of the preferred
stock.
10. STOCK OPTIONS
The Company has adopted an incentive stock option plan which provides for
the purchase of the Company's common stock by certain employees. Under the terms
of the plan, 20% of total shares awarded are exercisable one year after the date
of grant and 20% are exercisable for each of the following four years. Options
terminate ten years from date of grant. As of December 31, 1996 none of the
outstanding options had been exercised. The Company has reserved a sufficient
number of shares of common stock for future issuance under the Stock Option
Plan.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("SFAS 123") requires use of option valuation models that were
not developed for use in valuing employee stock options. The Company has
recorded deferred compensation expense of $300,000 for the difference between
the grant price and the deemed fair value of certain of the Company's common
stock options granted in 1996.
Pro forma information regarding net (loss) income and (loss) earnings per
share is required by SFAS 123, and has been determined as if the Company
accounted for its employee stock options under the fair value method of SFAS
123. The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions for the year ended March 31, 1996 and the nine month period ended
December 31, 1996: risk-free interest rate of 6%, no expected dividends, a
volatility factor of .70 and a weighted average expected life of the options of
5 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because changes in the subjective input assumption can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.
F-14
<PAGE> 78
RF MICRO DEVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
NINE MONTH
YEAR ENDED PERIOD ENDED
MARCH 31, DECEMBER 31,
1996 1996
----------- ------------
<S> <C> <C>
Pro forma net (loss) income earnings........................ $(5,197,990) $750,300
Pro forma (loss) income earnings per share.................. $ (0.43) $ 0.06
</TABLE>
A summary of the Company's stock option activity follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES OPTION PRICE
------------------------------------- --------------------------
AVAILABLE OPTIONS PER SHARE
EXERCISABLE FOR GRANT OUTSTANDING RANGE TOTAL
----------- --------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
March 31, 1993............... -- 257,500 203,750 $ 0.15 $ 30,563
Granted.................... -- 220,000 69,895 $0.15 - $0.28 11,183
Exercised.................. -- -- -- -- --
Canceled................... -- -- -- -- --
Expired.................... -- -- -- -- --
March 31, 1994............... 41,250 477,500 273,645 $0.15 - $0.28 41,746
Granted.................... -- 175,000 67,771 $ 0.28 18,637
Exercised.................. -- -- -- -- --
Canceled................... -- -- -- -- --
Expired.................... -- -- -- -- --
March 31, 1995............... 103,125 652,500 341,416 $0.15 - $0.28 60,383
Granted.................... -- -- 255,040 $0.28 - $0.91 160,675
Exercised.................. -- -- -- -- --
Canceled................... -- -- (2,250) $0.15 - $0.28 (525)
Expired
March 31, 1996............... 163,105 652,500 594,206 $0.15 - $0.91 220,533
Granted.................... -- 773,500 413,000 $0.91 - $6.50 1,548,750
Exercised.................. -- -- -- -- --
Canceled................... -- -- (7,850) $0.15 - $0.91 (2,370)
Expired.................... -- -- -- -- --
------- --------- ------- ------------- ----------
December 31, 1996............ 269,829 1,426,000 999,356 $0.15 - $6.50 $1,766,913
======= ========= ======= ============= ==========
</TABLE>
Exercise prices for options outstanding as of December 31, 1996, ranged
from $.15 to $6.50. The weighted average remaining contractual life of
outstanding options is 8.34 years. The weighted average exercise price of
outstanding options at December 31, 1996 is $1.77.
The following table summarizes in more detail information regarding the
Company's stock options outstanding at December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS REMAINING OPTIONS
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISABLE
- --------------- ----------- ---------------- -----------
<C> <C> <C> <C>
$0.15 265,545 5.90 years 194,897
0.27 180,811 8.20 years 48,662
0.91 183,000 9.10 years 24,900
1.20 169,000 9.70 years --
6.50 201,000 9.93 years --
------- -------
999,356 268,459
======= =======
</TABLE>
F-15
<PAGE> 79
RF MICRO DEVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
11. COMMON STOCK RESERVED FOR FUTURE ISSUANCE
At December 31, 1996, the Company had reserved a total of 11,641,022 of its
authorized 15,000,000 shares of common stock for future issuance as follows:
<TABLE>
<S> <C>
Outstanding stock options................................... 999,356
Possible future issuance under stock option plan............ 426,644
Outstanding warrants issued shareholders.................... 1,066,946
Convertible preferred stock................................. 7,954,320
Convertible note payable.................................... 1,111,111
Possible future issuance related to lease agreements........ 82,645
----------
Total shares reserved....................................... 11,641,022
==========
</TABLE>
12. INCOME (LOSS) PER SHARE OF COMMON STOCK
Pro Forma income (loss) per share of common stock and historical income
(loss) per share of common stock computed in accordance with APB No. 15 and
presented below are computed using the weighted average number of shares of
common stock and the dilutive effect of common stock equivalents outstanding.
The pro forma calculation assumes the conversion of all outstanding classes of
redeemable convertible pro forma stock and conversion of the convertible note
payable.
In accordance with Securities and Exchange Commission Staff Accounting
Bulletins, all issuances of the Company's common and common equivalent shares,
at prices below the expected initial public offering price during the twelve
month period preceding the filing date of the initial public offering, have been
included in the pro forma and historical calculations as if they were
outstanding for all periods presented (using the treasury stock method and the
estimated initial public offering price).
Historical (loss) income per share amounts, computed in accordance with APB
No. 15, were $(0.62), $(0.90), $(1.13) and $0.06 for 1994, 1995, 1996 and the
nine month period ended December 31, 1996, respectively. Fully diluted income
(loss) per share amounts are not shown as the effect is anti-dilutive.
13. RELATED PARTY TRANSACTIONS
During the year ended March 31, 1996, in connection with the bridge
financing which was subsequently converted to preferred stock, the Company
issued to a shareholder warrants that entitle the holder to purchase 66,946
shares of common stock at exercise prices ranging from $2.75 to $6.05 per share.
The warrants expire on dates ranging from August 2000 to November 2000. No
warrants have been exercised as of December 31, 1996.
On June 6, 1996, the Company entered into a strategic alliance with TRW.
Pursuant to this alliance, the Company sold 826,445 shares of its Class C
preferred stock to TRW for net cash proceeds of $4,931,703. The Company also
entered into a $10 million subordinated, convertible promissory note agreement
with TRW, (see Note 6). The use of the proceeds from these transactions are to
be used exclusively in funding the development and construction of a wafer
fabrication facility.
Additionally, TRW granted to the Company a worldwide right and license to
make, have made, use and sell the products manufactured in the wafer fabrication
facility. This right and license will become exclusive and perpetual upon
completion of the condition discussed below. In consideration of the license,
the Company issued to TRW 2,683,930 shares of restricted common stock valued at
$2,952,323. The common stock is restricted in that it is non-voting and
non-transferable. These restrictions will lapse when the Company successfully
utilizes the TRW technology in its manufacturing process in the fabrication
facility. If by December 31, 1998 the wafer foundry is not operational, as
defined in the agreement, TRW has the right to
F-16
<PAGE> 80
RF MICRO DEVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
revoke the license and the Company correspondingly has the right to redeem as
much as one-half of the TRW shares for a nominal amount. At the option of TRW,
the license will become non-exclusive if the Company fails to meet the following
revenue goals, as measured in accordance with GAAP, following the date on which
the Company's wafer fabrication facility becomes operational: during the first
year, $30 million; during the second year, $65 million; and during the third
year, $125 million.
In connection with the licensing agreement, the Company issued a warrant to
TRW to purchase up to 1,000,000 shares of the Company's common stock at an
exercise price of $10 per share. The exercise price is subject to adjustment in
the event of certain changes, as defined by the agreement, affecting the
Company's capitalization. The TRW warrant first becomes exercisable on the date
that the Company's wafer facility becomes operational and thereafter must be
exercised before the first to occur of (i) the second anniversary of such date
and (ii) 90 days after the Company has provided notice to TRW that the current
market price of the Company's common stock is, and has been for at least 20
consecutive days, greater than $12 per share. If the Company's wafer facility
does not become operational by December 31, 1998, the warrant will terminate in
full. A value of $250,000 has been recorded for this warrant.
The restricted common stock and the related warrant have an aggregate value
of $3,202,323, which represents the Company's right to use the technology and
accordingly, a related intangible asset has been recorded on the Company balance
sheet. Amortization of this intangible asset will be provided on a straight-line
basis over a fifteen year estimated useful life of the asset and will commence
once the wafer facility becomes operational. Should the technology license be
revoked or made nonexclusive under the circumstances described above, a
resulting charge to income would be recorded to recognize impairment, if any, of
its value.
14. COMMITMENTS
Facility Construction and Equipment
At December 31, 1996, the Company is committed to leasing from a third
party real estate developer a wafer fabrication facility which is under
construction adjacent to its existing facility. The facility will be built in
two phases. The first and second phases are budgeted at approximately $40
million and $30 million, respectively. The Company's lease arrangement with the
developer is based on a total estimated cost to construct the facility. The term
of this operating lease is 15 years with the option to renew for two separate 10
year periods. The developer will provide partial construction financing for the
facility. For the remainder of the estimated construction costs, the Company is
obligated to put up cash deposits with the developer to fund the construction.
Costs to install a clean room at the facilities, estimated to cost between
$2.5 and $3 million including equipment, will be financed through a construction
loan which will convert to a 60 month lease upon completion of construction and
an equipment lease line. The Company has also obtained a lease commitment for an
additional $10 million of financing for equipment to up-fit the new facility.
The term of these capital leases will be 52 months. In connection with this
financing commitment, the Company has issued a warrant to purchase 41,322 shares
of its common stock at an exercise price of $9.00 per share to the equipment
financing company.
The terms of these lease financing commitments are as follows:
<TABLE>
<CAPTION>
TOTAL COSTS
FINANCED
-------------------------
<S> <C>
Fabrication facility commitment............................. Estimated at $7.8 million
Clean room equipment commitment............................. Up to $2.5 million
Equipment lease commitment.................................. Up to $10.0 million
</TABLE>
F-17
<PAGE> 81
RF MICRO DEVICES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Estimated minimum future lease payments under the leases are (in
thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<S> <C> <C>
1998........................................................ $ 1,698 $ 988
1999........................................................ 2,912 1,695
2000........................................................ 2,912 1,695
2001........................................................ 2,912 1,720
2002........................................................ 2,184 1,737
Thereafter.................................................. -- 10,579
------- -------
Total minimum payments...................................... 12,618 $18,414
Less interest............................................... (2,618)
-------
Present value of net minimum payments....................... $10,000
=======
</TABLE>
Supply Agreement
The Company has agreed to purchase from TRW, through the year 2000, certain
minimum quantities of wafers and wafer starting material used in its production
of RFICs.
15. SUBSEQUENT EVENTS
During the period from December 31, 1996 to February 28, 1997, the Company
granted 45,500 incentive stock options to employees. The exercise price of these
shares ranged from $6.50 per share to $9.00 per share.
In connection with the Company's planned initial public offering, the
Company's Board of Directors intends to adopt the following:
- The 1997 Key Employees' Stock Option Plan which will permit the granting
of both Incentive and Nonqualified Options. The aggregate shares granted
under this plan will not exceed 1.3 million.
- The Nonemployee Directors' Option Plan which will provide for reserving
up to 200,000 shares of common stock for future option grants under this
plan.
- The Employee Stock Purchase Plan is intended to qualify under Section 423
of the Internal Revenue Code. The plan is intended to provide the
opportunity for the Company's employees to purchase the Company's common
stock based on terms and conditions allowed by Section 423. An aggregate
of 500,000 shares of common stock will be reserved for offering under this
plan.
F-18
<PAGE> 82
=======================================================
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with this
offering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company, any Selling Shareholder or any of the Underwriters.
This Prospectus does not constitute an offer to sell or a solicitation of any
offer to buy any securities other than the shares of Common Stock to which it
relates or an offer to, or a solicitation of, any person in any jurisdiction
where such an offer or solicitation would be unlawful. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of the
Company or that the information contained herein is correct as of any time
subsequent to the date hereof.
----------------------------
TABLE OF CONTENTS
----------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 5
Use of Proceeds........................ 15
Dividend Policy........................ 15
Capitalization......................... 16
Dilution............................... 17
Selected Financial Data................ 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operation............................ 19
Business............................... 26
Management............................. 40
Certain Transactions................... 47
Principal and Selling Shareholders..... 52
Description of Capital Stock........... 55
Shares Eligible for Future Sale........ 58
Underwriting........................... 60
Legal Matters.......................... 61
Experts................................ 62
Additional Information................. 62
Index to Financial Statements.......... F-1
</TABLE>
------------------------
Until , 1997 (25 days after the date of this Prospectus), all
dealers effecting transactions in the Common Stock offered hereby, whether or
not participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
=======================================================
=======================================================
2,537,000 SHARES
(RF MICRO DEVICES LOGO)
COMMON STOCK
------------------------
PROSPECTUS
------------------------
MONTGOMERY SECURITIES
HAMBRECHT & QUIST
OPPENHEIMER & CO., INC.
, 1997
=======================================================
<PAGE> 83
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Other expenses of issuance and distribution payable by the Registrant are
estimated as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 11,494
National Association of Securities Dealers, Inc. filing
fee....................................................... 4,293
Nasdaq National Market quotation fee........................ 50,000
Accounting fees and expenses................................ 150,000
Legal fees and expenses..................................... 250,000
Printing and engraving...................................... 100,000
Fees of Transfer Agent and Registrar........................ 5,000
State Blue Sky registration fees and expenses (including
counsel fees)............................................. 10,000
Miscellaneous expenses...................................... 19,213
----------
Total............................................. $ 600,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 55-8-50 through 55-8-58 of the North Carolina Business Corporation
Act contains specific provisions relating to indemnification of directors and
officers of North Carolina corporations. In general, such sections provide that
(i) a corporation must indemnify a director or officer who is wholly successful
in his defense of a proceeding to which he is a party because of his status as
such, unless limited by the articles of incorporation, and (ii) a corporation
may indemnify a director or officers if he is not wholly successful in such
defense, if it is determined as provided by statute that the director or officer
meets a certain standard of conduct, provided when a director or officer is
liable to the corporation or is adjudged liable on the basis that personal
benefit was improperly received by him, the corporation may not indemnify him. A
director or officer of a corporation who is a party to a proceeding may also
apply to the courts for indemnification, and the court may order indemnification
under certain circumstances set forth in the statute. A corporation may, in its
articles of incorporation or bylaws or by contract or resolution, provide
indemnification in addition to that provided by statute, subject to certain
conditions.
The Registrant's bylaws provide for the indemnification of any director or
officer of the Registrant against liabilities and litigation expenses arising
out of his status as such, excluding (i) any liabilities or litigation expenses
relating to activities which were at the time taken known or believed by such
person to be clearly in conflict with the best interest of the Registrant and
(ii) that portion of any liabilities or litigation expenses with respect to
which such person is entitled to receive payment under any insurance policy.
The Registrant's articles of incorporation provide for the elimination of
the personal liability of each director of the Registrant to the fullest extent
permitted by law.
In connection with the Offering, the Registrant intends to obtain
directors' and officers' liability insurance, under which any controlling
person, director or officer of the Registrant will be insured or indemnified
against certain liabilities which he may incur to his capacity as such.
Under the underwriting agreement to be entered into by the Registrant,
certain controlling persons, directors and officers of the Registrant may be
entitled to indemnification by underwriters who participate in the distribution
of securities covered by the Registration Statement against certain liabilities,
including liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since April 1, 1994, except as set forth below, no securities of the
Registrant have been sold by the Registrant without registration under the
Securities Act.
II-1
<PAGE> 84
On December 30, 1994 and January 24, 1995, the Registrant issued an
aggregate amount of 1,272,727 shares of Class B Convertible Preferred Stock to
certain individuals and entities, each, except one individual, believed to be an
accredited investor. In exchange for such shares, the Registrant received cash
in the aggregate amount of $3,500,000. The Registrant issued the securities in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act.
On August 4, 1995, the Registrant issued to an investor, believed to be an
accredited investor, a subordinated note to evidence the borrowing of up to
$2,000,000. The note bore interest at a rate equal to the prime rate as reported
in the Wall Street Journal plus one percent. The note had a term of the shorter
of six months or the closing date of the sale and issuance of equity securities
by the Registrant with cash proceeds of at least $1,000,000. In connection with
the note, on August 7, 1995 and November 10, 1995, the Registrant borrowed
$1,000,000 and $500,000, respectively, from the investor and issued to the
investor warrants for the purchase of up to an aggregate amount of 54,546 and
27,272 shares of Common Stock, respectively, for a purchase price of $2.75 per
share. The Registrant issued the note and warrants in each case in reliance on
the exemption from registration provided by Section 4(2) of the Securities Act.
On November 22, 1995, in reliance on the exemption provided by Section 4(2) of
the Securities Act, the Registrant issued an aggregate amount of 178,071 shares
of Class C Convertible Preferred Stock to this investor in satisfaction of
$1,076,974 in principal and accrued interest owed under the note. Pursuant to
its terms, the warrant issued to this investor for the purchase of 27,272 shares
of Common Stock at $2.75 per share became on this date a warrant for the
purchase of 12,400 shares of Common Stock at $6.048 per share.
In addition to the shares referred to in the foregoing paragraph, on
November 22, 1995, the Registrant issued an aggregate amount of 1,640,712 shares
of Class C Convertible Preferred Stock to certain individuals and entities, each
believed to be an accredited investor. In consideration for these shares, the
Registrant received cash in the amount of $9,923,084. The Registrant issued
these securities in reliance on the exemption from registration provided in
Section 4(2) of the Securities Act.
On June 6, 1996, the Registrant issued 826,446 shares of Class C
Convertible Preferred Stock to an entity, believed to be an accredited investor,
in exchange for an aggregate consideration of $5,000,000 in cash. In
consideration of this investor's execution, delivery and performance of a
licence and technical assistance agreement, the Registrant also issued to the
investor 2,683,930 shares of Common Stock, which shares are subject to a
restricted stock agreement pursuant to which, among other things, the investor
granted to the president of the Registrant an irrevocable proxy to vote such
shares of Common Stock in favor of any proposal approved by the Registrant's
board of directors. The Registrant also issued to the investor a promissory note
pursuant to which the Registrant may borrow funds in an amount up to
$10,000,000. The note bears interest at the rate of 6% per annum and is payable
in a lump sum on June 6, 2003. The note is convertible, at the option of the
noteholder, into certain equity securities of the Registrant at the conversion
price of $9.00 per share, subject to adjustment. In the event of an offering of
Common Stock with gross proceeds to the Registrant of at least $15,000,000, the
noteholder is required (subject to compliance with applicable antitrust
requirements) to convert the note into Common Stock. The note was accompanied by
a warrant for the purchase of equity securities of the Registrant on terms and
conditions set forth in the note. The warrant may be exercised only to the
extent that the note is not converted; together, the two securities provide for
the purchase of up to an aggregate amount of 1,111,111 shares of equity
securities of the Registrant at a conversion price or exercise price, as the
case may be, of $9.00 per share. The Registrant also issued to the investor an
additional warrant to purchase up to 1,000,000 shares of Common Stock at an
exercise price of $10.00 per share. This warrant may be exercised only if
certain conditions are met. The Registrant issued the Common Stock, the note and
the warrants in each case in reliance on the exemptions from registration
provided by Section 4(2) of the Securities Act.
Between May 2, 1992 and March 31, 1997, the Registrant granted options for
the purchase of an aggregate amount of 1,060,556 shares of Common Stock to
certain officers and employees of the Registrant pursuant to its 1992 Stock
Option Plan and in consideration of services rendered and to be rendered to the
Registrant. The options have an exercise price ranging from $0.15 per share to
$9.00 per share. On March 24, 1997, the Company issued an aggregate of 18,080
shares of Common Stock to three individuals upon the exercise of options
previously granted to them and in exchange for the cash payment of an aggregate
of $3,597.
II-2
<PAGE> 85
Options covering 1,026,776 shares of Common Stock remained outstanding as of
March 31, 1997. The Registrant granted the options and issued the shares of
Common Stock upon the exercise thereof in reliance on the exemption from
registration provided by Rule 701 under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
The following exhibits listed in accordance with the number assigned
to each in the exhibit table of Item 601 of Regulation S-K are included in
Part II of this Registration Statement. Exhibit numbers omitted are not
applicable.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1 -- Form of Underwriting Agreement*
3.1 -- Articles of Incorporation of RF Micro Devices, Inc.
3.2 -- Bylaws of RF Micro Devices, Inc.
4.1 -- Specimen Certificate of Common Stock
4.2 -- Warrant, dated August 7, 1995, for the purchase of up to
54,546 shares of Common Stock*
4.3 -- Warrant, dated November 10, 1995, for the purchase of up to
12,400 shares of Common Stock*
4.4 -- Subordinated Convertible Promissory Note, dated June 6,
1996*
4.5 -- Warrant, dated June 6, 1996, for the purchase of up to
1,111,111 shares of Common Stock
4.6 -- Warrant, dated June 6, 1996, for the purchase of up to
1,000,000 shares of Common Stock
4.7 -- Warrant, dated February 25, 1997, for the purchase of up to
41,322 shares of Common Stock
4.8 -- Loan and Security Agreement, dated March 29, 1995, and Loan
Modification Agreement, dated December 20, 1996, between RF
Micro Devices, Inc. and Silicon Valley Bank
The registrant hereby undertakes to furnish to the
Securities and Exchange Commission, upon its request, a copy
of any instrument defining the rights of holders of
long-term debt of the registrant not filed herewith pursuant
to Item 601(b)(4)(iii) of Regulation S-K.
5 -- Opinion of Womble Carlyle Sandridge & Rice, PLLC**
10.1 -- 1992 Stock Option Plan of RF Micro Devices, Inc.*
10.2 -- Form of Stock Option Agreement (1992 Stock Option Plan)**
10.3 -- 1997 Key Employees' Stock Option Plan of RF Micro Devices,
Inc.
10.4 -- Form of Stock Option Agreement (1997 Key Employees' Stock
Option Plan)
10.5 -- Nonemployee Directors' Stock Option Plan of RF Micro
Devices, Inc.
10.6 -- Form of Stock Option Agreement (1997 Directors' Stock Option
Plan)
10.7 -- Stock Purchase Agreement, dated November 22, 1995, between
RF Micro Devices, Inc. and certain investors, as amended*
10.8 -- Securities Purchase Agreement, dated June 6, 1996, between
RF Micro Devices, Inc. and TRW Inc.*
10.9 -- License and Technical Assistance Agreement, dated June 6,
1996, between RF Micro Devices, Inc. and the Electronic
Systems & Technology Division of the Space and Electronics
Group of TRW Inc.+
10.10 -- Supply Agreement, dated June 6, 1996, between RF Micro
Devices, Inc. and TRW Inc.+
10.11 -- Restricted Stock Agreement, dated June 6, 1996, between RF
Micro Devices, Inc. and TRW Inc.*
10.12 -- Second Amended and Restated Registration Rights Agreement,
dated June 6, 1996, between RF Micro Devices, Inc. and
certain shareholders, as amended*
</TABLE>
II-3
<PAGE> 86
<TABLE>
<C> <C> <S>
10.13 -- Lease Agreement, dated October 31, 1995, between RF Micro Devices, Inc. and Piedmont Land Company, as
amended*
10.14 -- Lease Agreement, dated October 9, 1996, between RF Micro Devices, Inc. and Highwoods/Forsyth Limited
Partnership, as amended*
10.15 -- Master Equipment Lease Agreement, dated as of December 2, 1996, between Finova Technology Finance, Inc.
and RF Micro Devices, Inc.
11 -- Computation of Net Loss Per Share
23.1 -- Consent of Womble Carlyle Sandridge & Rice, PLLC (included in Exhibit 5)
23.2 -- Consent of Ernst & Young LLP
24 -- Power of Attorney (included on the signature page of this Registration Statement)*
27 -- Financial Data Schedule
</TABLE>
- ---------------
* Previously filed
** To be filed by amendment
+ The registrant has requested that certain portions of this exhibit be given
confidential treatment.
(b) Financial Statement Schedules
The following financial statement schedule is included in Part II of this
Registration Statement:
Schedule II -- Valuation and Qualifying Accounts, Nine Months Ended December 31,
1996 and Years Ended March 31, 1996, 1995 and 1994.
All other schedules are omitted because they are not required, they
are not applicable or the information is already included in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
1. The undersigned registrant hereby undertakes that:
(a) 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
the 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.
(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
2. The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
3. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE> 87
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Greensboro, State of North Carolina, on April 8, 1997.
RF MICRO DEVICES, INC.
By: /s/ DAVID A. NORBURY
------------------------------------
David A. Norbury
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the registration statement has been signed by the following persons on
April 8, 1997 in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ DAVID A. NORBURY President, Chief Executive Officer and
- ----------------------------------------------------- Director (principal executive officer)
David A. Norbury
/s/ WILLIAM A. PRIDDY, JR. Vice President of Finance and Treasurer
- ----------------------------------------------------- (principal financial and accounting officer)
William A. Priddy, Jr.
/s/ ROBERT C. FLEMING Director
- -----------------------------------------------------
Robert C. Fleming
/s/ ERIK H. VAN DER KAAY Director
- -----------------------------------------------------
Erik H. van der Kaay
/s/ ALBERT E. PALADINO Director
- -----------------------------------------------------
Albert E. Paladino
/s/ WILLIAM J. PRATT Director
- -----------------------------------------------------
William J. Pratt
/s/ TERRI D. ZINKIEWICZ Director
- -----------------------------------------------------
Terri D. Zinkiewicz
/s/ WALTER H. WILKINSON, JR. Director
- -----------------------------------------------------
Walter H. Wilkinson, Jr.
</TABLE>
II-5
<PAGE> 88
RF MICRO DEVICES, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
NINE MONTHS ENDED DECEMBER 31, 1996 AND
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND DEDUCTIONS BALANCE AT
PERIOD EXPENSES FROM RESERVES END OF PERIOD
------------ ---------- ------------- -------------
<S> <C> <C> <C> <C>
Nine months ended December 31, 1996
Allowance for doubtful accounts...... 489,131 21,000 -- 510,131
Inventory allowances................. 80,511 619,161 -- 699,672
Year ended March 31, 1996
Allowance for doubtful accounts...... -- 489,131 -- 489,131
Inventory allowances................. -- 80,511 -- 80,511
Year ended March 31, 1995
Allowance for doubtful accounts...... -- -- -- --
Inventory allowances................. -- -- -- --
Year ended March 31, 1994
Allowance for doubtful accounts...... -- -- -- --
Inventory allowances................. -- -- -- --
</TABLE>
II-6
<PAGE> 1
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
RF MICRO DEVICES, INC.
Pursuant to Section 55-10-07 of the North Carolina General Statutes,
RF Micro Devices, Inc. (the "Corporation") hereby submits the following for the
purpose of amending and restating its articles of incorporation.
1. The name of the Corporation is RF Micro Devices, Inc.
2. Capitalization.
(a) Authorized Shares. The number of shares of stock
that the Corporation shall have authority to issue is (i) 50,000,000
shares of Common Stock, no par value (the "Common Stock"); (ii) until
the time of any automatic conversion of such outstanding shares as
provided for in paragraph 3(d)(v) hereof, 1,000,000 shares of Class
A-1 Convertible Preferred Stock, no par value (the "Class A-1
Preferred Stock"), 1,100,000 shares of Class A-2 Convertible Preferred
Stock, no par value (the "Class A-2 Preferred Stock"), 3,700,000
shares of Class B Convertible Preferred Stock, no par value (the
"Class B Preferred Stock"), 2,700,000 shares of Class C Convertible
Preferred Stock, no par value (the "Class C Preferred Stock"), and
1,200,000 shares of Class D Convertible Preferred Stock, no par value
(the "Class D Preferred Stock"); and (iii) from and after the time of
any automatic conversion of the outstanding shares of Class A-1
Preferred Stock, Class A-2 Preferred Stock, Class B Preferred Stock
and Class C Preferred Stock described in clause (ii) above, 5,000,000
shares of one or more classes of preferred stock, no par value, to be
established by the Board of Directors of the Corporation as provided
herein (the "New Preferred Stock") or one or more series within a
class so established. The Class A-1 Preferred Stock and the Class A-2
Preferred Stock are referred to collectively as the "Class A Preferred
Stock." The Class A Preferred Stock, the Class B Preferred Stock and
the Class C Preferred Stock are referred to collectively as the "Old
Preferred Stock."
(b) Class D Preferred Stock. The Board of Directors is
expressly authorized to establish, at any time up to and including
December 31, 1998, but not thereafter, and provided such stock remains
authorized at such time, the Class D Preferred Stock by fixing and
determining the preferences, limitations and relative rights,
including dividend, liquidation, conversion, voting, redemption and
other rights, preferences and limitations of the shares so
established, as shall be stated and expressed in the resolution
establishing such class and providing for the issuance thereof adopted
by the Board of Directors pursuant to the authority so to do which is
hereby expressly vested in it including, without limiting the
generality of the foregoing, the following:
(i) the designation of such class;
(ii) the dividend rate, if any, thereof, the
conditions and dates upon which such dividends shall be
payable, the preference or relation of such dividends to
dividends payable on any other class or classes of capital
stock of the Corporation, and whether such dividends shall be
cumulative or noncumulative;
(iii) whether the shares of such class shall be
subject to redemption by the Corporation, and, if made subject
to such redemption, the times, prices, rates, adjustments and
other terms and conditions of such redemption;
(iv) the terms and amount of any sinking or
similar fund provided for the purchase or redemption of the
shares of such class;
<PAGE> 2
(v) providing that the shares of such class shall
be convertible into or exchangeable for shares of capital
stock or other securities of the Corporation or of any other
corporation and the times, prices, rates, adjustments and
other terms and conditions of such conversion or exchange;
(vi) the extent, if any, to which the holders of
the shares of such class shall be entitled to vote as a class
or otherwise with respect to the election of directors or
otherwise;
(vii) the restrictions and conditions, if any, upon
the issue or reissue of any additional Preferred Stock ranking
on a parity with or prior to such shares as to dividends or
upon dissolution;
(viii) the rights of the holders of the shares of
such class upon the dissolution of, or upon the distribution
of assets of, the Corporation, which rights may be different
in the case of voluntary dissolution than in the case of
involuntary dissolution; and
(ix) any other preferences, limitations or
relative rights of shares of such class consistent with this
Article and applicable law;
provided, however, that shares of such Class D Preferred Stock may
only be issued upon the conversion or exercise, as the case may be,
and in accordance with the terms, of the Corporation's Subordinated
Convertible Promissory Note dated June 6, 1996 in the principal amount
of $10,000,000 (the "Convertible Note") payable to TRW Inc. ("TRW")
and/or that certain Stock Purchase Warrant No. 3 dated June 6, 1996
issued by the Corporation to TRW (the "Deficit Warrant"). The
preferences, limitations and relative rights, including dividend,
liquidation, conversion, voting, redemption and other rights,
preferences and limitations of the Class D Preferred Stock must be
substantially identical to, and ranking on a parity with, the
preferences, limitations and relative rights, including dividend,
liquidation, conversion, voting, redemption and other rights,
preferences and limitations of (i) the class of Preferred Stock the
shares of which were issued immediately prior to the first to occur of
(x) any conversion of all or any portion of the principal amount of
the Convertible Note or (y) the exercise in whole or in part of the
Deficit Warrant provided that such shares were sold in a bona fide
transaction or series of related transactions, the aggregate gross
proceeds from which payable to the Corporation were at least
$5,000,000 or (ii) if such proceeds were less than $5,000,000, then
the Class C Preferred Stock, except that in any event the dividend,
liquidation and redemption amounts of the Class D Preferred Stock may
be different insofar as such differences are based solely on the
relative differences in original issue prices of such stock and the
Class D Preferred Stock.
(c) New Preferred Stock. The Board of Directors is
expressly authorized to establish, at any time after such stock
becomes authorized, one or more classes of New Preferred Stock or one
or more series within a class of New Preferred Stock by fixing and
determining the preferences, limitations and relative rights,
including dividend, liquidation, conversion, voting, redemption and
other rights, preferences and limitations of the class or series of
shares so established, as shall be stated and expressed in the
resolution establishing such class or series and providing for the
issuance thereof adopted by the Board of Directors pursuant to the
authority so to do that is hereby expressly vested in it including,
without limiting the generality of the foregoing, the following:
(i) the designation of such class or series;
(ii) the dividend rate, if any, thereof, the
conditions and dates upon which such dividends shall be
payable, the preference or relation of such dividends to
dividends payable on any other class or classes of capital
stock of the Corporation or series within a class, and whether
such dividends shall be cumulative or noncumulative;
(iii) whether the shares of such class or series
shall be subject to redemption by the Corporation, and, if
made subject to such redemption, the times, prices, rates,
adjustments and other terms and conditions of such redemption;
<PAGE> 3
(iv) the terms and amount of any sinking or
similar fund provided for the purchase or redemption of the
shares of such class or series;
(v) providing that the shares of such class or
series may be convertible into or exchangeable for shares of
capital stock or other securities of the Corporation or of any
other corporation and the times, prices, rates, adjustments
and other terms and conditions of such conversion or exchange;
(vi) the extent, if any, to which the holders of
the shares of such class or series shall be entitled to vote
as a class, series or otherwise with respect to the election
of directors or otherwise;
(vii) the restrictions and conditions, if any, upon
the issue or reissue of any additional New Preferred Stock
ranking on a parity with or prior to such shares as to
dividends or upon dissolution;
(viii) the rights of the holders of the shares of
such class or series upon the dissolution of, or upon the
distribution of assets of, the Corporation, which rights may
be different in the case of voluntary dissolution than in the
case of involuntary dissolution; and
(ix) any other preferences, limitations or
relative rights of shares of such class or series consistent
with this Article 2 and applicable law.
3. The powers, preferences and relative participating, optional
or other special rights, and qualifications, limitations or restrictions of
Common Stock and of the Old Preferred Stock are as follows:
(a) Dividends. The holders of record of the then
outstanding shares of Old Preferred Stock shall not be entitled to
receive any regular fixed or cumulative dividend, but shall be
entitled to receive when, as and if declared by the Board of Directors
out of any funds legally available therefor, such dividends as are
declared and paid in accordance with the provisions of this paragraph
3(a). No dividends (other than those payable solely by delivery of
additional shares of Common Stock) shall be declared on the Common
Stock unless prior to or simultaneously with such declaration, a
dividend is declared on each share of Old Preferred Stock in an amount
equal to or greater than the amount that would have been received by
the holders of the Old Preferred Stock had such holders held, on the
record date for the Common Stock dividend, the number of shares of
Common Stock into which the Old Preferred Stock would have been
convertible upon conversion of the Old Preferred Stock pursuant to
paragraph 3(d) hereof. No dividends shall be declared on the Class A
Preferred Stock, the Class B Preferred Stock or the Class C Preferred
Stock unless prior to or simultaneously with such declaration a
dividend in an equal amount is declared with respect to the Class A
Preferred Stock, Class B Preferred Stock or the Class C Preferred
Stock, as the case may be, calculated on the basis that each holder of
Old Preferred Stock held, on the record date for such dividend, the
number of shares of Common Stock into which his or its Old Preferred
Stock would have been convertible upon conversion of the Old Preferred
Stock in accordance with paragraph 3(d) hereof. If, following the
declaration of dividends in accordance with the terms hereof, there
shall be insufficient funds legally available for the payment of
dividends to the holders of each share of stock upon which a dividend
was so declared, then payment shall be made as follows: first, to the
holders of Old Preferred Stock, ratably in accordance with their
ownership of such shares; and second, if dividends shall have been
declared with respect to such shares, to the holders of Common Stock,
ratably in accordance with their ownership of such shares. If in
accordance with the preceding sentence one or more classes of stock
shall not have been paid all dividends previously declared thereon,
the deficiency shall first be fully paid before any other dividend or
distribution shall be declared on any class of stock.
(b) Voting.
(i) General. Except as otherwise expressly
provided herein or required by law, the Old Preferred Stock
shall vote together with all other classes and series of stock
of the Corporation as a single class on all actions to be
taken by the shareholders of the Corporation. Each share of
Old Preferred Stock shall entitle the holder thereof to such
number of votes per share on each such action as shall equal
the number of shares of Common Stock (including fractions of a
share) into which each share of Old
<PAGE> 4
Preferred Stock is convertible at the record date for the
determination of the shareholders entitled to vote on such
matter, or if no record date is established, at the date such
vote is taken or any written consent of shareholders is
solicited.
(ii) Class A Preferred Stock. The affirmative
consent or vote of the holders holding sixty percent (60%) of
the aggregate outstanding shares of Class A Preferred Stock
shall be required with respect to any amendment of these
Articles of Incorporation or the the Bylaws of the Corporation
(the "Bylaws") if such amendment would have an adverse effect
on the rights, preferences or privileges of the holders of
shares of Class A Preferred Stock that is materially and
adversely different from the effect of such amendment on the
rights, preferences or privileges of the holders of other
classes of Old Preferred Stock.
(iii) Class B Preferred Stock. The affirmative
consent or vote of the holders holding sixty percent (60%) of
the aggregate outstanding shares of Class B Preferred Stock
shall be required with respect to any amendment of these
Articles of Incorporation or the Bylaws if such amendment
would have an adverse effect on the rights, preferences or
privileges of the holders of shares of Class B Preferred Stock
that is materially and adversely different from the effect of
such amendment on the rights, preferences or privileges of the
holders of other classes of Old Preferred Stock.
(iv) Class C Preferred Stock. The affirmative
consent or vote of the holders holding seventy-five percent
(75%) of the aggregate outstanding shares of Class C Preferred
Stock shall be required with respect to any amendment of these
Articles of Incorporation or the Bylaws if such amendment
would have an adverse effect on the rights, preferences or
privileges of the holders of shares of Class C Preferred Stock
that is materially and adversely different from the effect of
such amendment on the rights, preferences or privileges of the
holders of other classes of Old Preferred Stock.
(v) Old Preferred Stock Generally. The
affirmative consent or vote of the holders holding sixty
percent (60%) of the Old Preferred Stock (voting as a single
class on an as-if-converted basis) (the "Required Holders")
shall be required with respect to any action not specifically
provided for herein (A) that would amend these Articles of
Incorporation or the Bylaws if such amendment would adversely
affect the rights, preferences or privileges of the holders of
the Old Preferred Stock in a comparable manner; (B) that would
create, by reclassification or otherwise, any new class or
series of any stock of the Corporation having preference
equivalent to or over the Old Preferred Stock; (C) that would
increase or decrease the authorized number of shares of Old
Preferred Stock; (D) that would result in the redemption of
any shares of Common Stock or Old Preferred Stock (other than
pursuant to employment agreements); (E) that would result in
any merger, consolidation, corporate reorganization, sale of
control, or sale or other disposition of all or substantially
all of the assets of the Corporation; or (F) that would result
in the issuance or sale of any shares of any class of the
Corporation's capital stock, or the granting, issuance or sale
of any options, warrants or other obligations or securities
that are directly or indirectly convertible into or
exchangeable for shares of any class of such capital stock, or
the issuance or sale of any rights to subscribe for or options
to purchase such obligations or stock other than (X) the
issuance of options to purchase up to an aggregate of
1,426,000 shares of Common Stock issued or issuable pursuant
to the Corporation's stock option plans, (Y) the issuance of
shares of Common Stock pursuant to such options, or (Z) the
issuance of shares of Common Stock upon the conversion or
exercise, as the case may be, of (1) that certain Stock
Purchase Warrant No. 1 dated August 7, 1995 issued by the
Corporation to Allen Telecom Group, Inc., (2) that certain
Stock Purchase Warrant No. 2 dated November 10, 1995 issued by
the Corporation to Allen Telecom Group, Inc. (Warrants No. 1
and 2 collectively, the "Allen Telecom Group Warrants"), (3)
the Convertible Note, (4) the Deficit Warrant or (5) that
certain Stock Purchase Warrant No. 4 dated June 6, 1996 (the
"TRW Warrant") issued by the Corporation to TRW. If at any
time a shareholder, alone or together with one or more of its
affiliates or any other person for
<PAGE> 5
whom such shareholder serves as the Related Investor (as
defined in the Securities Purchase Agreement between TRW and
the Corporation dated June 6, 1996), owns 20% or more of the
Corporation's then outstanding equity securities (calculated
on a fully diluted basis), then the reference above to "sixty
percent (60%) of the Old Preferred Stock" shall thereafter be
deemed a reference to "more than fifty percent (50%) of the
Old Preferred Stock."
(c) Liquidation.
(i) Distribution Preference. In the event of any
liquidation, dissolution, winding up, liquidating dividend or
a dividend as part of a plan of liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary
(collectively, a "Liquidating Event"), the holders of Class
A-1, Class A-2, Class B and Class C Preferred Stock shall be
entitled to receive, prior and in preference to any
distribution of any of the assets of the Corporation to the
holders of the Common Stock by reason of their ownership
thereof, the amount of $1.538, $1.692, $2.75 and $6.048 per
share (as adjusted for any stock dividend, combinations or
splits with respect to such shares), respectively, plus all
declared but unpaid dividends on such share for each share of
Class A-1, Class A-2, Class B or Class C Preferred Stock then
held by them (the "Liquidation Preference"). Written notice
of any such Liquidating Event, stating a payment date, the
place where such payment shall be made, the amount of each
liquidating payment and the amount of declared but unpaid
dividends to be paid, shall be given by first class mail,
postage paid, not less than fifteen (15) days prior to the
payment date stated therein, to each holder of record of Old
Preferred Stock at such holder's address as shown on the
records of the Corporation. The Class A-1, Class A-2, Class B
and Class C Preferred Stock shall rank on a parity as to the
receipt of the respective preferential amounts for each such
class upon the occurrence of a Liquidating Event. If upon the
occurrence of such Liquidating Event, the assets and funds to
be thus distributed among the holders of Old Preferred Stock
shall be insufficient to permit the payment to such holders of
the full Liquidation Preferences due hereunder, then the
holders of Old Preferred Stock shall share ratably in any
distribution of assets of the Corporation in proportion to the
respective Liquidation Preferences that would otherwise be
payable with respect to the shares held by them upon such
distribution if all Liquidation Preferences payable on or with
respect to such shares were paid in full.
(ii) Distribution to Holders of Common Stock.
After such payment shall have been made in full to the holders
of Old Preferred Stock as provided in subparagraph 3(c)(i)
above, the holders of Common Stock shall be entitled to
receive from the remaining assets of the Corporation a per
share cash amount equal to $.50 per share, plus, in the case
of each share, a cash amount equal to dividends declared but
unpaid thereon, if any. If, upon any such Liquidating Event,
the remaining assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay
the holders of shares of the Common Stock the full amount to
which they shall be entitled, the holders of Common Stock
shall share ratably in any distribution of assets of the
Corporation.
(iii) Distribution of Remaining Assets. Any assets
of the Corporation remaining after the payments specified in
subparagraphs 3(c)(i) and 3(c)(ii) above shall be distributed
with respect to the outstanding Common Stock and Old Preferred
Stock (each share of such Old Preferred Stock shall be treated
for purposes of this distribution as the number of shares of
Common Stock into which such share could be converted) pro
rata without regard to class.
(iv) Merger, Reorganization, Sale of Assets. For
the purposes of this paragraph 3(c), any acquisition of the
Corporation by means of merger or other form of corporate
reorganization in which outstanding shares of the Corporation
are exchanged for securities or other consideration issued, or
caused to be issued, by the acquiring corporation or its
subsidiary (other than a mere reincorporation transaction) or
a sale of all or substantially all the assets of the
Corporation, shall be treated as a Liquidating Event and
entitle each holder of the outstanding shares of Old Preferred
Stock to receive at the closing of such transaction in cash,
securities or a combination thereof, the amounts specified in
subparagraphs 3(c)(i) and 3(c)(iii) above unless the holders
of sixty percent (60%) of each
<PAGE> 6
class of Old Preferred Stock (seventy-five percent (75%) in
the case of the Class C Preferred Stock) elect to not treat
such occurrence as a Liquidating Event.
(v) Distribution of Property. For purposes of
this paragraph 3(c), if any assets distributed to stockholders
consist of property other than cash, the amount of such
distribution shall be deemed to be the fair market value
thereof at the time of such distribution, as determined in
good faith by the Board of Directors of the Corporation.
(d) Conversion into Common Stock. Each holder of shares
of Old Preferred Stock shall have the right to convert all or any
portion of such shares as such holder desires to convert, at any time
and from time to time, into shares of the Corporation's Common Stock
as follows:
(i) Conversion Rate and Conversion Value. Each
share of Old Preferred Stock initially shall be convertible
into one (1) share of the Corporation's Common Stock (the
"Conversion Rate") based upon a conversion value per share
equal to $1.538 for Class A-1 Preferred Stock, $1.692 for
Class A-2 Preferred Stock, $2.75 for Class B Preferred Stock
and $6.048 for Class C Preferred Stock (each, a "Conversion
Value"), which Conversion Rate and Conversion Value are
subject to adjustment as hereinafter provided. Upon and
following any adjustment to the Conversion Rate as hereinafter
provided, each share of Old Preferred Stock shall be
convertible into that number of shares of Common Stock equal
to the Conversion Rate in effect following such adjustment.
(ii) Procedure for Conversion. In order to
exercise the conversion privilege, a holder of Old Preferred
Stock shall surrender the certificate or certificates
representing the shares of the Old Preferred Stock being
converted to the Corporation at its principal offices,
accompanied by written notice to the Corporation that such
holder elects to convert the same. Such notice shall also
state the name or names (with addresses) in which the
certificate or certificates for shares of Common Stock
issuable upon such conversion shall be issued. As promptly as
practicable after the receipt of such notice and surrender of
the certificate or certificates as aforesaid, the Corporation
shall issue and deliver to such holder, or on its written
order, to a third party designated by the holder as the proper
and duly authorized recipient thereof, a certificate or
certificates for the number of full shares of Common Stock
issuable upon the conversion of the Old Preferred Stock,
together with payment of the unpaid dividends on the shares of
Old Preferred Stock so converted, declared through the date of
written notice of conversion, if any. Such conversion shall
be deemed to have been effected at the close of business on
the date on which such notice shall have been received by the
Corporation and the shares of Old Preferred Stock shall have
been surrendered as aforesaid. No fractional shares of Common
Stock shall be issued upon conversion of shares of Old
Preferred Stock and any portion of the Conversion Value
thereof that would otherwise be convertible into a fractional
share of Common Stock shall be paid in cash.
(iii) Adjustment to Conversion Rate and Conversion
Value. If any shares of Old Preferred Stock remain
outstanding, then the Conversion Value and the Conversion Rate
shall be adjusted in amount and number as provided below:
(A) If the Corporation shall declare and
pay on shares of Common Stock a dividend payable in
shares of Common Stock or shall split the then
outstanding shares of Common Stock into a greater
number of shares, the Conversion Rate in effect at
the time of taking of a record for such dividend or
at the time of such stock split, shall be
proportionately increased and the Conversion Value
then in effect shall be proportionately decreased,
and conversely, if at any time the Corporation shall
contract or reduce the number of outstanding shares
of Common Stock by combining such shares into a
smaller number of shares, the Conversion Rate at the
time of such action shall be proportionately
decreased as of such time, and the Conversion Value
then in effect shall be proportionately increased.
<PAGE> 7
(B) If the Corporation shall issue or
sell any shares of its Common Stock at a price per
share less than the Conversion Value of the Class C
Preferred Stock (as previously adjusted hereunder),
then and in such event, the Conversion Value for the
Class C Preferred Stock shall be reduced to an amount
(calculated to the nearest cent) determined by
multiplying the Conversion Value by a fraction, the
numerator of which shall be the total number of
outstanding shares of Common Stock of the
Corporation, determined on a fully-diluted basis and
as if all shares of Old Preferred Stock have been
converted, plus the number of shares of Common Stock
that the aggregate consideration received by the
Corporation for the total number of additional shares
of Common Stock so issued would purchase at the
Conversion Value in effect immediately prior to such
issuance and the denominator of which shall be the
total number of outstanding shares of Common Stock of
the Corporation, determined on a fully-diluted basis
and as if all shares of Old Preferred Stock have been
converted, plus the number of additional shares of
Common Stock so issued. The Conversion Rate of the
Class C Preferred Stock immediately prior to the date
of such issuance (as previously adjusted hereunder)
shall be adjusted by dividing the Conversion Rate by
a fraction, of which the numerator shall be the
Conversion Value adjusted pursuant to the immediately
preceding sentence, and of which the denominator
shall be the Conversion Value in effect immediately
prior to such adjustment, such adjustment to be
immediately effective thereafter.
(C) If the Corporation shall sell or
issue options, rights or warrants entitling the
holders thereof to subscribe for or purchase shares
of Common Stock at a price per share that, when added
to the consideration (per share of Common Stock), if
any, received for such options, rights or warrants is
less than the Conversion Value of the Class C
Preferred Stock (as previously adjusted hereunder),
the Conversion Value of the Class C Preferred Stock
shall be reduced to an amount (calculated to the
nearest cent) determined by multiplying the
Conversion Value by a fraction, the numerator of
which shall be the total number of outstanding shares
of Common Stock of the Corporation, determined on a
fully-diluted basis and as if all shares of Old
Preferred Stock have been converted, plus the number
of shares of Common Stock that the aggregate purchase
price of the total number of options, rights or
warrants so offered (together with the exercise price
of such options, rights or warrants) would purchase
at the Conversion Value in effect immediately prior
to such issuance, and the denominator of which shall
be the total number of shares of Common Stock of the
Corporation, determined on a fully-diluted basis and
as if all shares of Old Preferred Stock have been
converted, plus the number of additional shares of
Common Stock that may be obtained upon the exercise
of such options, rights or warrants. The Conversion
Rate of the Class C Preferred Stock immediately prior
to the date of such issuance (as previously adjusted
hereunder) shall be adjusted by dividing the
Conversion Rate by a fraction, of which the numerator
shall be the Conversion Value adjusted pursuant to
the immediately preceding sentence, and of which the
denominator shall be the Conversion Value in effect
immediately prior to such adjustment, such adjustment
to be immediately effective thereafter. If such
options, rights or warrants shall by their terms
provide for an increase or increases with the passage
of time or otherwise in the price payable to the
Corporation upon the exercise thereof, the Conversion
Value and the Conversion Rate of the Class C
Preferred Stock shall forthwith upon any such
increase becoming effective be readjusted (but to no
greater extent than originally adjusted by reason of
such issuance or sale) to reflect the same; provided,
that upon the expiration or termination of such
options, rights or warrants, if any such options,
rights or warrants shall not have been exercised,
then the Conversion Value and the Conversion Rate of
the Class C Preferred Stock shall forthwith be
readjusted and thereafter be the amount and rate at
which they would have been had an adjustment been
made on the basis that (x) the only options, rights
or warrants so issued or sold were those so exercised
and (y) they were issued or sold for the
consideration actually received by the Corporation
upon such exercise, plus the consideration, if any,
actually received by the Corporation for the granting
of all such options, rights or warrants whether or
not exercised.
<PAGE> 8
(D) If the Corporation shall issue or
sell securities convertible into Common Stock
entitling the holder thereof to convert such
securities into shares of Common Stock at a
conversion price per share (i.e., the amount payable
upon involuntary liquidation, in the case of stock,
or the principal amount, in the case of debt, divided
by the number of shares of Common Stock issuable upon
conversion thereof) that is less than the Conversion
Value of the Class C Preferred Stock (as previously
adjusted hereunder), the Conversion Value of the
Class C Preferred Stock shall each be reduced to an
amount (calculated to the nearest cent) determined by
multiplying the Conversion Value by a fraction, the
numerator of which shall be the total number of
outstanding shares of Common Stock of the
Corporation, determined on a fully-diluted basis and
as if all shares of Old Preferred Stock have been
converted, plus the number of shares of Common Stock
that the aggregate conversion price of the total
number of shares of Common Stock issuable upon
conversion of such convertible securities would
purchase at the Conversion Value in effect
immediately prior to such issuance, and the
denominator of which shall be the total number of
outstanding shares of Common Stock of the
Corporation, determined on a fully-diluted basis and
as if all shares of Old Preferred Stock have been
converted, plus the number of additional shares of
Common Stock issuable upon conversion of such
convertible securities so issued. The Conversion
Rate of the Class C Preferred Stock immediately prior
to the date of such issuance (as previously adjusted
hereunder) shall be adjusted by dividing the
Conversion Rate by a fraction, of which the numerator
shall be the Conversion Value adjusted pursuant to
the immediately preceding sentence, and of which the
denominator shall be the Conversion Value in effect
immediately prior to such adjustment, such adjustment
to be immediately effective thereafter. If such
convertible securities shall by their terms provide
for an increase or increases with the passage of time
or otherwise in the conversion price thereof, the
Conversion Value and the Conversion Rate of the Class
C Preferred Stock shall forthwith upon any such
increase becoming effective be readjusted (but to no
greater extent than originally adjusted by reason of
such issuance or sale) to reflect the same; provided,
that upon the expiration or termination of the
conversion rights under said convertible securities,
if any such conversion rights shall not have been
exercised, then the Conversion Value and the
Conversion Rate of the Class C Preferred Stock shall
forthwith be readjusted and thereafter be the amount
and rate at which they would have been had an
adjustment been made on the basis that (x) the
Corporation issued and sold a number of shares of
Common Stock equal to those actually issued upon
exercise of such conversion rights, and (y) such
shares were issued and sold for a consideration equal
to the aggregate conversion price in effect under the
conversion rights actually exercised at the
respective dates of their exercise.
(E) Notwithstanding anything contained
herein to the contrary, the provisions of this
subparagraph 3(d)(iii) shall not apply with respect
to the issuance of the Excluded Securities as
hereinafter defined. For the purposes hereof,
"Excluded Securities" shall mean and include the
following:
(1) Shares of the Common Stock to
be issued in connection with the exercise of
options granted or to be granted to
employees, directors, officers, consultants,
advisors and other individuals performing
services for or on behalf of the Corporation
pursuant to the terms of the Corporation's
stock option plans to purchase up to
1,426,000 shares of Common Stock in the
aggregate (subject to appropriate adjustments
in the event of stock dividends, stock splits
or similar capital adjustments or
recapitalizations) upon the vesting and
subsequent exercise of such options;
(2) Shares of Common Stock issued
upon conversion of Old Preferred Stock;
<PAGE> 9
(3) Shares of Common Stock,
options, rights, warrants or convertible
securities designated as Excluded Securities
by the holders of seventy-five percent (75%)
of the Class C Preferred Stock;
(4) Shares of Common Stock to be
issued in connection with the exercise of
options (other than the options referred to
in clause (1) above) to be granted to
officers or employees of the Corporation
pursuant to the terms of one or more stock
purchase plans adopted by the Corporation, if
the Required Holders designated such shares
of Common Stock as Excluded Securities; and
(5) Shares of Common Stock issued
upon the exercise of the Allen Telecom Group
Warrants.
(iv) Notice of Adjustments.
(A) Whenever the Conversion Rate or the
Conversion Value of the Old Preferred Stock shall be
adjusted as provided in this paragraph 3(d), the
Corporation shall as soon as practicable thereafter
file at its principal office a statement signed by
its Chief Financial Officer, showing in reasonable
detail the basis for such adjustment and the actual
Conversion Rate and Conversion Value that shall be in
effect after such adjustment and shall cause a copy
of such statement to be sent to the holders of all
shares of Old Preferred Stock at their addresses
appearing on the records of the Corporation.
(B) All shares of Common Stock that
shall be issued from time to time upon conversion of
the Old Preferred Stock shall be duly and validly
issued and fully paid and nonassessable.
(v) Mandatory Conversion into Common Stock.
(A) Contemporaneously with the closing
of an underwritten public offering pursuant to an
effective registration statement under the Securities
Act of 1933, covering the offer and sale to the
public of Common Stock resulting in gross proceeds to
the Corporation (before deduction of underwriters'
commissions and expenses) of not less than
$15,000,000 and at a price per share to the public
that implies a pre-financing, fully-diluted valuation
of the Corporation of at least $75,000,000 (a "Public
Offering"), each share of Old Preferred Stock shall
automatically be converted into the number of shares
of Common Stock then applicable to such share in
accordance with the adjustment provisions of this
paragraph 3(d). Following such automatic conversion
of outstanding shares of Old Preferred Stock, all
shares of Old Preferred Stock and Class D Preferred
Stock shall cease to be authorized for issuance by
the Corporation, and the authorized capitalization of
the Corporation shall consist of 50,000,000 shares of
Common Stock and 5,000,000 shares of New Preferred
Stock.
(B) All holders of record of shares of
Old Preferred Stock will be given at least twenty
(20) days' prior written notice of the date fixed and
place designated for mandatory conversion of the Old
Preferred Stock, and the event that resulted in the
mandatory conversion of the Old Preferred Stock into
Common Stock. Such notice shall be sent by first
class mail, postage prepaid, to each holder of record
of the Old Preferred Stock at such holder's address
as shown in the records of the Corporation. On or
before the date so fixed for conversion, each holder
of shares of the Old Preferred Stock shall surrender
its certificate or certificates for all such shares
to the Corporation at the place designated in such
notice and shall thereafter receive certificates for
the number of shares of Common Stock to which such
holder is entitled. The procedures for conversion
set forth in subparagraph 3(d)(ii) above and other
provisions relating to conversion of Old Preferred
Stock into Common Stock set forth
<PAGE> 10
elsewhere herein shall apply to the mandatory
conversion of the Old Preferred Stock provided in
this subparagraph 3(d)(v).
(vi) Optional Redemption. On or after November
23, 2000 and provided that no Public Offering shall have
occurred, the Required Holders, by written notice to the
Corporation executed by the Required Holders, shall have the
right to require the Corporation to redeem the Old Preferred
Stock on the following terms:
(A) The redemption price shall be the
Liquidation Preference of the shares of Old Preferred
Stock.
(B) As soon as practicable following the
receipt of the written notice from the Required
Holders, the Corporation shall deliver to each holder
of Old Preferred Stock a notice stating (1) that the
Corporation has been required to redeem such of the
Old Preferred Stock as the holders thereof shall
desire to be redeemed and (2) the redemption price
for each share. Within 30 days following the
delivery of such notice, each holder of Old Preferred
Stock who shall desire the Corporation to redeem such
shares shall surrender the stock certificates
representing its ownership of all such shares,
together with its written demand for redemption.
(C) Upon receipt of each such stock
certificate and demand for redemption, the
Corporation shall deliver to each such holder its
duly authorized and executed promissory note
(individually, a "Redemption Note" and collectively,
the "Redemption Notes") providing for the payment of
the Redemption Price of the shares redeemed in 36
equal monthly payments, together with interest at the
rate of 12%. The Redemption Notes may be prepaid
without penalty.
(vii) No Impairment. The Corporation will not, by
amendment of these Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other
voluntary action (other than actions taken in good faith),
avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation but will at
all times in good faith assist in carrying out all the
provisions of this paragraph 3(d) and in taking all such
action as may be necessary or appropriate in order to protect
the conversion rights of the holders of the Old Preferred
Stock against impairment.
(viii) Reservation of Common Stock. The Corporation
shall, at all times when any shares of Old Preferred Stock
shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting
the conversion of the Old Preferred Stock into Common Stock
such number of its duly authorized shares of Common Stock as
shall from time to time be sufficient to effect the conversion
of the Old Preferred Stock.
(ix) No Adjustment. Upon any voluntary conversion
of the Old Preferred Stock, no adjustment to the conversion
rights shall be made for declared and unpaid dividends on such
stock surrendered for conversion; provided, however, that this
subparagraph 3(d)(ix) shall not limit the right of the former
holders of Old Preferred Stock so converted to collect such
declared and unpaid dividends.
4. The address of the registered office of the Corporation in the
State of North Carolina is 7625 Thorndike Road, Greensboro, Guilford County,
North Carolina 27409, and the name of its registered agent at such address is
William J. Pratt.
5. To the fullest extent permitted by applicable law, no person
who is serving or has served as a director of the Corporation shall have any
personal liability arising out of any action whether by or in the right of the
Corporation or otherwise for monetary damages for breach of any duty as
director. This Article 5 shall not impair any right to
<PAGE> 11
indemnity from the Corporation that any director may now or hereafter have.
Any repeal or modification of this Article 5 shall be prospective only and
shall not adversely affect any limitation hereunder on the personal liability
of a director with respect to modification.
6. The following provisions shall govern certain business
combinations involving the Corporation. Capitalized terms used in this Article
6 and not otherwise defined in these Articles of Incorporation shall have the
meanings ascribed to them in paragraph 6(d) hereof.
(a) Any Business Combination shall require only such
affirmative vote, if any, as is required by law and any other
provision of these Articles of Incorporation if the Business
Combination shall have been approved by at least a majority of the
Continuing Directors and, if deemed advisable by a majority of the
Continuing Directors, the Board of Directors shall have obtained an
opinion of a reputable investment banking firm to the effect that the
financial terms of such Business Combination are fair from a financial
point of view to the holders of Voting Shares (other than the
Interested Shareholder).
(b) If the provisions of paragraph 6(a) have not been
satisfied, any Business Combination shall require the affirmative
vote, in person or by proxy, at any meeting called as provided in the
Bylaws, of the holders of at least 60% in interest of the issued and
outstanding Voting Shares of the Corporation held by Persons other
than any Interested Shareholder or any Affiliate or Associate of any
Interested Shareholder. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified by law or in any agreement with any
national securities exchange or otherwise.
(c) The provisions of paragraphs 6(a) and 6(b) shall not
be applicable to any particular Business Combination, and such
Business Combination shall require only such affirmative vote, if any,
as is required by law and any other provision of these Articles of
Incorporation, if such Business Combination constitutes a transaction
between the Corporation or any Subsidiary and any corporation of which
a majority of the outstanding shares of all classes of stock entitled
to vote in elections of directors is owned of record or beneficially
by the Corporation or its Subsidiaries; provided, however, that this
paragraph 6(c) shall not apply to any transaction to which any
Affiliate of any Interested Shareholder is a party.
(d) For the purposes of these Articles of Incorporation:
(i) The term "Business Combination" shall mean
any transaction that is referred to in any one or more of
clauses (A) through (F) of this subparagraph 6(d)(i) and that
occurs at any time following the closing of a Public Offering:
(A) Any merger, share exchange or
consolidation of the Corporation or any Subsidiary
with or into (1) any Interested Shareholder or (2)
any other entity (whether or not itself an Interested
Shareholder) that immediately before is, or
immediately after such merger, share exchange or
consolidation would be, an Affiliate of an Interested
Shareholder;
(B) Any sale, lease, exchange, mortgage,
pledge, transfer or other disposition (in one
transaction or a series of related transactions) to
or with any Interested Shareholder or any Affiliate
of any Interested Shareholder of any assets of the
Corporation or any Subsidiary when such assets have
an aggregate Fair Market Value of $5,000,000 or more;
(C) The issuance or transfer to any
Interested Shareholder or any Affiliate of any
Interested Shareholder by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any equity securities of the
Corporation or any Subsidiary where such equity
securities have an aggregate Fair Market Value of
$5,000,000 or more;
(D) The adoption of any plan or proposal
for the liquidation or dissolution of the
Corporation;
<PAGE> 12
(E) Any reclassification of securities
(including any reverse stock split), or
recapitalization of the Corporation, or any merger,
share exchange or consolidation of the Corporation
with or into any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Shareholder) that has the
effect, directly or indirectly, of increasing the
percentage of the outstanding shares of any class of
equity or convertible securities of the Corporation
or any Subsidiary that is directly or indirectly
owned by any Interested Shareholder or any Affiliate
of any Interested Shareholder; or
(F) Any agreement, contract or other
arrangement providing for any of the transactions
described in this definition of "Business
Combination."
(ii) A "Person" shall mean any individual, firm,
corporation, partnership, limited liability company or other
entity.
(iii) "Interested Shareholder" shall mean any
Person (other than the Corporation, any Subsidiary or a
trustee holding stock for the benefit of the employees of the
Corporation or its Subsidiaries) who or which, along with any
Affiliates and Associates of the Interested Shareholder:
(A) Is the Beneficial Owner, directly or
indirectly, of more than 15% of the Voting Shares of
the Corporation or a Subsidiary; or
(B) Is an assignee of or has otherwise
succeeded to any share of capital stock of the
Corporation or a Subsidiary that was at any time
within two years prior thereto beneficially owned by
any Interested Shareholder, and such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a
public offering within the meaning of the Securities
Act of 1933.
A Person shall be deemed an Interested Shareholder for the
purpose of this definition if such Person is an Interested
Shareholder as of the record date for the determination of
shareholders entitled to notice of and to vote on any Business
Combination, as of the date any definitive agreement relating
to a Business Combination is entered into or amended so as to
make it less favorable to the Corporation or its shareholders
other than the Interested Shareholder, or immediately prior to
the consummation of any such Business Combination.
(iv) A Person shall be the "Beneficial Owner" of
any Voting Shares:
(A) As to which such Person or any of
its Affiliates and Associates, pursuant to any
agreement, arrangement or understanding, or
otherwise, has or shares, directly or indirectly,
voting power, including the power to vote or direct
the voting of such shares, or investment power,
including the power to dispose or to direct the
disposition of such shares, or both;
(B) That such Person or any of its
Affiliates or Associates has (1) the right to acquire
(whether such right is exercisable immediately or
only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights,
warrants or options, or otherwise or (2) the right to
vote pursuant to any agreement, arrangement or
understanding; or
(C) That are beneficially owned,
directly or indirectly, by any other Person with
which such first-mentioned Person or any of its
Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares
of capital stock of the Corporation or a Subsidiary,
as the case may be.
<PAGE> 13
(v) "Voting Shares" when used with respect to the
Corporation or a Subsidiary shall mean shares of such entity
having power to vote on the election of directors. For the
purpose of determining whether a Person is an Interested
Shareholder pursuant to subparagraph 6(d)(iii), the
outstanding Voting Shares shall include shares deemed owned by
a Beneficial Owner through application of subparagraph
6(d)(iv) but shall not include any other Voting Shares that
may be issuable to any other Person pursuant to any agreement
or upon exercise of conversion rights, warrants or options, or
otherwise.
(vi) "Affiliate" and "Associate" shall have the
respective meanings given those terms in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange
Act of 1934, as in effect on January 1, 1997.
(vii) "Subsidiary" shall mean any entity of which a
majority of any class of equity security (as defined in Rule
3a11-1 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on January 1,
1997) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of
Interested Shareholder set forth in subparagraph 6(d)(iii),
the term "Subsidiary" shall mean only an entity of which a
majority of each class of equity security is owned, directly
or indirectly, by the Corporation.
(viii) "Continuing Director" shall mean an
individual who was a member of the Board of Directors of the
Corporation on the date a Person became an Interested
Shareholder; provided, however, that each individual who was
elected as a member of the Board of Directors at the 1997
Annual Meeting of the Shareholders of the Corporation shall be
deemed to be a Continuing Director with respect to any Person
who was an Interested Shareholder at or prior to April 10,
1997 notwithstanding the fact that he or she may have become a
member of the Board of Directors of the Corporation after the
date on which such Person became an Interested Shareholder.
(ix) "Fair Market Value" shall mean (A) in the
case of stock, the highest closing sales price during the
30-day period immediately preceding the date in question of a
share of such stock on the Composite Tape for New York Stock
Exchange--Listed Stocks, or, if such stock is not quoted on
the Composite Tape, on the New York Stock Exchange, or, if
such stock is not listed on such Exchange, on the principal
United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is listed,
or, if such stock is not listed on any such exchange, as
quoted in the National Association of Securities Dealers, Inc.
Automated Quotations System (National Market System), or, if
such stock is not included in such system, the highest closing
bid quotation with respect to a share of such stock during the
30-day period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotations
System or any system then in use, or, if no such quotations
are available, the fair market value on the date in question
of a share of such stock as determined in good faith by a
majority of Continuing Directors, and (B) in the case of
property other than cash or stock, the fair market value of
such property on the date in question as determined in good
faith by a majority of Continuing Directors.
(e) The Continuing Directors, by a majority vote, shall
have the power to determine for the purposes of this Article 6 on the
basis of information known to them (i) the number of Voting Shares
beneficially owned by any Person, (ii) whether a Person is an
Affiliate or Associate of another, (iii) whether a Person has an
agreement, arrangement or understanding with another as to the matters
referred to in subparagraph 6(d)(iv), (iv) whether the assets of the
Corporation or any Subsidiary have an aggregate fair market value of
$5,000,000 or more, (v) whether the consideration received for the
issuance or transfer of securities by the Corporation or any
Subsidiary has an aggregate fair market value of $5,000,000 or more
and (vi) such other matters with respect to which a determination is
necessary or appropriate under this Article 6.
(f) Nothing contained in this Article 6 shall be
construed to relieve any Interested Shareholder from any fiduciary
obligation imposed by law.
<PAGE> 14
7. Except as otherwise provided herein (and in addition to any
other vote that may be required by law, these Articles of Incorporation or the
Bylaws), following the closing of a Public Offering, the affirmative vote, in
person or by proxy, at any meeting called as provided in the Bylaws, of the
holders of at least 60% in interest of the Voting Shares of the Corporation
issued and outstanding held by Persons other than an Interested Shareholder or
any Affiliate or Associate of any Interested Shareholder shall be required to
amend, alter or repeal Articles 2, 6, 7 or 8 of these Articles of Incorporation
or Section 4 of Article II or Section 2 of Article III of the Bylaws, or to
adopt any new provision inconsistent with such provisions of these Articles of
Incorporation or the Bylaws; provided, however, that if at the time of any such
proposed amendment, alteration, repeal or adoption, (a) there shall exist one
or more Interested Shareholders and at least a majority of the Continuing
Directors approve such proposed amendment, alteration, repeal or adoption, or
(b) no such Interested Shareholder exists, and a majority of the members of the
Board of Directors approve such proposed amendment, alteration, repeal or
adoption, then the affirmative vote, in person or by proxy, at any meeting
called as provided in the Bylaws, of the holders of a majority in interest of
the issued and outstanding Voting Shares of the Corporation shall be required
to approve such amendment, alteration, repeal or adoption. Pursuant to Section
55-10-20(a) of the North Carolina General Statutes, the Board of Directors may
adopt, amend or repeal the Bylaws generally, including any Bylaw adopted,
amended or repealed by the shareholders of the Corporation.
8. The provisions of Articles 9 and 9A of Chapter 55 of the North
Carolina General Statutes shall not be applicable to the Corporation.
IN WITNESS WHEREOF, these Restated Articles of Incorporation are
approved by the shareholders of the Corporation and executed by the President
and Secretary of the Corporation, this __ day of ___, 1997, and supersede and
replace all Articles of Incorporation previously filed on behalf of the
Corporation and all amendments thereto.
______________________________
David A. Norbury, President
______________________________
Powell T. Seymour, Secretary
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
RF MICRO DEVICES, INC.
Amended and Restated
Effective __, 1997
<PAGE> 2
TABLE OF CONTENTS TO BYLAWS
OF
RF MICRO DEVICES, INC.
<TABLE>
Page
----
<S> <C>
ARTICLE 1 -- OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Principal and Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 -- MEETINGS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Place of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Substitute Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 4. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 5. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 6. Notice of Shareholder Nominations and Proposals . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 7. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 8. Shareholders' List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 9. Voting of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 10.Inspectors of Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 11.Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 3 -- BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1. General Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2. Number, Term and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 4 -- MEETINGS OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1. Annual and Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5. Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 6. Presumption of Assent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 7. Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 8. Meeting by Communications Device . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 5 -- COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1. Election and Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2. Removal; Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3. Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4. Minutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 6 -- OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1. Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2. Election; Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 3. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 6. Chairman and Vice Chairman of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . 6
Section 7. President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 8. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 9. Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 10.Assistant Secretaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 11.Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 12.Assistant Treasurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 13.Controller and Assistant Controllers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 14.Voting Upon Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 7 -- CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1. Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2. Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. Transfer Agent and Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5. Fixing Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6. Lost Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 8 -- INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1. Indemnification Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4. Litigation Expense Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5. Approval of Indemnification Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6. Suits by Claimant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7. Consideration; Personal Representatives and Other Remedies . . . . . . . . . . . . . . . . . . . . 9
Section 8. Scope of Indemnification Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 9 -- GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1. Dividends and other Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2. Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4. Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 7. Shareholders' Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8. Applicability of Antitakeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
ii
<PAGE> 4
BYLAWS
OF
RF MICRO DEVICES, INC.
ARTICLE 1 -- OFFICES
Section 1. Principal and Registered Office. The principal office of
the corporation shall be located at Guilford County, North Carolina or at such
other place as the board of directors may from time to time determine. The
registered office of the corporation may, but need not, be the same as the
principal office.
Section 2. Other Offices. The corporation may have offices at such
other places, either within or without the State of North Carolina, as the
board of directors may from time to time determine.
ARTICLE 2 -- MEETINGS OF SHAREHOLDERS
Section 1. Place of Meeting. Meetings of shareholders shall be held
at the principal office of the corporation, or at such other place, either
within or without the State of North Carolina, as shall be designated in the
notice of the meeting.
Section 2. Annual Meeting. Commencing in 1998, the annual meeting of
shareholders shall be held at 10 o'clock a.m. on the fourth Tuesday of July of
each year, if not a legal holiday, but if a legal holiday, then on the next
business day which is not a legal holiday, for the purpose of electing
directors of the corporation and the transaction of such other business as may
be properly brought before the meeting.
Section 3. Substitute Annual Meeting. If the annual meeting is not
held on the day designated by these bylaws, a substitute annual meeting may be
called in accordance with Section 4 of this Article. A meeting so called shall
be designated and treated for all purposes as the annual meeting.
Section 4. Special Meetings. Special meetings of the shareholders
may be called at any time by the chairman of the board, president, secretary or
board of directors of the corporation.
Section 5. Notice of Meetings. Written or printed notice stating the
time and place of the meeting shall be delivered not less than ten nor more
than sixty days before the date of any shareholders' meeting, either personally
or by mail, by or at the direction of the president, secretary or other person
calling the meeting, to each shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail, addressed to the shareholder at his address as it
appears on the record of shareholders of the corporation, with postage thereon
prepaid.
In the case of a special or substitute annual meeting, the notice of
meeting shall specifically state the purpose of purposes for which the meeting
is called; but, in the case of an annual meeting, the notice of meeting need
not specifically state the business to be transacted unless such a statement is
required by the provisions of the North Carolina Business Corporation Act.
When a meeting is adjourned for 120 days or more after the date fixed
for the original meeting, notice of the adjourned meeting shall be given as in
the case of an original meeting. When a meeting is adjourned for a period less
than 120 days from the record date fixed for the original meeting in any one
adjournment, it is not necessary to give any notice of the adjourned meeting
other than by announcement at the meeting at which the adjournment is taken
unless a new record date is set for the meeting.
<PAGE> 5
Section 6. Notice of Shareholder Nominations and Proposals.
Following the closing of a Public Offering, as such term is defined in the
corporation's articles of incorporation, nominations for election as a director
and proposals for shareholder action by a holder of any outstanding class of
shares of the corporation entitled to vote for the election of directors shall
be made in writing and be delivered or mailed to the chief executive officer of
the corporation (i) in the case of an annual meeting that is called for a date
that is within 30 days before or after the anniversary of the immediately
preceding annual meeting of shareholders, not less than 60 days nor more than
90 days prior to such anniversary date and (ii) in the case of an annual
meeting that is called for a date that is not within 30 days before or after
the anniversary date of the immediately preceding annual meeting or in the case
of a special meeting of shareholders, not later than the close of business on
the tenth day following the day on which the notice of meeting was mailed or
public disclosure of the date of the meeting was made, whichever occurs first.
Such notification shall contain a written statement of the shareholder's
proposal and of the reasons therefor, and, in the case of a director
nominations, shall contain the following information to the extent known by the
notifying shareholder: (a) the name, age and address of each proposed nominee;
(b) the principal occupation of each proposed nominee; (c) the total number of
shares that will be voted for each proposed nominee; (d) the name and residence
address of the notifying shareholder; and (e) the number of shares owned by the
notifying shareholder. Nominations or proposals not made in accordance
herewith may be disregarded by the chairman of the meeting in his discretion,
and upon his instructions all votes cast for each such nominee or for such
proposal may be disregarded.
Section 7. Quorum. A majority of the votes entitled to be cast by a
voting group on a matter, represented in person or by proxy at a meeting of
shareholders, shall constitute a quorum for that voting group for any action on
that matter, unless quorum requirements are otherwise fixed by a court of
competent jurisdiction acting pursuant to Section 55-7-03 of the North Carolina
General Statutes. Once a share is represented for any purpose at a meeting, it
is deemed present for quorum purposes for the remainder of the meeting and any
adjournment thereof, unless a new record date is or must be set for the
adjournment. Action may be taken by a voting group at any meeting at which a
quorum of that voting group is represented, regardless of whether action is
taken at that meeting by any other voting group. In the absence of a quorum at
the opening of any meeting of shareholders, such meeting may be adjourned from
time to time by a vote of the majority of the shares voting on the motion to
adjourn.
Section 8. Shareholders' List. After a record date is fixed for a
meeting, the secretary of the corporation shall prepare an alphabetical list of
the names of all its shareholders who are entitled to notice of the
shareholders' meeting. Such list shall be arranged by voting group (and within
each voting group by class or series of shares) and shall show the address of
and number of shares held by each shareholder. The shareholders' list shall be
made available for inspection by any shareholder beginning two business days
after notice of the meeting is given for which the list was prepared and
continuing through the meeting, at the corporation's principal office or at
such other place identified in the meeting notice in the city where the meeting
will be held. The corporation shall make the shareholders' list available at
the meeting, and any shareholder or his agent or attorney is entitled to
inspect the list at any time during the meeting or any adjournment.
Section 9. Voting of Shares. Except as otherwise provided by the
articles of incorporation or by law, each outstanding share of voting capital
stock of the corporation shall be entitled to one vote on each matter submitted
to a vote at a meeting of the shareholders. Unless otherwise provided in the
articles of incorporation or by law, cumulative voting for directors shall not
be allowed. Action on a matter by a voting group for which a quorum is present
is approved if the votes cast within the voting group favoring the action
exceed the votes cast opposing the action, unless the vote of a greater number
is required by law or by the articles of incorporation. Voting on all matters
shall be by voice vote or by a show of hands, unless the holders of one-tenth
of the shares represented at the meeting shall demand a ballot vote on a
particular matter. Absent special circumstances, the shares of the corporation
are not entitled to vote if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation, except that this provision shall not limit the power of the
corporation to vote shares held by it in a fiduciary capacity.
Section 10. Inspectors of Elections.
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(a) Appointment of inspectors of election. In advance of
any meeting of shareholders, the board of directors may appoint any
persons, other than nominees for office, as inspectors of election to
act at such meeting or any adjournment thereof. If inspectors of
election are not so appointed, the chairman of any such meeting may,
and on the request of any shareholder or his proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall
be either one or three. If appointed at a meeting on the request of
one or more shareholders or proxies, the majority of shares present
shall determine whether one or three inspectors are to be appointed.
In case any person appointed as inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment by the board
of directors in advance of the meeting, or at the meeting by the
person acting as chairman.
(b) Duties of inspectors. The inspectors of election
shall determine the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of a
quorum, the authenticity, validity, and effect of proxies, receive
votes, ballots, or consents, hear and determine all challenges and
questions in any way arising in connection with the right to vote,
count and tabulate all votes or consents, determine the result, and do
such acts as may be proper to conduct the election or vote with
fairness to all shareholders. The inspectors of election shall
perform their duties impartially, in good faith, to the best of their
ability and as expeditiously as is practical.
(c) Vote of inspectors. If there are three inspectors of
election the decision, act, or certificate of a majority is effective
in all respects as the decision, act, or certificate of all.
(d) Report of inspectors. On request of the chairman of
the meeting or of any shareholder or his proxy the inspectors shall
make a report in writing of any challenge or question or matter
determined by them and execute a certificate of any fact found by
them. Any report or certificate made by them is prima facie evidence
of the facts stated herein.
Section 11. Action Without Meeting. Any action which the
shareholders could take at a meeting may be taken without a meeting if one or
more written consents, setting forth the action taken, shall be signed, before
or after such action, by all the shareholders who would be entitled to vote
upon the action at a meeting. The consent shall be delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
If by law, the corporation is required to give its nonvoting shareholders
written notice of the proposed action, it shall do so at least 10 days before
the action is taken, and such notice must contain or be accompanied by the same
material that would have been required by law to be sent to nonvoting
shareholders in a notice of meeting at which the proposed action would have
been submitted to the shareholders for action.
ARTICLE 3 -- BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the
corporation shall be managed under the direction of the board of directors
except as otherwise provided by the articles of incorporation or by a valid
shareholders' agreement.
Section 2. Number, Term and Qualification. The number of directors
of the corporation shall be not less than seven nor more than nine individuals.
The number of directors within the maximum and minimum shall be determined from
time to time by resolution adopted by the board of directors or the
shareholders of the corporation. In the absence of such resolution, the number
of directors elected at the meeting shall constitute the number of directors of
the corporation until the next annual meeting of shareholders, unless the
number is changed prior to such meeting by action of the board of directors.
Each director's term shall expire at the annual meeting next following the
director's election as a director, provided, that notwithstanding the
expiration of the term of the director, the director shall continue to hold
office until a successor is elected and qualifies or until his death,
resignation, removal or disqualification or until there is a decrease in the
number of directors. The term of a director elected to fill a vacancy expires
at the next annual meeting of shareholders. Directors need not be residents of
the state of North Carolina or shareholders of the corporation unless the
articles of incorporation so provide.
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Section 3. Removal. Directors may be removed from office with or
without cause (unless the articles of incorporation provide that directors may
be removed only for cause) provided the notice of the shareholders' meeting at
which such action is to be taken states that a purpose of the meeting is
removal of the director and the number of votes cast to remove the director
exceeds the number of votes cast not to remove the director.
Section 4. Vacancies. Except as otherwise provided in the articles
of incorporation, a vacancy occurring in the board of directors, including,
without limitation, a vacancy resulting from an increase in the number of
directors or from the failure by the shareholders to elect the full authorized
number of directors, may be filled by a majority of the remaining directors or
by the sole director remaining in office. The shareholders may elect a
director at any time to fill a vacancy not filled by the directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office.
Section 5. Compensation. The directors shall not receive
compensation for their services as such, except that by resolution of the board
of directors, the directors may be paid fees, which may include but are not
restricted to fees for attendance at meetings of the board or of a committee,
and they may be reimbursed for expenses of attendance. Any director may serve
the corporation in any other capacity and receive compensation therefor.
ARTICLE 4 -- MEETINGS OF DIRECTORS
Section 1. Annual and Regular Meetings. The annual meeting of the
board of directors shall be held immediately following the annual meeting of
the shareholders. The board of directors may by resolution provide for the
holding of regular meetings of the board on specified dates and at specified
times. Notice of regular meetings held at the principal office of the
corporation and at the usual scheduled time shall not be required. If any date
for which a regular meeting is scheduled shall be a legal holiday, the meeting
shall be held on a date designated in the notice of the meeting, if any, during
either the same week in which the regularly scheduled date falls or during the
preceding or following week. Regular meetings of the board shall be held at
the principal office of the corporation or at such other place as may be
designated in the notice of the meeting.
Section 2. Special Meetings. Special meetings of the board of
directors may be called by or at the request of the chairman of the board, the
president or any two directors. Such meetings may be held at the time and place
designated in the notice of the meeting.
Section 3. Notice of Meetings. Unless the articles of incorporation
provide otherwise, the annual and regular meetings of the board of directors
may be held without notice of the date, time, place or purpose of the meeting.
The secretary or other person or persons calling a special meeting shall give
notice by any usual means of communication to be sent at least two days before
the meeting if notice is sent by means of telephone, telecopy or personal
delivery and at least five days before the meeting if notice is sent by mail.
A director's attendance at, or participation in, a meeting for which notice is
required shall constitute a waiver of notice, unless the director at the
beginning of the meeting (or promptly upon arrival) objects to holding the
meeting or transacting business at the meeting and does not thereafter vote for
or assent to action taken at the meeting.
Section 4. Quorum. Except as otherwise provided in the articles of
incorporation, a majority of the number of directors prescribed, or if no
number is prescribed the number in office immediately before the meeting
begins, shall constitute a quorum for the transaction of business at a meeting
of the board of directors.
Section 5. Manner of Acting. Except as otherwise provided in the
articles of incorporation, the affirmative vote of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 6. Presumption of Assent. A director of the corporation who
is present at a meeting of the board of directors at which action on any
corporate matter is taken is deemed to have assented to the action taken unless
he objects at the beginning of the meeting (or promptly upon arrival) to
holding, or transacting business at, the meeting, or unless his dissent or
abstention is entered in the minutes of the meeting or unless he shall file
written notice of his dissent or
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abstention to such action with the presiding officer of the meeting before its
adjournment or with the corporation immediately after adjournment of the
meeting. The right of dissent or abstention shall not apply to a director who
voted in favor of such action.
Section 7. Action Without Meeting. Unless otherwise provided in the
articles of incorporation, action required or permitted to be taken at a
meeting of the board of directors may be taken without a meeting if the action
is taken by all members of the board. The action must be evidenced by one or
more written consents signed by each director before or after such action,
describing the action taken, and included in the minutes or filed with the
corporate records. Action taken without a meeting is effective when the last
director signs the consent, unless the consent specifies a different effective
date.
Section 8. Meeting by Communications Device. Unless otherwise
provided in the articles of incorporation, the board of directors may permit
any or all directors to participate in a regular or special meeting by, or
conduct the meeting through the use of, any means of communication by which all
directors participating may simultaneously hear each other during the meeting.
A director participating in a meeting by this means is deemed to be present in
person at the meeting.
ARTICLE 5 -- COMMITTEES
Section 1. Election and Powers. Unless otherwise provided by the
articles of incorporation or the bylaws, a majority of the board of directors
may create one or more committees and appoint two or more directors to serve at
the pleasure of the board on each such committee. To the extent specified by
the board of directors or in the articles of incorporation, each committee
shall have and may exercise the powers of the board in the management of the
business and affairs of the corporation, except that no committee shall have
authority to do the following:
(a) Authorize distributions.
(b) Approve or propose to shareholders action required to
be approved by shareholders.
(c) Fill vacancies on the board of directors or on any of
its committees.
(d) Amend the articles of incorporation.
(e) Adopt, amend or repeal the bylaws.
(f) Approve a plan of merger not requiring shareholder
approval.
(g) Authorize or approve the reacquisition of shares,
except according to a formula or method prescribed by the board of
directors.
(h) Authorize or approve the issuance, sale or contract
for sale of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except
that the board of directors may authorize a committee (or a senior
executive officer of the corporation) to do so within limits
specifically prescribed by the board of directors.
Section 2. Removal; Vacancies. Any member of a committee may be
removed at any time with or without cause, and vacancies in the membership of a
committee by means of death, resignation, disqualification or removal shall be
filled by a majority of the whole board of directors.
Section 3. Meetings. The provisions of Article 4 governing meetings
of the board of directors, action without meeting, notice, waiver of notice and
quorum and voting requirements shall apply to the committees of the board and
its members.
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Section 4. Minutes. Each committee shall keep minutes of its
proceedings and shall report thereon to the board of directors at or before the
next meeting of the board.
ARTICLE 6 -- OFFICERS
Section 1. Titles. The officers of the corporation shall be a
president, a vice president, a secretary and a treasurer and may include a
chairman and vice chairman of the board of directors, an executive vice
president, one or more additional vice presidents, a controller, one or more
assistant secretaries, one or more assistant treasurers, one or more assistant
controllers, and such other officers as shall be deemed necessary. The
officers shall have the authority and perform the duties as set forth herein or
as from time to time may be prescribed by the board of directors or by the
president (to the extent that the president is authorized by the board of
directors to prescribe the authority and duties of officers). Any two or more
offices may be held by the same individual, but no officer may act in more than
one capacity where action of two or more officers is required.
Section 2. Election; Appointment. The officers of the corporation
shall be elected from time to time by the board of directors or appointed from
time to time by the president (to the extent that the president is authorized
by the board to appoint officers).
Section 3. Removal. Any officer may be removed by the board at any
time with or without cause whenever in its judgment the best interests of the
corporation will be served, but removal shall not itself affect the officer's
contract rights, if any, with the corporation.
Section 4. Vacancies. Vacancies among the officers may be filled and
new offices may be created and filled by the board of directors, or by the
president (to the extent authorized by the board).
Section 5. Compensation. The compensation of the officers shall be
fixed by, or under the direction of, the board of directors.
Section 6. Chairman and Vice Chairman of the Board of Directors. The
chairman of the board of directors, if such officer is elected, shall preside
at meetings of the board of directors and shall have such other authority and
perform such other duties as the board of directors shall designate. The vice
chairman, if elected, shall preside at meetings of the board in the absence of
the chairman and shall have such other authority and perform such other duties
as the board of directors shall designate.
Section 7. President. The president shall be in general charge of
the affairs of the corporation in the ordinary course of its business and shall
preside at meetings of the shareholders. The president may perform such acts,
not inconsistent with applicable law or the provisions of these bylaws, as may
be performed by the president of a corporation and may sign and execute all
authorized notes, bonds, contracts and other obligations in the name of the
corporation. The president shall have such other powers and perform such other
duties as the board of directors shall designate or as may be provided by
applicable law or elsewhere in these bylaws.
Section 8. Vice Presidents. The executive vice president, if such
officer is elected or appointed, shall exercise the powers of the president
during that officer's absence or inability to act. In default of both the
president and the executive vice president, any other vice president may
exercise the powers of the president. Any action taken by a vice president in
the performance of the duties of the president shall be presumptive evidence of
the absence or inability to act of the president at the time the action was
taken. The vice presidents shall have such other powers and perform such other
duties as may be assigned by the board of directors or by the president (to the
extent that the president is authorized by the board of directors to prescribe
the authority and duties of other officers).
Section 9. Secretary. The secretary shall keep accurate records of
the acts and proceedings of all meetings of shareholders and of the board of
directors and shall give all notices required by law and by these bylaws. The
secretary shall have general charge of the corporate books and records and
shall have the responsibility and authority to maintain
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and authenticate such books and records. The secretary shall have general
charge of the corporate seal and shall affix the corporate seal to any lawfully
executed instrument requiring it. The secretary shall have general charge of
the stock transfer books of the corporation and shall keep at the principal
office of the corporation a record of shareholders, showing the name and
address of each shareholder and the number and class of the shares held by
each. The secretary shall sign such instruments as may require the signature
of the secretary, and in general shall perform the duties incident to the
office of secretary and such other duties as may be assigned from time to time
by the board of directors or the president (to the extent that the president is
authorized by the board of directors to prescribe the authority and duties of
other officers).
Section 10. Assistant Secretaries. Each assistant secretary, if such
officer is elected, shall have such powers and perform such duties as may be
assigned by the board of directors or the president (if authorized by the board
of directors to prescribe the authority and duties of other officers), and the
assistant secretaries shall exercise the powers of the secretary during that
officer's absence or inability to act.
Section 11. Treasurer. The treasurer shall have custody of all funds
and securities belonging to the corporation and shall receive, deposit or
disburse the same under the direction of the board of directors. The treasurer
shall keep full and accurate accounts of the finances of the corporation, which
may be consolidated or combined statements of the corporation and one or more
of its subsidiaries as appropriate, that include a balance sheet as of the end
of the fiscal year, an income statement for that year, and a statement of cash
flows for the year unless that information appears elsewhere in the financial
statements. If financial statements are prepared for the corporation on the
basis of generally accepted accounting principles, the annual financial
statements must also be prepared on that basis. The corporation shall mail the
annual financial statements, or a written notice of their availability, to each
shareholder within 120 days of the close of each fiscal year. The treasurer
shall in general perform all duties incident to the office and such other
duties as may be assigned from time to time by the board of directors or the
president (to the extent that the president is authorized by the board of
directors to prescribe the authority and duties of other officers).
Section 12. Assistant Treasurers. Each assistant treasurer, if such
officer is elected, shall have such powers and perform such duties as may be
assigned by the board of directors or the president (to the extent that the
president is authorized by the board of directors to prescribe the authority
and duties of other officers), and the assistant treasurers shall exercise the
powers of the treasurer during that officer's absence or inability to act.
Section 13. Controller and Assistant Controllers. The controller, if
such officer is elected, shall have charge of the accounting affairs of the
corporation and shall have such other powers and perform such other duties as
the board of directors or the president (to the extent that the president is
authorized by the board of directors to prescribe the authority and duties of
other officers) shall designate. Each assistant controller shall have such
powers and perform such duties as may be assigned by the board of directors or
the president (to the extent that the president is authorized by the board of
directors to prescribe the authority and duties of other officers), and the
assistant controllers shall exercise the powers of the controller during that
officer's absence or inability to act.
Section 14. Voting Upon Stocks. Unless otherwise ordered by the board
of directors, the president shall have full power and authority in behalf of
the corporation to attend, act and vote at meetings of the shareholders of any
corporation in which this corporation may hold stock, and at such meetings
shall possess and may exercise any and all rights and powers incident to the
ownership of such stock and which, as the owner, the corporation might have
possessed and exercised if present. The board of directors may by resolution
from time to time confer such power and authority upon any other person or
persons.
ARTICLE 7 -- CAPITAL STOCK
Section 1. Certificates. Shares of the capital stock of the
corporation shall be represented by certificates. The name and address of the
persons to whom shares of capital stock of the corporation are issued, with the
number of shares and date of issue, shall be entered on the stock transfer
records of the corporation. Certificates for shares of the capital stock of
the corporation shall
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be in such form not inconsistent with the articles of incorporation of the
corporation as shall be approved by the board of directors. Each certificate
shall be signed (either manually or by facsimile) by (a) the president or any
vice president and by the secretary, assistant secretary, treasurer or
assistant treasurer or (b) any two officers designated by the board of
directors. Each certificate may be sealed with the seal of the corporation or
a facsimile thereof.
Section 2. Transfer of Shares. Transfer of shares shall be made on
the stock transfer records of the corporation, and transfers shall be made only
upon surrender of the certificate for the shares sought to be transferred by
the recordholder or by a duly authorized agent, transferee or legal
representative. All certificates surrendered for transfer or reissue shall be
cancelled before new certificates for the shares shall be issued.
Section 3. Transfer Agent and Registrar. The board of directors may
appoint one or more transfer agents and one or more registrars of transfers and
may require all stock certificates to be signed or countersigned by the
transfer agent and registered by the registrar of transfers.
Section 4. Regulations. The board of directors may make rules and
regulations as it deems expedient concerning the issue, transfer and
registration of shares of capital stock of the corporation.
Section 5. Fixing Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders,
or entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other purpose, the board of directors may
fix in advance a date as the record date for the determination of shareholders.
The record date shall be not more than 70 days before the meeting or action
requiring a determination of shareholders. A determination of shareholders
entitled to notice of or to vote at a shareholders' meeting shall be effective
for any adjournment of the meeting unless the board of directors fixes a new
record date, which it shall do if the meeting is adjourned to a date more than
120 days after the date fixed for the original meeting. If no record date is
fixed for the determination of shareholders, the record date shall be the day
the notice of the meeting is mailed or the day the action requiring a
determination of shareholders is taken. If no record date is fixed for action
without a meeting, the record date for determining shareholders entitled to
take action without a meeting shall be the date the first shareholder signs a
consent to the action taken.
Section 6. Lost Certificates. The board of directors must authorize
the issuance of a new certificate in place of a certificate claimed to have
been lost, destroyed or wrongfully taken, upon receipt of (a) an affidavit from
the person explaining the loss, destruction or wrongful taking, and (b) a bond
from the claimant in a sum as the corporation may reasonably direct to
indemnify the corporation against loss from any claim with respect to the
certificate claimed to have been lost, destroyed or wrongfully taken. The
board of directors may, in its discretion, waive the affidavit and bond and
authorize the issuance of a new certificate in place of a certificate claimed
to have been lost, destroyed or wrongfully taken.
ARTICLE 8 -- INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Indemnification Provisions. Any person who at any time
serves or has served as a director or officer of the corporation or of any
wholly owned subsidiary of the corporation, or in such capacity at the request
of the corporation for any other foreign or domestic corporation, partnership,
joint venture, trust or other enterprise, or as a trustee or administrator
under any employee benefit plan of the corporation or of any wholly owned
subsidiary thereof (a "Claimant"), shall have the right to be indemnified and
held harmless by the corporation to the fullest extent from time to time
permitted by law against all liabilities and litigation expenses (as
hereinafter defined) in the event a claim shall be made or threatened against
that person in, or that person is made or threatened to be made a party to, any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether or not brought by or on
behalf of the corporation, including all appeals therefrom (a "proceeding"),
arising out of such service; provided, that such indemnification shall not be
effective with respect to (a) that portion of any liabilities or litigation
expenses with respect to which the Claimant is entitled to receive payment
under any insurance policy or (b) any liabilities or litigation expenses
incurred on account of any of the Claimant's activities which were at the time
taken known or believed by the Claimant to be clearly in conflict with the best
interests of the corporation.
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Section 2. Definitions. As used in this Article, (a) "liabilities"
shall include, without limitation, (1) payments in satisfaction of any
judgment, money decree, excise tax, fine or penalty for which Claimant had
become liable in any proceeding and (2) payments in settlement of any such
proceeding subject, however, to Section 3 of this Article 8; (b) "litigation
expenses" shall include, without limitation, (1) reasonable costs and expenses
and attorneys' fees and expenses actually incurred by the Claimant in
connection with any proceeding and (2) reasonable costs and expenses and
attorneys' fees and expenses in connection with the enforcement of rights to
the indemnification granted hereby or by applicable law, if such enforcement is
successful in whole or in part; and (c) "disinterested directors" shall mean
directors who are not party to the proceeding in question.
Section 3. Settlements. The corporation shall not be liable to
indemnify the Claimant for any amounts paid in settlement of any proceeding
effected without the corporation's written consent. The corporation will not
unreasonably withhold its consent to any proposed settlement.
Section 4. Litigation Expense Advances.
(a) Except as provided in subsection (b) below, any
litigation expenses shall be advanced to any Claimant within 30 days
of receipt by the secretary of the corporation of a demand therefor,
together with an undertaking by or on behalf of the Claimant to repay
to the corporation such amount unless it is ultimately determined that
the Claimant is entitled to be indemnified by the corporation against
such expenses. The secretary shall promptly forward notice of the
demand and undertaking immediately to all directors of the
corporation.
(b) Within 10 days after mailing of notice to the
directors pursuant to subsection (a) above, any disinterested director
may, if desired, call a meeting of all disinterested directors to
review the reasonableness of the expenses so requested. No advance
shall be made if a majority of the disinterested directors
affirmatively determines that the item of expense is unreasonable in
amount; but if the disinterested directors determine that a portion of
the expense item is reasonable, the corporation shall advance such
portion.
(c) Without limiting the rights contained in subsection
(a) above, the board of directors may take action to advance any
litigation expenses to a Claimant upon receipt of an undertaking by or
on behalf of the Claimant to repay to the corporation such amount
unless it is ultimately determined that the Claimant is entitled to be
indemnified by the corporation against such expenses.
Section 5. Approval of Indemnification Payments. Except as provided
in Section 4 of this Article, the board of directors of the corporation shall
take all such action as may be necessary and appropriate to authorize the
corporation to pay the indemnification required by Section 1 of this Article,
including, without limitation, making a good faith evaluation of the manner in
which the Claimant acted and of the reasonable amount of indemnity due the
Claimant. In taking any such action, any Claimant who is a director of the
corporation shall not be entitled to vote on any matter concerning such
Claimant's right to indemnification.
Section 6. Suits by Claimant. No Claimant shall be entitled to bring
suit against the corporation to enforce his rights under this Article until
sixty days after a written claim has been received by the corporation, together
with any undertaking to repay as required by Section 4 of this Article. It
shall be a defense to any such action that the Claimant's liabilities or
litigation expenses were incurred on account of activities described in clause
(b) of Section 1, but the burden of proving this defense shall be on the
corporation. Neither the failure of the corporation to determine that
indemnification of the Claimant is proper, nor determination by the corporation
that indemnification is not due because of application of clause (b) of Section
1 shall be a defense to the action or create a presumption that the Claimant
has not met the applicable standard of conduct.
Section 7. Consideration; Personal Representatives and Other
Remedies. Any Claimant who during such time as this Article or corresponding
provisions of predecessor bylaws is or has been in effect serves or has served
in any of the capacities described in Section 1 shall be deemed to be doing so
or to have done so in reliance upon, and as consideration for, the right of
indemnification provided herein or therein. The right of indemnification
provided herein
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or therein shall inure to the benefit of the legal representatives of any
Claimant hereunder, and the right shall not be exclusive of any other rights to
which the Claimant or legal representative may be entitled apart from this
Article.
Section 8. Scope of Indemnification Rights. The rights granted
herein shall not be limited by the provisions of Section 55-8-51 of the North
Carolina General Statutes or any successor statute.
ARTICLE 9 -- GENERAL PROVISIONS
Section 1. Dividends and other Distributions. The board of directors
may from time to time declare and the corporation may pay dividends or make
other distributions with respect to its outstanding shares in the manner and
upon the terms and conditions provided by law.
Section 2. Seal. The seal of the corporation shall be any form
approved from time to time or at any time by the board of directors.
Section 3. Waiver of Notice. Whenever notice is required to be given
to a shareholder, director or other person under the provisions of these
bylaws, the articles of incorporation or applicable law, a waiver in writing
signed by the person or persons entitled to the notice, whether before or after
the date and time stated in the notice, and delivered to the corporation shall
be equivalent to giving the notice.
Section 4. Checks. All checks, drafts or orders for the payment of
money shall be signed by the officer or officers or other individuals that the
board of directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the corporation shall be
fixed by the board of directors.
Section 6. Amendments. Unless otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or by law, these bylaws
may be amended or repealed by the board of directors, except that a bylaw
adopted, amended or repealed by the shareholders may not be readopted, amended
or repealed by the board of directors if neither the articles of incorporation
nor a bylaw adopted by the shareholders authorizes the board of directors to
adopt, amend or repeal that particular bylaw or the bylaws generally. These
bylaws may be amended or repealed by the shareholders even though the bylaws
may also be amended or repealed by the board of directors. A bylaw that fixes
a greater quorum or voting requirement for the board of directors may be
amended or repealed (a) if originally adopted by the shareholders, only by the
shareholders, unless such bylaw as originally adopted by the shareholders
provides that such bylaw may be amended or repealed by the board of directors
or (b) if originally adopted by the board of directors, either by the
shareholders or by the board of directors. A bylaw that fixes a greater quorum
or voting requirement may not be adopted by the board of directors by a vote
less than a majority of the directors then in office and may not itself be
amended by a quorum or vote of the directors less than the quorum or vote
prescribed in such bylaw or prescribed by the shareholders.
Section 7. Shareholders' Agreement. In the event of a conflict
between these bylaws and a valid shareholders' agreement, the shareholders'
agreement shall control.
Section 8. Applicability of Antitakeover Statutes. The provisions of
Articles 9 and 9A of Chapter 55 of the North Carolina General Statutes shall
not be applicable to the corporation.
* * * * *
-10-
<PAGE> 14
THIS IS TO CERTIFY that the above bylaws of RF Micro Devices,
Inc. were adopted by the board of directors and the shareholders of the
corporation by action taken at meetings held on ___ 1997 and ___ 1997,
respectively.
This __ day of __ 1997.
________________________________________
Powell T. Seymour, Secretary
[Corporate Seal]
-11-
<PAGE> 1
EXHIBIT 4.1
[LOGO]
RF MICRO DEVICES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA
COMMON STOCK CUSIP 749941 10 0
NO PAR VALUE SEE REVERSE FOR CERTAIN DEFINITIONS
This Certifies that THIS CERTIFICATE IS TRANSFERRABLE
IN THE CITY OF NEW YORK OR IN
CHARLOTTE, NORTH CAROLINA
Is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF
RF Micro Devices, Inc. transferable on the books of the Corporation by the
registered holder hereof in person or by duly authorized attorney upon surrender
of this Certificate properly endorsed. This Certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
---------------
[CORPORATE SEAL]
/s/ Powell T. Seymour /s/ David A. Norbury
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE> 2
RF MICRO DEVICES, INC.
THE CORPORATION IS AUTHORIZED TO ISSUE COMMON STOCK, NO PAR VALUE, AND PREFERRED
STOCK, NO PAR VALUE. PURSUANT TO THE CORPORATION'S ARTICLES OF INCORPORATION,
THE BOARD OF DIRECTORS MAY DETERMINE THE RELATIVE RIGHTS, PREFERENCES AND
LIMITATIONS OF THE PREFERRED STOCK OR ANY CLASS THEREOF OR ANY SERIES OF A
CLASS. THE CORPORATION WILL, UPON REQUEST, FURNISH ANY SHAREHOLDERS, WITHOUT
CHARGE, INFORMATION IN WRITING REGARDING THE DESIGNATIONS, RELATIVE RIGHTS,
PREFERENCES AND LIMITATIONS APPLICABLE TO THE COMMON STOCK AND PREFERRED STOCK
(INCLUDING THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE THE RELATIVE
RIGHTS, PREFERENCES AND LIMITATIONS OF THE PREFERRED STOCK).
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- ___________ Custodian ___________ under Uniform Gifts to
(Cust) (Minor)
Minors Act _______
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received hereby sell, assign and transfer unto
---------------------
- ------------------------------------
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
shares of the common stock represented by the within Certificate and do hereby
irrevocably constitute and appoint __________________________ Attorney to
transfer the said stock on the books of the within-named Corporation with full
power of substitution in the premises.
DATED: SIGNED:
-------------------------- -----------------------------
SIGNED:
-----------------------------
NOTICE: The signature(s) on this assignment must conform in all respects with
the name(s) as written upon the face of the certificate.
SIGNATURE(S) GUARANTEED:
----------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 4.5
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAS
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
THE SECURITIES LAWS OF ANY STATE AND NEITHER THIS WARRANT NOR SUCH SECURITIES
MAY BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND LAWS UNLESS RF MICRO DEVICES, INC.
RECEIVES AN OPINION OF COUNSEL, WHICH MAY BE HOLDER'S IN-HOUSE COUNSEL,
REASONABLY ACCEPTABLE TO IT THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT NO. 3
RF MICRO DEVICES, INC.
A North Carolina Corporation
(Void after 5:00 p.m.,
Washington D.C. Time, on December 31, 1998)
THIS CERTIFIES THAT, for value received, TRW Inc. (the "Holder")
is entitled at any time before 5:00 p.m. Washington D.C. time on December
31, 1998 (the "Expiration Time") to purchase up to 1,111,111 (one million, one
hundred eleven thousand one hundred eleven) RFMD Shares (as defined in that
certain Subordinated Convertible Promissory Note (the "Convertible Note")
issued by the Company to the Holder of even date herewith), less that number
of shares, if any, that have been acquired by Holder pursuant to the
conversion of the Convertible Note at the time of exercise of this Warrant,
at the price of $9.00 per RFMD Share, subject to adjustment as provided in
paragraph 4 of this Warrant (that price, as it may be adjusted from time to
time, being referred to as the "Warrant Price").
1. To exercise this Warrant, this Warrant must be surrendered
prior to the Expiration Time at the office of the Company at 7341-D West
Friendly Avenue, Greensboro, North Carolina 27410 (or such other address as
the Company may specify in writing to the Holder of this Warrant at least
ten days before this Warrant is exercised) with the attached Notice of
Exercise duly completed and executed, accompanied by evidence of a wire
transfer of immediately available funds to the Company's money market account
#________ with Silicon Valley Bank, Santa Clara, California, ABA Routing
#________ (or such other account as the Company may specify in writing to
the Holder of this Warrant at least ten days before this Warrant is
exercised) in full payment of the purchase price of the RFMD Shares with
respect to which this Warrant is exercised. This Warrant may be exercised in
whole or in part as to any whole number of shares. If this Warrant is
exercised in part, upon surrender of this Warrant for exercise, the Company
will issue to the Holder a new Warrant to purchase the remaining number of
RFMD Shares which may be purchased upon exercise of this Warrant (before
taking account of adjustments by reason of paragraphs 4, 5, and 6) and the
number of RFMD Shares with respect to which it is exercised (before taking
account of adjustments by reason of paragraphs 4, 5, and 6). The new Warrant
will bear the same date as this Warrant and will be identical to this
Warrant in all respects, except as to the number of RFMD Shares as to which
it may be exercised.
2. The RFMD Shares as to which this Warrant is exercised will be
deemed to be issued when this Warrant is exercised. Holder agrees that prior
to the exercise of this Warrant, it will comply with the provisions of the
Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act") as in effect from time to time. If action is taken by the Federal
Trade Commission or the United States Department of Justice to enjoin Holder's
exercise of this Warrant, the Company agrees reasonably to cooperate with
Holder to contest such enjoinment at the expense of this Holder. A
certificate representing the RFMD Shares will be issued to the Holder of
this Warrant promptly after it is exercised. The certificate may bear a
legend to the effect that the shares it represents have not been registered
under the Securities Act of 1933, as amended (the "Act"), or any applicable
state securities laws, and may only be transferred in a transaction registered
under the Act or such laws or exempt from the registration requirements of
the Act or such laws. In addition, any other legend required by any other
agreement
<PAGE> 2
between the Company and Holder may be included on the certificate or
certificates for such shares.
3. This Warrant will expire, and the right to purchase the RFMD
Shares by exercise of this Warrant will terminate, at the Expiration Time;
provided, however, that if Holder has complied with the filing provisions of
the HSR Act at least thirty days prior to the Expiration Time, but the waiting
period imposed by the HSR Act has not terminated or lapsed, then the
Expiration Time will be extended until ten days after such termination or
lapse. After that time this Warrant will be void.
4. The Warrant Price will be subject to adjustment from time to
time as follows:
(a) If the RFMD Shares issuable upon exercise hereof are
New Preferred Shares (as defined in the Convertible Note), and if, prior
to such time that this Warrant has been fully exercised, the Company (i)
pays a dividend on its Common Stock in Common Stock, (ii) splits or
subdivides its outstanding shares of Common Stock, or (iii) combines its
outstanding shares of Common Stock into a smaller number of shares, the
Warrant Price in effect immediately prior to each of those events will be
adjusted, and the number of shares into which this Warrant is exercisable
will be adjusted, proportionately to reflect such event; provided,
however, that such proportionate adjustment may instead be made pursuant
to the terms of the New Preferred Shares to be issued upon exercise of this
Warrant.
(b) If the RFMD Shares issuable upon exercise hereof are
shares of common stock, as defined in paragraph 4 below, and if the Company
(i) pays a dividend on its Common Stock in Common Stock, (ii) splits or
subdivides its outstanding shares of Common Stock, or (iii) combines its
outstanding shares of Common Stock into a smaller number of shares, the
Warrant Price in effect immediately prior to each of those events will be
adjusted proportionately so that the adjusted Warrant Price will bear the
same relation to the Warrant Price in effect immediately prior to the event
as the total number of shares of Common Stock outstanding immediately prior
to the event will bear to the total number of shares of Common Stock
outstanding immediately after the event.
(c) An adjustment made pursuant to subparagraph (a) or (b)
of this paragraph will become effective immediately after the corresponding
record date in the case of a dividend and immediately after the effective
date in the case of a subdivision or combination.
No adjustment of the Warrant Price will be made if the amount of
such adjustment would be less than 2% of the Warrant Price, but any such
adjustment that would otherwise be required to be made and has not previously
been made will be carried forward and be made at the time of and together
with the next subsequent adjustment which, together with all adjustments so
carried forward, amount in the aggregate to 2% or more of the Warrant Price.
As used in this paragraph, "Common Stock" includes any class of the
Company's capital stock, now or hereafter authorized, having the right to
participate in the distribution of either earnings or assets of the
Company without limitation as to amount or percentage. At no time will the
Warrant Price be less than $.01 per share.
5. Upon each adjustment of the Warrant Price pursuant to
paragraph 4, the number of New Preferred Shares or shares of Common Stock, as
the case may be, purchasable upon exercise of this Warrant will be adjusted
so that the number of New Preferred Shares or shares of Common Stock, as the
case may be, which would be issued if this Warrant were exercised in full (at
such adjusted Warrant Price) would be the number of shares obtained by
multiplying the number of New Preferred Shares or shares of Common Stock, as
the case may be, purchasable by exercise of this Warrant in full immediately
prior to the adjustment by the Warrant Price in effect prior to the
adjustment and dividing the product so obtained by the new Warrant Price, but
upon any exercise of this Warrant, the number of Shares to be issued will be
the nearest number of whole Shares.
6. In case of a distribution to all holders of the Company's
Common Stock of shares of its capital stock (other than Common Stock) or
evidences of its indebtedness or assets, or a capital reorganization of the
Company, a reclassification of the Common Stock, a consolidation of the
Company with or merger of the Company into another corporation or entity
(other than a consolidation or merger in which the Company is the continuing
entity) or a sale of the properties and assets of the Company as, or
substantially as, an entirety and distribution of the proceeds of sale, after
such distribution, capital reorganization, reclassification, consolidation,
merger or sale, on
<PAGE> 3
exercise of this Warrant the Holder will receive the number of shares of stock
or other securities or property which the Holder would have received if this
Warrant had been exercised immediately before the first such corporate event
and the Holder had retained what it would have received as a result of each
such corporate event. The split or subdivision or combination of shares of
Common Stock at any time outstanding into a greater or lesser number of shares
of Common Stock will not be deemed to be a reclassification of the Common
Stock of the Company for the purposes of this paragraph. The Company will not
effect any consolidation or merger unless prior to or simultaneously with
its consummation the successor entity (if other than the Company) resulting
from the consolidation agrees in writing to deliver to the Holder of this
Warrant on exercise of this Warrant the shares of stock or other securities
or property to which the Holder becomes entitled because of that exercise.
7. Whenever the Warrant Price is adjusted as provided in
this Warrant, the Company will compute the adjusted Warrant Price and the
number of RFMD Shares or other assets the Holder would receive on exercise
of this Warrant in full and will provide a notice to the Holder within thirty
(30) days of the date of such adjustment stating that the Warrant Price has
been adjusted and setting forth the adjusted Warrant Price and what the Holder
would receive upon exercise of this Warrant in full. The Company will also
provide a notice to the Holder describing any event that would trigger an
adjustment in the Warrant Price in the absence of the last paragraph of
paragraph 4. Such notice will be given within thirty (30) days of the
effective date of such event.
8. The Company will at all times keep a sufficient number of
authorized but unissued RFMD Shares to permit exercise in full of this
Warrant. The Company represents and warrants that all RFMD Shares which
are delivered on exercise of this Warrant (and payment of the Warrant Price
therefor) will, upon delivery, be duly issued, fully paid and non-assessable.
9. The Holder will not, by reason of holding this Warrant, have
any right to vote, to receive dividends or other distributions, or any other
rights of a shareholder, with regard to the RFMD Shares.
10. The Holder may not assign this Warrant or any of the
Holder's rights under it, except (i) to a corporation controlling,
controlled by or under common control with the Holder or (ii) by merger or
other operation of law, and any transfer or attempted transfer of this Warrant
will be of no force or effect.
11. Any notices or other communications to the holder of this
Warrant will be addressed to TRW Inc., Space & Electronics Group, One Space
Park, Redondo Beach, California 90278, Attention: Vice President, Finance,
Electronic Systems & Technology Division, with a copy to TRW Inc., 1900
Richmond Road, Cleveland, Ohio 44124, Attention: Secretary, or to such other
address as the Holder may specify in writing to the Company.
12. This Warrant will be governed by, and construed under, the
laws of the State of North Carolina.
13. This Warrant may not be modified without the written consent
of the Company.
Dated: June 6, 1996 RF MICRO DEVICES, INC.
By: /s/ David A. Norbury
-----------------------
President and CEO
<PAGE> 1
EXHIBIT 4.6
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND NEITHER
THIS WARRANT NOR SUCH SECURITIES MAY BE
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND LAWS UNLESS
RF MICRO DEVICES, INC. RECEIVES AN OPINION OF COUNSEL, WHICH MAY BE HOLDER'S
IN-HOUSE COUNSEL, REASONABLY ACCEPTABLE TO
IT THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT NO. 4
RF MICRO DEVICES, INC.
A North Carolina Corporation
(Void after 5:00 p.m.,
Washington D.C. Time, at the Expiration Date (as hereinafter defined))
THIS CERTIFIES THAT, for value received, TRW Inc. (the "Holder") is
entitled at any time before 5:00 p.m. Washington D.C. time on the Expiration
Date (as hereinafter defined) (such time on the Expiration Date being referred
to herein as the "Expiration Time") to purchase up to 1,000,000 (one million)
shares (the "Shares") of the Common Stock, no par value, of RF MICRO DEVICES,
INC. (the "Company"), a North Carolina corporation, at the price of $10.00 per
Share, subject to adjustment as provided in paragraph 5 of this Warrant (that
price, as it may be adjusted from time to time, being referred to as the
"Warrant Price").
1. This Warrant may only be exercised if the Technology
Transfer Date (as hereinafter defined) has occurred and prior to the first to
occur of: (i) the second anniversary of the Technology Transfer Date; or (ii)
90 days after the Company has provided notice to the Holder that the current
market price of the Company's Common Stock (as determined pursuant to this
paragraph) is, and has been for at least 20 (twenty) consecutive trading days
(as defined below), at least $12.00 per share (subject to adjustment to reflect
stock splits, subdivisions, combinations, or dividends paid in common stock of
the Company) (the first to occur of subparagraph (i) or (ii) of this paragraph
1 being the "Expiration Date"); provided, however, that if the Holder has
complied with the filing provisions of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") at least thirty days prior
to the Expiration Date, but the waiting period imposed by the HSR Act has not
terminated or lapsed, then the Expiration Date will be extended until ten days
after such termination or lapse; and further provided, that if the Technology
Transfer Date (defined below) does not occur by December 31, 1998 (or such
other date as to which the parties mutually agree pursuant to Section 8.2.2 of
the License), this Warrant will be void and of no further force or effect.
As used herein, the term "Technology Transfer Date" will mean the
date when a "Foundry" is considered an "Operational Foundry" under the terms of
that certain License and Technical Assistance Agreement of even date herewith
between the Company and the Holder (the "License Agreement"), and the terms
"Foundry and "Operational Foundry" will have the meanings given them in the
License Agreement. A "trading day" will mean any day upon which the New York
Stock Exchange is open for trading.
The current market price per share of Common Stock on any day will be
deemed to be the closing price of the Common Stock on the day before the day in
question. The closing price of the Common Stock on a day will be the last
reported sale price regular way or, in case no reported sale takes place on
that day, the average of the reported bid and asked prices regular way, in
either case on the principal trading market on which the Common Stock is listed
or authorized for trading, or if not listed or authorized for trading on any
trading market in which actual transactions are reported, the average of the
highest reported bid and lowest reported asked prices as furnished by the
National Association of Securities Dealers Inc.'s Automated Quotation System
Level I, or the nearest comparable system.
<PAGE> 2
2. To exercise this Warrant, this Warrant must be surrendered
prior to the Expiration Time at the office of the Company at 7341-D West
Friendly Avenue, Greensboro, North Carolina 27410 (or such other address as
the Company may specify in writing to the Holder of this Warrant at least ten
days before this Warrant is exercised) with the attached Notice of Exercise
duly completed and executed, accompanied by evidence of a wire transfer of
immediately available funds to the Company's money market account #________
with Silicon Valley Bank, Santa Clara, California, ABA Routing #________ (or
such other account as the Company may specify in writing to the Holder of this
Warrant at least ten days before this Warrant is exercised) in full payment of
the purchase price of the Shares with respect to which this Warrant is
exercised. This Warrant may be exercised in whole or in part as to any whole
number of Shares. If this Warrant is exercised in part, upon surrender of this
Warrant for exercise, the Company will issue to the Holder a new Warrant to
purchase the remaining number of Shares which may be purchased upon exercise of
this Warrant (before taking account of adjustments by reason of paragraphs 5, 6
and 7). The new Warrant will bear the same date as this Warrant and will be
identical to this Warrant in all respects, except as to the number of Shares as
to which it may be exercised.
3. The Shares as to which this Warrant is exercised will be
deemed to be issued when this Warrant is exercised. Holder agrees that, prior
to the exercise of this Warrant, it will comply with the provisions of the HSR
Act as in effect from time to time. If action is taken by the Federal Trade
Commission or the United States Department of Justice to enjoin Holder's
exercise of the Warrant, the Company agrees to reasonably cooperate with Holder
to contest such enjoinment at the expense of this Holder. A certificate
representing those Shares will be issued to the Holder of this Warrant promptly
after it is exercised. The certificate may bear a legend to the effect that
the Shares it represents have not been registered under the Securities Act of
1933, as amended (the "Act"), or any applicable state securities laws, and may
only be transferred in a transaction registered under that Act or such laws or
exempt from the registration requirements of that Act or such laws. In
addition, any other legend required by any other agreement between the Company
and Holder may be included on the certificate or certificates for such Shares.
4. This Warrant will expire, and the right to purchase the Shares
by exercise of this Warrant will terminate, at the Expiration Time (as it may
be extended pursuant to paragraph 1: provided, however, that if Holder has
complied with the filing provisions of the HSR Act at least thirty days prior
to the Expiration Time, but the waiting period imposed by the HSR Act has not
terminated or lapsed, then the Expiration Time will be extended until ten days
after such termination or lapse. After that time this Warrant will be void.
5. The Warrant Price will be subject to adjustment from time to
time as follows: If the Company (i) pays a dividend on its Common Stock in
Common Stock, (ii) splits or subdivides its outstanding shares of Common Stock,
or (iii) combines its outstanding shares of Common Stock into a smaller number
of shares, the Warrant Price in effect immediately prior to each of those
events will be adjusted proportionately so that the adjusted Warrant Price will
bear the same relation to the Warrant Price in effect immediately prior to the
event as the total number of shares of Common Stock outstanding immediately
prior to the event will bear to the total number of shares of Common Stock
outstanding immediately after the event. An adjustment made pursuant to this
paragraph will become effective immediately after the corresponding record date
in the case of a dividend and immediately after the effective date in the case
of a subdivision or combination.
No adjustment of the Warrant Price will be made if the amount of such
adjustment would be less than 2% of the Warrant Price, but any such adjustment
that would otherwise be required to be made and has not previously been made
will be carried forward and be made at the time of and together with the next
subsequent adjustment which, together with all adjustments so carried forward,
amount in the aggregate to 2% or more of the Warrant Price. As used in this
paragraph, "Common Stock" includes any class of the Company's capital stock,
now or hereafter authorized, having the right to participate in the
distribution of either earnings or assets of the Company without limitation as
to amount or percentage. At no time will the Warrant Price be less than $.01
per share.
6. Upon each adjustment of the Warrant Price pursuant to
paragraph 5, the number of shares of Common Stock purchasable upon exercise of
this Warrant will be adjusted so that the number of shares of Common Stock
which would be issued if this Warrant were exercised in full (at such adjusted
Warrant Price) would be the number of shares obtained by multiplying the number
of shares of Common Stock purchasable by exercise of this
<PAGE> 3
Warrant in full immediately prior to the adjustment by the Warrant Price in
effect prior to the adjustment and dividing the product so obtained by the new
Warrant Price, but upon any exercise of this Warrant, the number of Shares to
be issued will be the nearest number of whole Shares.
7. In case of a distribution to all holders of the Company's
Common Stock of shares of its capital stock (other than Common Stock) or
evidences of its indebtedness or assets, or a capital reorganization of the
Company, a reclassification of the Common Stock, a consolidation of the Company
with or merger of the Company into another corporation or entity (other than a
consolidation or merger in which the Company is the continuing entity) or a
sale of the properties and assets of the Company as, or substantially as, an
entirety and distribution of the proceeds of sale, after such distribution,
capital reorganization, reclassification, consolidation, merger or sale, on
exercise of this Warrant the Holder will receive the number of shares of stock
or other securities or property which the Holder would have received if this
Warrant had been exercised immediately before the first such corporate event
and the Holder had retained what it would have received as a result of each
such corporate event. The split or subdivision or combination of shares of
Common Stock at any time outstanding into a greater or lesser number of shares
of Common Stock will not be deemed to be a reclassification of the Common Stock
of the Company for the purposes of this paragraph. The Company will not effect
any consolidation or merger unless prior to or simultaneously with its
consummation the successor entity (if other than the Company) resulting from
the consolidation agrees in writing to deliver to the Holder of this Warrant on
exercise of this Warrant the shares of stock or other securities or property to
which the Holder becomes entitled because of that exercise.
8. Whenever the Warrant Price is adjusted as provided in this
Agreement, the Company will compute the adjusted Warrant Price and the number
of Shares or other assets the Holder would receive on exercise of this Warrant
in full and will provide a notice to the Holder within thirty (30) days of the
date of such adjustment stating that the Warrant Price has been adjusted and
setting forth the adjusted Warrant Price and what the Holder would receive upon
exercise of this Warrant in full. The Company will also provide a notice to the
Holder describing any event that would trigger an adjustment in the Warrant
Price in the absence of the last paragraph of paragraph 5. Such notice will be
given within thirty (30) days of the effective date of such event.
9. The Company will at all times keep a sufficient number of
authorized but unissued shares of its Common Stock to permit exercise in full
of this Warrant. The Company represents and warrants that all the shares of
Common Stock which are delivered on exercise of this Warrant (and payment of
the Warrant Price therefor) will, upon delivery, be duly issued, fully paid and
non-assessable.
10. The Holder will not, by reason of holding this Warrant, have
any right to vote, to receive dividends or other distributions, or any other
rights of a shareholder, with regard to the Shares.
11. The Holder may not assign this Warrant or any of the Holder's
rights under it, except (i) to a corporation controlling, controlled by or
under common control with the Holder or by (ii) merger or other operation of
law, and any transfer or attempted transfer of this Warrant will be of no
force or effect.
12. Any notices or other communications to the holder of this
Warrant will be addressed to TRW Inc., Space & Electronics Group, One Space
Park, Redondo Beach, California 90278, Attention: Vice President, Finance,
Electronic Systems & Technology Division, with a copy to TRW Inc., 1900
Richmond Road, Cleveland, Ohio 44124, Attention: Secretary, or to such other
address as the Holder may specify in writing to the Company.
13. This Warrant will be governed by, and construed under, the
laws of the State of North Carolina.
14. This Warrant may not be modified without the written consent
of the Company.
Dated: June 6, 1996 RF MICRO DEVICES, INC.
By: /s/ David A. Norbury
--------------------------
President and CEO
<PAGE> 1
EXHIBIT 4.7
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAWS AND NEITHER MAY BE SOLD OR OTHERWISE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD
THERETO, OR (II) THE COMPANY SHALL HAVE RECEIVED A WRITTEN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER SUCH SECURITIES
ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION
WITH SUCH PROPOSED TRANSFER.
RF MICRO DEVICES, INC.
STOCK PURCHASE WARRANT
COMMON STOCK
Warrant No. 5 41,322 Shares
This certifies that, for value received,
FINOVA TECHNOLOGY FINANCE, INC. ("FINOVA")
or its assigns, is entitled, subject to the terms and conditions hereinafter
set forth, at any time after the date hereof and prior to 5:00 o'clock P.M.,
Greensboro, North Carolina time, on February 25, 2002, but not thereafter, to
purchase up to 41,322 shares of Common Stock, no par value ("Common Stock"), of
RF Micro Devices, Inc., a North Carolina corporation (the "Company"), such
number of shares being subject to adjustment upon the occurrence of the
contingencies set forth in this Warrant. The purchase price payable upon the
exercise of this Warrant shall be $9.00 per share, said amount being subject to
adjustment upon the occurrence of the contingencies set forth in this Warrant
(the "Warrant Price").
Upon delivery of this Warrant duly executed, together with
payment of the Warrant Price for the shares of Common Stock thereby purchased,
at the principal office of the Company or at such other address as the Company
may designate by notice in writing to the registered holder hereof, the
registered holder of this Warrant shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. All shares of Common
Stock issued upon the exercise of this Warrant will, upon issuance, be fully
paid and nonassessable and free from all taxes, liens and charges with respect
thereto.
This Warrant is subject to the following terms and conditions:
1. Exercise of Warrant. This Warrant may be exercised
in whole or in part, from time to time, at any time after the date hereof but
in any event at or prior to 5:00 o'clock P.M., Greensboro, North Carolina time,
on February 25, 2002, but not thereafter, as to all or any part of the number
of 41,322 whole shares of Common Stock then subject hereto. In case of any
partial exercise of this Warrant, the Company shall execute and deliver a new
Warrant of like tenor and expiration date for the balance of the shares of
Common Stock purchasable hereunder.
2. Adjustment of Warrant Price and Number of Shares
Purchasable Hereunder. The Warrant Price and the number of shares purchasable
hereunder shall be subject to adjustment from time to time in accordance with
the following provisions:
(a) The Warrant Price for the shares of Common Stock then
subject to this Warrant shall be reduced by the per share amount of
any cash dividend or distribution of property by the Company otherwise
than out of earned surplus, either tangible or intangible (other than
distributions of Common Stock), to the holders of the Common Stock,
unless and until the Warrant Price is equal to zero. If and when the
Warrant Price is reduced to zero, the registered holder of this
Warrant shall
<PAGE> 2
be entitled to receive, concurrently with the holders of the Common
Stock then outstanding, the per share amount of any such dividend or
distribution with respect to the number of shares of Common Stock then
purchasable upon exercise of this Warrant in the same manner and to
the same extent as if the registered holder of this Warrant were then
the registered owner of such number of shares of Common Stock. For
purposes of this subparagraph (a), the per share amount of any
distribution of property shall be the fair market value thereof as
determined by the Board of Directors in good faith in the resolutions
authorizing any such distribution. No adjustment in the number of
shares that may be purchased upon exercise of this Warrant shall be
required in the event of an adjustment in the Warrant Price per share
pursuant to this subparagraph (a).
(b) In case the Company shall at any time subdivide the
outstanding shares of its Common Stock, the Warrant Price in effect
immediately prior to such subdivision shall be proportionately
decreased, and in case the Company shall at any time combine the
outstanding shares of its Common Stock, the Warrant Price in effect
immediately prior to such combination shall be proportionately
increased, effective from and after the record date of such
subdivision or combination, as the case may be. Upon any adjustment
in the Warrant Price per share pursuant to this subparagraph (b), the
registered holder of this Warrant shall thereafter be entitled to
purchase, at the adjusted Warrant Price, the number of shares of
Common Stock, calculated to the nearest full share obtained by (X)
multiplying the number of shares of Common Stock purchasable hereunder
immediately prior to such adjustment by the Warrant Price in effect
immediately prior to such adjustment, and (Y) dividing the product
thereof by the Warrant Price resulting from such adjustment.
(c) In the event of the issuance of additional shares of
Common Stock of the Company as a dividend on the Common Stock, from
and after the day which is the record date for the determination of
shareholders entitled to such dividend, the registered holder of this
Warrant shall (until another adjustment) be entitled to purchase the
number of shares of Common Stock, calculated to the nearest full
share, obtained by multiplying the number of shares of Common Stock
purchasable hereunder immediately prior to said record date by a
fraction, the numerator of which is the total number of shares of
Common Stock outstanding after the issuance of dividend, calculated on
a fully diluted basis assuming the conversion of all outstanding
convertible securities and the exercise of all outstanding options,
warrants or other rights (including those with respect to convertible
securities), and the denominator of which is the number of shares of
Common Stock outstanding immediately prior to said record date,
calculated on a fully diluted basis assuming the conversion of all
outstanding convertible securities and the service of all outstanding
options, warrants, or other rights (including those with respect to
convertible securities). Upon each adjustment pursuant to this
subparagraph (c), the Warrant Price in effect immediately prior to
such adjustment shall be reduced to an amount determined by dividing
(X) the product obtained by multiplying such Warrant Price by the
number of shares of Common Stock purchasable hereunder immediately
prior to such adjustment by (Y) the number of shares of Common Stock
purchasable hereunder immediately following such adjustment.
(d) If the Company shall issue any additional shares of
Common Stock at a price per share less than the Warrant Price per
share at such time, including, for purposes of this paragraph 2(d) any
shares of Common Stock that may be issued upon the exercise of
conversion rights with respect to any other security of the Company
convertible into Common Stock (otherwise than as provided in
subparagraphs (b) or (c) of this paragraph 2), then the Warrant Price
upon each such issuance shall be reduced, as of the opening of
business on the date of such issue or sale, to the price determined by
multiplying the then adjusted Warrant Price by a fraction (A) the
numerator of which shall be (i) the number of shares of Common Stock
outstanding immediately prior to such issue or sale calculated on a
fully diluted basis assuming the conversion of all outstanding
convertible securities and the exercise of all outstanding options,
warrants or other rights (including those with respect to convertible
securities), plus (ii) the number of shares of Common Stock that the
aggregate consideration received by the Company for the total number
of additional shares of Common Stock so issued would purchase at the
then adjusted Warrant Price, and (B) the denominator of which shall be
the number of shares of Common Stock outstanding immediately after
such issue or sale calculated on a fully diluted basis
- 2 -
<PAGE> 3
assuming the conversion of all outstanding convertible securities and
the exercise of all outstanding options, warrants or other rights
(including those with respect to convertible securities).
The provisions of this subparagraph (d) shall not apply under
any of the circumstances for which an adjustment is provided in
subparagraphs (a), (b), or (c) of this paragraph 2.
For the purposes of this subparagraph (d), the issuance of any
warrants, options or other subscription rights with respect to Common
Stock and the issuance of any securities convertible into Common Stock
(or the issuance of any warrants, options or other subscription rights
with respect to such convertible securities) shall be deemed an
issuance at such time of Common Stock if the net consideration which
may be received by the Company for such Common Stock shall be less
than the Warrant Price at such time. No adjustment of the Warrant
Price shall be made under this subparagraph (d) upon the issuance of
any additional shares of Common Stock which are issued pursuant to the
exercise of any warrants, options or other subscription or purchase
rights or pursuant to the exercise of any conversion or exchange
rights in any convertible securities if any adjustment shall
previously have been made upon the issuance of any such warrants,
options or other rights or upon the issuance of any convertible
securities (or upon the issuance of any warrants, options or any
rights therefor) as above provided. On the expiration or termination
of any warrants, options or other subscription rights with respect to
Common Stock, or on the expiration or termination of any conversion or
exchange rights with respect to securities convertible into or
exchangeable for Common Stock (or warrants, options or any rights
therefor), the Warrant Price then in effect hereunder shall forthwith
be increased to the Warrant Price which would have been in effect at
the time of such expiration or termination if such warrants, options
or other subscription rights, or such conversion or exchange rights
(or warrants, options or any rights therefor), to the extent
outstanding immediately prior to such expiration or termination, had
never been issued.
For the purpose of this subparagraph (d), in the case of the
issue of shares of Common Stock for a consideration other than cash,
the consideration received by the Company therefor shall be deemed to
be the fair value of such consideration as determined in good faith by
its Board of Directors.
The provisions of this subparagraph (d) shall not apply with
respect to the issuance of any "Excluded Securities" (as hereinafter
defined). For the purposes hereof, "Excluded Securities" shall mean
the following:
(i) shares of Common Stock to be issued in
connection with the exercise of options granted or to be
granted to employees, directors, officers, consultants,
advisors, and other individuals performing services for or on
behalf of the Company pursuant to the terms of the Company's
stock option plans to purchase up to 1,426,000 shares of
Common Stock in the aggregate (subject to appropriate
adjustments in the event of stock dividends, stock splits or
similar capital adjustments or recapitalizations) upon the
vesting and subsequent exercise of such options;
(ii) shares of Common Stock issued upon conversion
of the Company's Class A-1 Convertible Preferred Stock, Class
A-2 Convertible Preferred Stock, Class B Convertible Preferred
Stock ,or Class C Convertible Preferred Stock;
(iii) shares of Common Stock issued upon exercise
of that certain Stock Purchase Warrant No. 1 dated August 7,
1995, and that certain Stock Purchase Warrant No. 2 dated
November 10, 1995, issued by the Company to Allen Telecom
Group, Inc.;
(iv) shares of Common Stock issued upon exercise
of that certain Stock Purchase Warrant No. 3 dated June 6,
1996, and that certain Stock Purchase Warrant No. 4 dated June
6, 1996, issued by the Company to TRW, Inc. ("TRW"); and
- 3 -
<PAGE> 4
(v) shares of the Company's equity securities
issued upon conversion of that certain Subordinated
Convertible Promissory Note dated June 6, 1996, issued by the
Company to TRW.
The provisions of this subparagraph (d) shall terminate and no further
adjustments shall be thereafter made to the Warrant Price or the number of
shares purchasable hereunder upon the closing of an underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the "Act") covering the offer and sale to the public
of Common Stock resulting in gross proceeds to the Company (before deduction of
underwriter's commission and expenses) of not less than $15,000,000 and at a
price per share to the public which implies a pre-financing fully diluted
valuation of the Company of at least $75,000,000.
3. Reorganization, Reclassification, Consolidation or
Merger. If at any time while this Warrant is outstanding there shall be any
reorganization or reclassification of the Common Stock of the Company (other
than a subdivision or combination of shares provided for in paragraph 2 above),
or any consolidation or merger of the Company with another corporation, the
holder of this Warrant shall thereafter be entitled to receive, during the term
hereof and upon payment of the Warrant Price, the number of shares of stock or
other securities or property of the Company or of the successor corporation
resulting from such consolidation or merger, as the case may be, to which a
holder of the Common Stock of the Company, deliverable upon the exercise of
this Warrant, would have been entitled upon such reorganization,
reclassification, consolidation or merger if this Warrant had been exercised
immediately prior to such reorganization, reclassification, consolidation or
merger; and in any such case, appropriate adjustment (as determined by the
Board of Directors of the Company) shall be made in the application of the
provisions herein set forth with respect to the rights and interest thereafter
of the holder of this Warrant to the end that the provisions set forth herein
(including the adjustment of the Warrant Price and the number of shares
issuable upon the exercise of this Warrant) shall thereafter be applicable, as
near as reasonably may be, in relation to any shares or other property
thereafter deliverable upon the exercise hereof.
4. Net Issue Exercise. Notwithstanding any provision
herein to the contrary, if the fair market value (as determined below) of one
share of Common Stock is greater than the Warrant Price (at the date of the
calculation as set forth below) for that share, in lieu of exercising this
Warrant for cash, the registered holder of this Warrant may elect to receive
shares equal to the value (as determined below) of this Warrant (or the portion
thereof being canceled) by surrender of this Warrant at the principal office of
the Company (or at such other address as the Company may designate) together
with notice of such election. In such event, the Company shall issue to the
registered holder the number of shares of Common Stock, calculated to the
nearest full share, obtained by (X) multiplying the (i) number of shares of
Common Stock purchasable under the Warrant or, if only a portion of the Warrant
is being exercised, the portion of the Warrant being canceled (at the date of
such calculation) by (ii) the difference between the fair market value of one
share of the Common Stock (at the date of such calculation) and the per share
Warrant Price (as adjusted to the date of such calculation), and (Y) dividing
the product thereof by the fair market value of one share of the Common Stock.
For purposes of this paragraph 4, the "fair market value" of one share of
Common Stock shall be determined by the Company's Board of Directors in good
faith; provided, however, that if a public market for the Company's Common
Stock exists at the time of such exercise, the fair market value per share
shall be the average of the closing bid and asked prices of the Common Stock
quoted in the Over-The-Counter Market Summary or the last reported sale price
of the Common Stock or the closing price quoted on the NASDAQ National Market
System or any national securities exchange on which the Common Stock is listed,
whichever is applicable, as published in The Wall Street Journal for the five
(5) trading days prior to the date of determination of fair market value.
5. Description of Adjustments. Upon the request of the
registered holder made at any time after any adjustment of the Warrant Price or
in the number of shares of Common Stock purchasable upon the exercise of this
Warrant, the Company shall provide the registered holder of this Warrant at the
address of such holder as shown on the books of the Company with a written
description setting forth in reasonable detail the adjusted Warrant Price and
number of shares purchasable hereunder and the method of calculation of each.
6. Charges, Taxes and Expenses. The issuance of
certificates for shares of Common Stock upon any exercise of this Warrant shall
be made without charge to the holder hereof for any tax or other expense in
respect to the issuance of such certificates, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of, or in such name or names as may be directed by, the holder of this Warrant;
provided,
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<PAGE> 5
however, that in the event that certificates for shares of Common Stock are to
be issued in a name other than the name of the holder of this Warrant, this
Warrant when surrendered for exercise shall be accompanied by an instrument of
transfer in form satisfactory to the Company, duly executed by the holder
hereof in person or by an attorney duly authorized in writing and the holder
shall pay all stock transfer taxes payable upon issuance of such stock
certificate.
7. Registration Rights. The holder of this Warrant
shall have such rights to have registered under any federal or state securities
laws the shares of Common Stock issuable upon exercise hereof upon the same
basis and subject to the same terms and conditions (including indemnification)
as provided in that certain Second Amended and Restated Registration Rights
Agreement dated June 6, 1996, as amended, between the Company and the investors
named therein.
8. Certain Obligations of the Company. The Company
agrees that it will not establish or if established increase the par value of
the shares of any Common Stock which are at the time issuable upon exercise of
this Warrant above the then prevailing Warrant Price hereunder and that, before
taking any action which would cause an adjustment reducing the Warrant Price
hereunder below the then par value, if any, of the shares of any Common Stock
issuable upon exercise hereof, the Company will take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and non assessable shares of Common Stock
at the Warrant Price as so adjusted.
9. Issuance of Additional Warrant. Reference is made to
the Master Equipment Lease Agreement dated as of December 2, 1996, between
Finova, as Lessor, and the Company, as Lessee (the "Lease"). At such time as
the "Purchase Price" (as defined in the lease) of "Equipment" (as defined in
the lease) exceeds Five Million and No/100 Dollars ($5,000,000.00), an
additional stock purchase warrant, substantially identical to this Warrant,
having a five-year term and covering 41,323 shares of Common Stock, shall be
promptly issued to Finova.
10. Miscellaneous.
(a) The Company covenants that it will at all times
reserve and keep available, solely for the purpose of issue upon the
exercise hereof, a sufficient number of shares of Common Stock to
permit the exercise hereof in full.
(b) The terms of this Warrant shall be binding upon and
shall inure to the benefit of any successors or assigns of the Company
and of the holder or holders hereof and of the Common Stock issued or
issuable upon the exercise hereof.
(c) No holder of this Warrant, as such, shall be entitled
to vote or receive dividends (except as provided in paragraph 2(a)
hereof) or be deemed to be a shareholder of the Company for any
purpose.
(d) This Warrant may be divided into separate Warrants
covering one share of the Common Stock or any whole multiple thereof,
for the total number of shares of Common Stock then subject to this
Warrant at any time, or from time to time, upon the request of the
registered holder of this Warrant and the surrender of the same to the
Company for such purpose. Such subdivided Warrants shall be
issued promptly by the Company following any such request and shall be
of the same form and tenor as this Warrant, except for any requested
change in the name of the registered holder stated herein.
(e) Except as otherwise provided herein, this Warrant and
all rights hereunder are transferrable by the registered holder hereof
in person or by duly authorized attorney on the books of the Company
upon surrender of this Warrant, properly endorsed, to the Company.
The Company may deem and treat the registered holder of this Warrant
at any time as the absolute owner hereof for all purposes and shall
not be affected by any notice to the contrary.
(f) Notwithstanding any provision herein to the contrary,
the holder hereof may not sell, transfer or otherwise assign this
Warrant unless the Company is provided with an opinion of counsel
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<PAGE> 6
satisfactory in form and substance to the Company, to the effect that
such sale, transfer or assignment does not violate the Act or
applicable state securities laws.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officers and its corporate seal to be affixed
hereto.
Dated February 25, 1997.
RF MICRO DEVICES, INC.
By: /s/ David A. Norbury
-----------------------------------
David A. Norbury
President and Chief
Executive Officer
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<PAGE> 1
EXHIBIT 4.8
LOAN AND SECURITY AGREEMENT
$2,000,000 WORKING CAPITAL LINE OF CREDIT
$1,000,000 EQUIPMENT LINE OF CREDIT
PROVIDED BY
SILICON VALLEY BANK
TO
RF MICRO DEVICES, INC.
MARCH 29, 1995
<PAGE> 2
This LOAN AND SECURITY AGREEMENT is entered into as of March 29, 1995,
by and between SILICON VALLEY BANK, a California-chartered bank with its
principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with
a loan production office located at Wellesley Office Park, 40 William Street,
Suite 350, Wellesley, MA 02181, doing business under the name Silicon Valley
East ("Bank"), and RF MICRO DEVICES, a North Carolina corporation with its
principal place of business at 7341-D West Friendly Avenue, Greensboro, NC 27410
("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following
terms shall have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means a Revolving Advance or Advances
and an Equipment Advance or Advances.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Bank Expenses" means all reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents, whether or not suit is
brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" has the meaning set forth in Section 2.1
hereof.
"Business Day" means any day that is not a Saturday, Sunday,
or other day on which banks in the State of California are authorized or
required to close.
"Closing Date" means the date of this Agreement.
"Code" means the Massachusetts Uniform Commercial Code.
<PAGE> 3
"Collateral" means the property described on Exhibit A
attached hereto, but specifically excludes any contract rights, general
intangibles, license agreement, franchise agreements or license rights of the
Borrower, or any other similar contracts or rights of the Borrower, now owned or
hereafter acquired, which, with Bank's written consent, prohibit the granting by
the Borrower of a security interest therein or the transfer, conveyance or
assignment by the Borrower of any right or interest therein. The Schedule sets
forth all rights presently or to be owned by Borrower, which rights prohibit the
granting by the Borrower of a security interest therein or the transfer,
conveyance or assignment by the Borrower of any right or interest therein, and
for which Bank has given its consent as of the date of this Agreement.
"Committed Revolving Line" means TWO MILLION AND NO/100THS
Dollars ($2,000,000).
"Committed Equipment Line" means ONE MILLION AND NO/100THS
Dollars ($1,000,000).
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"Current Assets" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Advances
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Daily Balance" means, with respect to a line of credit, the
aggregate principal balance of Advances made under that line of credit that are
owed at the end of a given day.
"Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank's reasonable judgment and upon notification thereof to Borrower in
accordance with the provisions hereof. Unless otherwise agreed to by Bank,
Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
2
<PAGE> 4
(b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within ninety (90)
days of invoice date;
(c) Accounts with respect to which the account debtor is an
officer, employee, or agent of Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor is an
Affiliate (other than by virtue of being directly or indirectly under common
ownership or control with Borrower) of Borrower;
(f) Accounts with respect to which the account debtor does not
have its principal place of business in the United States, except for Eligible
Foreign Accounts, and Accounts arising from products shipped to or services
provided to branches or offices located in the United States of any account
debtor that does not have its principal place of business in the United States;
(g) Accounts with respect to which the account debtor is a
federal, state, or local governmental entity or any department, agency, or
instrumentality thereof;
(h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of the amounts owing from Borrower bo the
account debtor;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed forty
percent (40%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;
(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business; and
(k) Accounts the collection of which Bank reasonably
determines to be doubtful.
"Eligible Foreign Accounts" means Accounts with respect to
which the account debtor does not have its principal place of business in the
United States and that are: (1) covered by credit insurance in form and amount,
and by an insurer satisfactory to Bank less the amount of any deductible(s)
which may be or become owing thereon; or (2) supported by one or more letters of
credit in favor of Bank as beneficiary, in an amount and of a tenor, and issued
by a financial institution, acceptable to Bank; or (3) that Bank approves on a
case-by-case basis.
"Eligible Inventory" means that portion of Borrower's
Inventory that is located at Borrower's principal place of business or such
other locations as are permitted under Section 7.10 and that complies with the
representations and warranties set forth in Section 5.5.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"Equipment Advance" means an Advance under the Committed
Equipment Line.
3
<PAGE> 5
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money
or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as Is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.
"Investment" means any beneficial ownership (including stock,
partnership interest or other securities) of any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note
or notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on
(i) the business operations or condition (financial or otherwise) of Borrower
and its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay
the Obligations or otherwise perform its obligations under the Loan Documents.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement
or any other agreement, whether absolute or contingent, due or to become due,
now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Payment Date" means the 29th calendar day of each month.
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"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay to
Bank pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Subordinated Debt; and
(d) Indebtedness to trade creditors incurred in the ordinary
course of business.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poors Corporation or Moody's Investors Service, Inc., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank.
"Permitted Liens" means the following
(a) Any Liens existing on the Closing Date and disclosed in
the Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank's
security interests;
(c) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
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"Quick Assets" means, at any date as of which the amount
thereof shall be determined, the consolidated cash, cash-equivalents, accounts
receivable and investments, with maturities not to exceed 90 days, of Borrower
determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive
Officer, the Chief Financial Officer and the Controller of Borrower.
"Revolving Advance" means an Advance under the Committed
Revolving Line.
"Revolving Maturity Date" means MARCH 28, 1997.
"Schedule" means the schedule of exceptions attached hereto.
"Subordinated Debt" means any debt incurred by Borrower that
is subordinated to the debt owing by Borrower to Bank on terms acceptable to
Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (i)
any general partnership interest or (ii) more than 50% of the stock of which by
the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through an
Affiliate.
"Tangible Net Worth" means at any date as of which the amount
thereof shall be determined, the consolidated total assets of Borrower and its
Subsidiaries minus, without duplication, (i) the sum of any amounts attributable
to (a) goodwill, (b) intangible items such as unamortized debt discount and
expense, patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) all reserves not already
deducted from assets, and (ii) Total Liabilities.
"Total Liabilities" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness, but specifically excluding Subordinated
Debt.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms "financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
2.1 Revolving Advances. Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Revolving Advances to Borrower
in an aggregate amount not to exceed the Committed Revolving Line or the
Borrowing Base, whichever is less. For purposes of this Agreement, "Borrowing
Base" shall mean an amount equal to SEVENTY FIVE percent (75%) of Eligible
Accounts. Subject to the terms and conditions of this Agreement, amounts
borrowed pursuant to this Section 2.1 may be repaid and reborrowed at any time
during the term of this Agreement.
Whenever Borrower desires a Revolving Advance, Borrower will
notify Bank by facsimile transmission or telephone no later than 3:00 p.m.
Pacific time, on the Business Day that the Revolving Advance is to be made. Each
such notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of Exhibit B hereto. Bank is authorized to make Revolving
Advances under this Agreement, based upon instructions received from a
Responsible Officer, or without instructions if in Bank's discretion such
Revolving Advances are necessary to meet Obligations which have become due and
remain unpaid. Bank shall be entitled to rely on any telephonic notice given by
a person who Bank reasonably believes to be a Responsible Officer, and Borrower
shall indemnify and hold Bank harmless for any damages or loss suffered by Bank
as a result of such
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reliance. Bank will credit the amount of Revolving Advances made under this
Section 2.1 to Borrower's deposit account.
The Committed Revolving Line shall terminate on the Revolving
Maturity Date, at which time all Revolving Advances under this Section 2.1 and
other amounts due under this Agreement (except as otherwise expressly specified
herein) shall be immediately due and payable.
2.1.1 Equipment Advances.
(a) At any time from the date hereof through MARCH
28, 1997 (the "Equipment Availability End Date"), Borrower may from time to time
request advances (each an "Equipment Advance" and collectively, the "Equipment
Advances") from Bank in an aggregate amount not to exceed the Committed
Equipment Line. To evidence the Equipment Advance or Equipment Advances,
Borrower shall deliver to Bank, at the time of each Equipment Advance request, a
Payment/Advance Form in substantially the form of Exhibit B hereto accompanied
by an invoice for the Equipment to be financed. The Equipment Advances shall be
used only to finance Equipment purchased after OCTOBER 31, 1995 and shall not
exceed SEVENTY-FIVE Percent (75%) of the invoice amount of such equipment
approved from time to time by Bank, excluding taxes, shipping, warranty charges,
freight discounts and installation expense.
(b) Interest an Equipment Advances made prior to
SEPTEMBER 29, 1996 shall accrue from the date of each Equipment Advance at the
rate specified in Section 2.3(a), and shall be payable monthly for each month
through SEPTEMBER 1996. Any Equipment Advances that are outstanding on SEPTEMBER
29, 1996 will be payable in THIRTY (30) equal monthly installments of principal,
plus all accrued and unpaid interest, beginning on the Payment Date of each
month following SEPTEMBER 1996.
(c) Interest on Equipment Advances made after
SEPTEMBER 29, 1996 shall accrue from the date of each Equipment Advance at the
rate specified in Section 2.3(a), and shall be payable monthly for each month
through the Equipment Availability End Date. Any Equipment Advances made after
SEPTEMBER 29, 1996 that are outstanding on the month in which the Equipment
Availability End Date falls will be payable in THIRTY (30) equal monthly
installments of principal, plus all accrued and unpaid interest, beginning on
the Payment Date of each month following the Equipment Availability End Date.
(d) When Borrower desires to obtain an Equipment
Advance, Borrower shall notify Bank (which notice shall be irrevocable) by
facsimile transmission to be received no later than 3:00 p.m. Pacific time one
(1) Business Day before the day on which the Equipment Advance is to be made.
Such notice shall be substantially in the form of Exhibit B. The notice shall be
signed by a Responsible Officer and include a copy of the invoice for the
Equipment to be financed.
2.2 Overadvances. If, at any time or for any reason, the
amount of Obligations owed by Borrower to Bank pursuant to Section 2.1 of this
Agreement is greater than the lesser of (i) the Committed Revolving Line or (ii)
the Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount
of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in Section
2.3(b), any Revolving Advances shall bear interest on the average Daily Balance
at a rate equal to ONE (1.0) percentage point above the Prime Rate, and any
Equipment Advances shall bear interest on the average Daily Balance at a rate
equal to ONE AND SEVENTY FIVE ONE HUNDREDTHS (1.75) percentage points above the
Prime Rate.
(b) Default Rate. All Obligations shall bear
interest, from and after the occurrence of an Event of Default, at a rate equal
to five (5) percentage points above the interest rate applicable under Section
2.3(a).
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(c) Payments. Interest hereunder shall be due and
payable on the Payment Date of each month during the term hereof. Borrower
hereby authorizes Bank to debit any accounts with Bank, including, without
limitation, Account Number 700696970 for payments of principal and interest due
on the Obligations and any other amounts owing by Borrower to Bank. Bank will
notify Borrower of all debits which Bank makes against Borrower's accounts. Any
such debits against Borrower's accounts in no way shall be deemed a set-off. Any
interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate then
applicable hereunder.
(d) Computation. In the event the Prime Rate is
changed from time to time hereafter, the applicable rate of interest hereunder
shall be increased or decreased effective as of 12:01 a.m. on the day the Prime
Rate is changed, by an amount equal to such change in the Prime Rate. All
interest chargeable under the Loan Documents shall be computed on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon Pacific time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. A Facility Fee equal to TEN
THOUSAND Dollars ($10,000.00), which fee shall be due on or before the Closing
Date and shall be fully earned and non-refundable;
(b) Financial Examination and Appraisal Fees. Bank's
customary fees and out-of-pocket expenses for Bank's audits of Borrowees
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Bank or its agents;
(c) Bank Expenses. Upon demand from Bank, including,
without limitation, upon the date hereof, all Bank Expenses incurred through the
date hereof, including reasonable attorneys' fees and expenses, and, after the
date hereof, all Bank Expenses, including reasonable attorneys' fees and
expenses, as and when they become due.
2.6 Additional Costs. In case any change in any law,
regulation, treaty or official directive or the interpretation or application
thereof by any court or any governmental authority charged with the
administration thereof or the compliance with any guideline or request of any
central bank or other governmental authority (whether or not having the force of
law), in each case after the date of this Agreement:
(a) subjects Bank to any tax with respect to payments
of principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or
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(c) imposes upon Bank any other condition with
respect to its performance under this Agreement,
and the result of any of the foregoing is to increase the cost
to Bank, reduce the income receivable by Bank or impose any expense upon Bank
with respect to any loans, Bank shall notify Borrower thereof. Borrower agrees
to pay to Bank the amount of such increase in cost, reduction in income or
additional expense as and when such cost, reduction or expense is incurred or
determined, upon presentation by Bank of a statement of the amount and setting
forth Bank's calculation thereof, all in reasonable detail, which statement
shall be deemed true and correct absent manifest error. Bank agrees that it will
allocate all such increased costs among its customers similarly affected in good
faith and in a manner consistent with Sank's customary practices.
2.7 Term. Except as otherwise set forth herein, this Agreement
shall become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for a term ending on the Revolving Maturity
Date. Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Advances under this Agreement immediately and without notice
upon the occurrence, and during the continuance, of an Event of Default.
Notwithstanding termination, Bank's Lien on the Collateral shall remain in
effect for so long as any Obligations are outstanding.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Advance. The obligation of
Bank to make the initial Advance is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement, the Working Capital Promissory
Note and the Equipment Line Promissory Note each duly executed by Borrower;
(b) a certificate of the Secretary of Borrower with
respect to incumbency and resolutions authorizing the execution and delivery of
this Agreement;
(c) financing statements (Forms UCC-l);
(d) insurance certificate(s);
(e) payment of the fees and Bank Expenses then due
specified in Section 2.5 hereof;
(f) and such other documents, and completion of such
other matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of
Bank to make each Advance, including the initial Advance, is further subject to
the following conditions:
(a) timely receipt by Bank of the Payment/Advance
Form as provided in Section 2.1; and
(b) the representations and warranties contained in
Section 5 shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Advance as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Advance. The making of
each Advance shall be deemed to be a representation and warranty by Borrower on
the date of such Advance as to the accuracy of the facts referred to in this
Section 3.2(b).
4. CREATION OF SECURITY INTEREST
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4.1 Grant of Security Interest. Borrower grants and pledges to
Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each of
its covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
Borrower acknowledges that Bank may place a "hold" on any Deposit Account
pledged as Collateral to secure the Obligations.
4.2 Delivery of Additional Documentation Required. Borrower
shall from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws of
its state of incorporation and qualified and licensed to do business in, and is
in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery,
and performance of the Loan Documents are within Borrower's powers, have been
duly authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible
title to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are
bona fide existing obligations. The property giving rise to such Eligible
Accounts has been delivered to the account debtor or to the account debtor's
agent for immediate shipment to and unconditional acceptance by the account
debtor. Borrower has not received notice of actual or imminent Insolvency
Proceeding of any account debtor that is included in any Borrowing Base
Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material
respects of good and marketable quality, free from all material defects.
5.6 Name; Location of Chief Executive Office. Except as
disclosed in the Schedule, Borrower has not done business under any name other
than that specified on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.
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5.7 Litigation. Except as set forth in the Schedule, there are
no actions or proceedings pending by or against Borrower or any Subsidiary
before any court or administrative agency in which an adverse decision could
have a Material Adverse Effect or a material adverse effect on Borrower's
interest or Bank's security interest in the Collateral. Borrower does not have
knowledge of any such pending or threatened actions or proceedings.
5.8 No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.
5.9 Solvency. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has
met the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. No event has occurred resulting from Borrower's
failure to comply with ERISA that is reasonably likely to result in Borrower's
incurring any liability that could have a Material Adverse Effect. Borrower is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940. Borrower is not
engaged principally, or as one of the important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.11 Environmental Condition. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.12 Taxes. Borrower and each Subsidiary has filed or caused
to be filed all tax returns required to be filed, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein.
5.13 Subsidiaries. Borrower does not own any stock,
partnership interest or other equity securities of any Person, except for
Permitted Investments.
5.14 Government Consents. Borrower and each Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower's business as currently
conducted.
5.15 Full Disclosure. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
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6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of
all outstanding Obligations, and for so long as Bank may have any commitment to
make an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain in force, and shall cause each of its Subsidiaries to maintain in
force, to the extent consistent with prudent management of Borrower's business,
all licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall
cause each Subsidiary to meet, the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA. Borrower shall comply,
and shall cause each Subsidiary to comply, with all statutes, laws, ordinances
and government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower
shall deliver to Bank:
(a) as soon as available, but in any event within
thirty (30) days after the end of each month, a company prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations
during such period, certified by an officer of Borrower reasonably acceptable to
Bank;
(b) as soon as available, but in any event within
ninety (90) days after the end of Borrower's fiscal year, audited consolidated
financial statements of Borrower prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such financial statements of an
independent certified public accounting firm reasonably acceptable to Bank;
(c) within five (5) days of filing, copies of all
statements, reports and notices sent or made available generally by Borrower to
its security holders or to any holders of Subordinated Debt and all reports on
Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission;
(d) promptly upon receipt of notice thereof, a report
of any legal actions pending or threatened against Borrower or any Subsidiary
that could result in damages or costs to Borrower or any Subsidiary of One
Hundred Thousand Dollars ($100,000) or more; and
(e) such budgets, sales projections, operating plans
or other financial information as Bank may reasonably request from time to time.
Within fifteen (15) days after the last day of each month,
Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in substantially the form of Exhibit C hereto, together with
aged listings of accounts receivable and accounts payable.
Within thirty (30) days after the last day of each month,
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit
Borrower's Accounts at Borrower's expense, provided that such audits will be
conducted no more often than every TWELVE (12) months unless an Event of Default
has occurred and is continuing.
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6.4 Inventory; Returns. Borrower shall keep all Inventory in
good and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on the
same basis and in accordance with the usual customary practices of Borrower, as
they exist at the time of the execution and delivery of this Agreement. Borrower
shall promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 Taxes. Borrower shall make, and shall cause each
Subsidiary to make, due and timely payment or deposit of all material federal,
state, and local taxes, assessments, or contributions required of it by law, and
will execute and deliver to Bank, on demand, appropriate certificates attesting
to the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the
Collateral insured against loss or damage by fire, theft, explosion, sprinklers,
and all other hazards and risks, and in such amounts, as ordinarily insured
against by other owners in similar businesses conducted in the locations where
Borrower's business is conducted on the date hereof. Borrower shall also
maintain insurance relating to Borrower's ownership and use of the Collateral in
amounts and of a type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such
form, with such companies, and in such amounts as reasonably satisfactory to
Bank. All such policies of property insurance shall contain a lender's loss
payable endorsement, in a form satisfactory to Bank, showing Bank as an
additional loss payee thereof and all liability insurance policies shall show
the Bank as an additional insured, and shall specify that the insurer must give
at least twenty (20) days notice to Bank before canceling its policy for any
reason. Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its
principal depository and operating accounts with Bank.
6.8 Quick Ratio. Borrower shall maintain, as of the last day
of each calendar month, a ratio of Quick Assets to Current Liabilities of at
least 1.5 to 1.0.
6.9 Tangible Net Worth. Borrower shall maintain, as of the
last day of each calendar month, a Tangible Net Worth of not less than FIVE
MILLION Dollars ($5,000,000).
6.10 Profitability. Borrower shall not incur net losses
greater than ONE MILLION NINE HUNDRED THOUSAND Dollars ($1,900,000) for the
fiscal quarter ending MARCH 31, 1996, and shall not incur net losses greater
than EIGHT HUNDRED THOUSAND Dollars ($800,000) for the fiscal quarter ending
JUNE 30, 1996, and shall not incur net losses greater than THREE HUNDRED
THOUSAND Dollars ($300,000) for the fiscal quarter ending SEPTEMBER 30, 1996.
Borrower agrees that its allowable net losses for the fiscal quarters ending
DECEMBER 31, 1996 and thereafter shall be subject to determination by Bank after
completion of Borrower's management projections.
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6.11 Liquidity. Borrower shall maintain, as of the last
calendar day of each month, liquidity of at least TWO MILLION FIVE HUNDRED
THOUSAND dollars ($2,500,000). Liquidity is defined as cash on hand (and cash
equivalents) plus the Borrowing Base less outstanding Revolving Advances.
6.12 Leverage. Borrower shall maintain, as of the last
calendar day of each month, a ratio of Total Liabilities to Tangible Net Worth
of not more than 0.75 to 1.0.
6.13 Further Assurances. At any time and from time to time
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes of
this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than: (i) Transfers
of Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of worn-out or obsolete Equipment.
7.2 Change in Business. Engage in any business, or permit any
of its Subsidiaries to engage in any business, other than the businesses
currently engaged in by Borrower and any business substantially similar or
related thereto (or incidental thereto), or undergo a material change in
Borrower's ownership, management or directors. Borrower will not, without thirty
(30) days prior written notification to Bank, relocate its chief executive
office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit
any of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable
with respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any
Lien with respect to any of its property, or assign or otherwise convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock.
7.7 Investments. Directly or indirectly acquire or own, or
make any Investment in or to any Person, or permit any of its Subsidiaries so to
do, other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a non-affiliated Person.
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7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory. Store the Inventory with a bailee,
warehouseman, or similar party unless Bank has received a pledge of the
warehouse receipt covering such Inventory. Except for Inventory sold in the
ordinary course of business and except for such other locations as Bank may
approve in writing, Borrower shall keep the Inventory only at the location set
forth in Section 10 hereof and such other locations of which Borrower gives Bank
prior written notice and as to which Borrower signs and files a financing
statement where needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" controlled by
an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose. Fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the
Federal Fair Labor Standards Act or violate any law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral, or permit any
of its Subsidiaries to do any of the foregoing.
7.12 Negative Pledge. Without Bank's prior written consent,
which consent shall not be unreasonably withheld, sell, transfer, assign,
mortgage, pledge, lease, grant a security interest in, or encumber any of
Borrower's intellectual property, including, without limitation, the following:
(a) Any and all trade secrets, and any and all
intellectual property rights in computer software and computer software products
now or hereafter existing, created, acquired or held;
(b) Any and all design rights which may be available
to Borrower now or hereafter existing, created, acquired or held;
(c) All patents, patent applications and like
protections including, without limitation, improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of the
same, including without limitation the patents and patent applications;
(d) Any trademark and service mark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire good will of the business of Borrower connected
with and symbolized by such trademarks;
(e) Any and all claims for damages by way of past,
present and future infringements of any of the intellectual property rights
identified above, with the right, but not the obligation, to sue for and collect
such damages for said use or infringement of such intellectual property rights;
(f) All licenses or other right to use any of the
Copyrights, Patents or Trademarks, and all license fees and royalties arising
from such use to the extent permitted by such licenses or rights;
(g) All amendments, extensions, renewals and
extensions of any of the Copyrights, Trademarks or Patents; and
(h) All proceeds and products of the foregoing,
including without limitation all payments under insurance or any indemnity or
warranty payable in respect of any of the foregoing.
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8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement.
8.1 Payment Default. If Borrower fails to pay, when due, any
of the Obligations.
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under
Sections 6.3, 6.7, 6.8, 6.9, 6.10, 6.11 or 6.12 or violates any of the covenants
contained in Article 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep,
or observe any other material term, provision, condition, covenant, or agreement
contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Bank and as to any default
under such other term, provision, condition, covenant or agreement that can be
cured, has failed to cure such default within ten (10) days after Borrower
receives notice thereof or any officer of Borrower becomes aware thereof;
provided, however, that if the default cannot by its nature be cured within the
ten (10) day period or cannot after diligent attempts by Borrower be cured
within such ten (10) day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed thirty (30) days) to attempt to cure such default,
and within such reasonable time period the failure to have cured such default
shall not be deemed an Event of Default (provided that no Advances will be
required to be made during such cure period);
8.3 Material Adverse Change. If there (i) occurs a material
adverse change in the business, operations, or condition (financial or
otherwise) of the Borrower, or (ii) is a material impairment of the prospect of
repayment of any portion of the Obligations or (iii) is a material impairment of
the value or priority of Bank's security interests in the Collateral;
8.4 Attachment. If any material portion of Borrower's assets
is attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any trustee, receiver or person acting in a
similar capacity and such attachment, seizure, writ or distress warrant or levy
has not been removed, discharged or rescinded within ten (10) days, or if
Borrower is enjoined, restrained, or in any way prevented by court order from
continuing to conduct all or any material part of its business affairs, or if a
judgment or other claim becomes a lien or encumbrance upon any material portion
of Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action er event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure periods);
8.5 Insolvency. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding
is commenced against Borrower and is not dismissed or stayed within ten (10)
days (provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement
to which Borrower is a party with a third party or parties resulting in a right
by such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000) or that could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on
account of Subordinated Debt, except to the extent such payment is allowed under
any subordination agreement entered into with Bank;
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8.8 Judgments. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least Fifty Thousand
Dollars ($50,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of Default
described in Section 8.5 all Obligations shall become immediately due and
payable without any action by Bank);
(b) Cease advancing money or extending credit to or
for the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(c) Settle or adjust disputes and claims directly
with account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(d) Without notice to or demand upon Borrower, make
such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's owned premises, Borrower hereby grants Bank a
license to enter into possession of such premises and to occupy the same,
without charge, for up to one hundred twenty (120) days in order to exercise any
of Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(e) Without notice to Borrower set off and apply to
the Obligations any and all (i) balances and deposits of Borrower held by Bank,
or (ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank:
(f) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Bank is hereby granted a license or other right,
solely pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1. To the
extent not in violation of any license or franchise agreement to which Borrower
is a party, now or hereafter existing, Borrower's rights under all licenses and
all franchise agreements shall inure to Bank's benefit;
(g) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable;
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(h) Bank may credit bid and purchase at any public
sale; and
(i) Any deficiency that exists after disposition of
the Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
bill of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) make, settle, and adjust all claims under and decisions
with respect to Borrower's policies of insurance; and (e) settle and adjust
disputes and claims respecting the accounts directly with account debtors, for
amounts and upon terms which Bank determines to be reasonable; provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. At any time from the date of this
Agreement, Bank may notify any Person owing funds to Borrower of Bank's security
interest in such funds and verify the amount of such Account. Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Committed Revolving Line as Bank deems necessary to protect
Bank from the exposure created by such failure; or (c) obtain and maintain
insurance policies of the type discussed in Section 6.6 of this Agreement, and
take any action with respect to such policies as Bank deems prudent. Any amounts
so paid or deposited by Bank shall constitute Bank Expenses, shall be
immediately due and payable, and shall bear interest at the then applicable rate
hereinabove provided, and shall be secured by the Collateral. Any payments made
by Bank shall not constitute an agreement by Bank to make similar payments in
the future or a waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies
with reasonable banking practices, Bank shall not in any way or manner be liable
or responsible for: (a) the safekeeping of the Collateral; (b) any loss or
damage thereto occurring or arising in any manner or fashion from any cause; (c)
any diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
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9.7 Demand; Protest. Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, Compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, at
its addresses set forth below:
If to Borrower RF Micro Devices, Inc.
7341-D West Friendly Avenue
Greensboro, NC 27410
Attn: William Priddy, VP - Finance
FAX: 910 ________
If to Bank Silicon Valley Bank
40 William Street, Suite 350
Wellesley, MA 02181
Attn: James C. Maynard, AVP
FAX: 617-431-9906
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
The laws of the Commonwealth of Massachusetts shall apply to
this Agreement. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN
ANY ACTION, SUIT, OR PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY
REASON OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT
AVAIL ITSELF OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER
ACCEPTS JURISDICTION OF THE COURTS AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA.
BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and permitted assigns of each
of the parties; provided, however, that neither this Agreement nor any rights
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hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have the right without the consent of or notice to Borrower to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and
hold harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the
performance of all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot
be amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement.
12.7 Survival. All covenants, representations and warranties
made in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run,
provided that so long as the obligations set forth in the first sentence of this
Section 12.7 have been satisfied, and Bank has no commitment to make any
Advances or to make any other loans to Borrower, Bank shall release all security
interests granted hereunder and redeliver all Collateral held by it in
accordance with applicable law.
12.8 Confidentiality. In handling any confidential information
Bank shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower, (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order and (iv) as may be required
in connection with the examination, audit or similar investigation of Bank.
Confidential information hereunder shall not include information that either:
(a) is in the public domain or in the knowledge or possession of Bank when
disclosed to Bank, or becomes part of the public domain after disclosure to Bank
through no fault of Bank; or (b) is disclosed to Bank by a third party, provided
Bank does not have actual knowledge that such third party is prohibited from
disclosing such information.
12.9 Effectiveness. This Agreement shall become effective only
when it shall have been executed by Borrower and Bank (provided, however, in no
event shall this Agreement become effective until signed by an officer of Bank
in California).
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as a sealed instrument as of the date first set forth
above.
"Borrower" "Bank"
RF MICRO DEVICES, INC. SILICON VALLEY BANK, doing business
as SILICON VALLEY EAST
By: By:
---------------------------- -----------------------------
William Priddy, VP James C. Maynard, AVP
SILICON VALLEY BANK
By:
----------------------------
David A. Norbury, President
By:
------------------------------
Title:
---------------------------
(Signed in Santa Clara County,
California)
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LOAN MODIFICATION AGREEMENT
This LOAN MODIFICATION AGREEMENT is entered into as of December 20,
1996, by and between SILICON VALLEY BANK, a California-chartered bank with its
principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with
a loan production office located at Wellesley Office Park, 40 William Street,
Suite 350, Wellesley, MA 02181, doing business under the name Silicon Valley
East ("Bank"), and RF MICRO DEVICES, INC., a North Carolina corporation with its
principal place of business at 7625 Thorndike Road, Greensboro, NC 27409
("Borrower").
RECITALS
Borrower has borrowed money from Bank pursuant to certain Existing Loan
Documents, as defined below. In consideration of certain financial
accommodations from Bank, and Borrower's continuing obligations under the
Existing Loan Documents, Borrower and Bank agree as follows;
AGREEMENT
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which
may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to,
among other documents, a Working Capital Promissory Note dated March 29, 1996 in
the original principal amount of TWO MILLION AND NO/100THS DOLLARS ($2,000,000)
(the "Working Capital Note"), and an Equipment Line Promissory Note dated March
29, 1996 in the original principal amount of ONE MILLION AND NO/100THS DOLLARS
($1,000,000) (the "Equipment Note"). The Working Capital Note and the Equipment
Note are governed by the terms of a Loan and Security Agreement dated March 29,
1996 between Borrower and Bank, as such loan and Security Agreement may be
amended from time to time (the "Loan Agreement").
Hereinafter, all indebtedness owing by Borrower to Bank shall be
referred to as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured
pursuant to the Loan Agreement. Hereinafter, the Loan Agreement, the Working
Capital Note and the Equipment Note, together with all other documents securing
payment of the indebtedness, shall be referred to as the "Existing Loan
Documents."
3. DESCRIPTION OF CHANGES IN TERMS.
3.1 Modifications to Working Capital Note. The Working Capital Note is
hereby amended as follows:
(a) The maximum principal amount of the Note is increased to
SEVEN MILLION AND NO/100THS DOLLARS ($7,000,000).
(b) The entire principal amount and all accrued interest shall
be due and payable on DECEMBER 19, 1997.
3.2 Modifications to Definitions. Section 1.1 of the Loan Agreement is
hereby amended by substituting the following definitions for those set forth
therein for the same terms, and in the case of new definitions, by adding the
following new definitions to that Section 1.1:
"Advance" of "Advances" means a loan advance under the
Committed Revolving Line.
"Committed Revolving Line" means SEVEN MILLION AND NO/100THS
DOLLARS ($7,000,000).
<PAGE> 24
The definition of "Eligible Accounts" is amended by deleting
in its entirety subsection (f) of that definition.
"Eligible Foreign Accounts" means Eligible Accounts (i) with
respect to which the account debtor does not have its
principal place of business in the United States and (ii)
arising from products shipped to or services provided to
branches or offices located in the United States of any
account debtor that does not have its principal place of
business in the United States.
"Payment Date" means the 19th calendar day of each month.
"Revolving Maturity Date" means DECEMBER 19, 1997.
"Second Committed Equipment Line" means TWO MILLION AND
NO/100THS DOLLARS ($2,000,000).
"Second Equipment Advance" means an advance under the Second
Committed Equipment Line.
3.3 Modifications to Revolving Advance Provisions. The first paragraph
of Section 2.1 of the Loan Agreement is hereby replaced in its entirety with the
following:
2.1 Revolving Advances. Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Advances to
Borrower in an aggregate amount not to exceed (i) the
Committed Revolving Line or the Borrowing Base, whichever is
less, minus (ii) the face amount of all outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit)
and minus (iii) the Foreign Exchange Reserve. For purposes of
this Agreement, "Borrowing Base" shall mean an amount equal to
EIGHTY percent (80%) of Eligible Accounts; provided, however,
that total Advances outstanding at any time based on Eligible
Foreign Accounts shall not exceed FIVE MILLION DOLLARS
($5,000,000); provided further, however, that this limitation
on total Advances based on Eligible Foreign Accounts may be
decreased by Bank if any issues deemed material by the Bank,
in its sole discretion, are raised by Bank's audit of
Borrower's Accounts. Subject to the terms and conditions of
this Agreement, amounts borrowed pursuant to this Section 2.1
may be repaid and reborrowed at any time during the term of
this Agreement.
3.4 Modifications to Equipment Advance Provisions. Section 2.1.1(a) of
the Loan Agreement is hereby replaced in its entirety with the following:
(a) At any time from the date hereof through
SEPTEMBER 29, 1996 (the "Equipment Availability End Date"),
Borrower may from time to time request advances (each an
"Equipment Advance" and collectively, the "Equipment
Advances") from Bank in an aggregate amount not to exceed the
Committed Equipment Line. To evidence the Equipment Advance or
Equipment Advances, Borrower shall deliver to Bank, at the
time of each Equipment Advance request, a Payment/Advance Form
in substantially the form of Exhibit B hereto accompanied by
an invoice for the Equipment to be financed. The Equipment
Advances shall be used only to finance Equipment purchased aft
October 31, 1995 and shall not exceed SEVENTY-FIVE Percent
(75%) of the invoice amount of such equipment approved from
time to time by Bank, excluding taxes, shipping, warranty
charges, freight discounts and installation expense.
3.5 Provisions for Letters of Credit and Foreign Exchange Transactions.
Sections 2.1.2 and 2.1.3 are hereby added to the Loan Agreement as follows:
2
<PAGE> 25
2.1.2 Letters of Credit.
(a) Subject to the terms and conditions of this
Agreement, Bank agrees to issue or cause to be issued Letters
of Credit for the account of Borrower in an aggregate
outstanding face amount not to exceed (i) the lesser of the
Committed Revolving Line or the Borrowing Base, whichever is
less, minus (ii) the then outstanding principal balance of the
Advances; provided that the aggregate face amount of
outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit
Reserve) shall not in any case exceed ONE MILLION Dollars
($1,000,000). Each Letter of Credit shall have an expiry date
no later than three hundred sixty (360) days after the
Revolving Maturity Date provided that Borrower's Letter of
Credit reimbursement obligation shall be secured by cash on
terms acceptable to Bank at any time after the Revolving
Maturity Date if the term of this Agreement is not extended by
Bank. All Letters of Credit shall be in form and substance
acceptable to Bank in its sole discretion and shall be subject
to the terms and conditions of Bank's form of standard
Application and Letter of Credit Agreement. If a demand for
payment is made under any such Letter of Credit, Bank shall
treat such demand as an Advance to Borrower of the equivalent
of the amount thereof.
(b) The obligation of Borrower to immediately
reimburse Bank for drawings made under Letters of Credit shall
be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this
Agreement and such Letters of Credit, under all circumstances
whatsoever. Borrower shall indemnify, defend, protect and hold
Bank harmless from any loss, cost, expense or liability,
including without limitation, reasonable attorneys' fees,
arising out of or in connection with any Letters of Credit,
other than loss, cost, expense or liability arising out of the
gross negligence or willful misconduct of Bank.
(c) Borrower may request that Bank issue a Letter of
Credit payable in a currency other than United States Dollars.
If a demand for payment is made under any such Letter of
Credit, Bank shall treat such demand as an Advance to Borrower
of the equivalent of the amount thereof (plus cable charges)
in United States currency at the then prevailing rate of
exchange in San Francisco, California, for sales of that other
currency for cable transfer to the country of which it is the
currency.
(d) Upon the issuance of any letter of credit payable
in a currency other than United States Dollars, Bank shall
create a reserve under the Committed Revolving Line for
letters of credit against fluctuations in currency exchange
rages, in an amount equal to ten percent (10%) of the face
amount of such letter of credit. The amount of such reserve
may be amended by Bank from time to time to account for
fluctuations in the exchange rate. The availability of funds
under the Committed Revolving Line shall be reduced by the
amount of such reserve for so long as such letter of credit
remains outstanding.
2.1.3 Foreign Exchange Contract: Foreign Exchange Settlements.
(a) Subject to the terms of this Agreement, Borrower
may enter into foreign exchange contracts (the "Exchange
Contracts") not to exceed an aggregate amount of FIVE HUNDRED
THOUSAND DOLLARS ($500,000) (the "Contract Limit"), pursuant
to which Bank shall sell to or purchase from Borrower foreign
currency on a spot or future basis. Borrower shall not request
any Exchange Contracts at any time it is out of compliance
with any of the provisions of this Agreement. All Exchange
Contracts must provide for delivery of settlement on or before
the Revolving Maturity Date. The amount available under the
Committed Revolving Line at any time shall be reduced by the
following amounts (the "Foreign Exchange Reserve") on any
given day (the "Determination Date"): (i) on all
3
<PAGE> 26
outstanding Exchange Contracts on which delivery is to be
effected or settlement allowed more than two business days
after the Determination Date, 10% of the gross amount of the
Exchange Contracts; plus (ii) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement
allowed within two business days after the Determination Date,
100% of the gross amount of the Exchange Contracts.
(b) Bank May, in its discretion, terminate any
existing Exchange Contracts at any time (a) that an Event of
Default occurs and is continuing or (b) that there is no
sufficient availability under the Committed Revolving Line and
Borrower does not have available funds in its bank account to
satisfy the Foreign Exchange Reserve. If Bank terminates the
Exchange Contracts, and without limitation of any applicable
indemnities, Borrower agrees to reimburse Bank for any and all
reasonable fees, costs and expenses relating thereto or
arising in connection therewith.
(c) Borrower shall not permit the total gross amount
of all Exchange Contracts on which delivery is to be effected
and settlement allowed in any two business day period to be
more than FIFTY THOUSAND DOLLARS ($50,000) (the "Settlement
Limit") nor shall Borrower permit the total gross amount of
all Exchange Contracts to which Borrower is a party,
outstanding at any one time, to exceed the Contract Limit.
Notwithstanding the above, however, the amount which may be
settled in any two (2) business day period may be increased
above the Settlement Limit up to, but in no event to exceed,
the amount of the Contract Limit under either of the following
circumstances:
(i) if there is sufficient availability
under the Committed Revolving Line in the amount of the
Foreign Exchange Reserve as of each Determination Date,
provided that Bank in advance shall reserve the full amount of
the Foreign Exchange Reserve against the Committed Revolving
Line; or
(ii) if there is insufficient availability
under the Committed Revolving Line, as to settlements within
any two (2) business day period, provided that Bank, in its
sole discretion, may: (A) verify good funds overseas prior to
crediting Borrower's deposit account with Bank (in the case of
Borrower's sale of foreign currency); or (B) debit Borrower's
deposit account with Bank prior to delivering foreign currency
overseas (in the case of Borrower's purchase of foreign
currency).
(d) In the case of Borrower's purchase of foreign
currency, Borrower in advance shall instruct Bank upon
settlement either to treat the settlement amount as an advance
under the Committed Revolving line, or to debit Borrower's
account for the amount settled.
(e) Borrower shall execute all standard form
applications and agreements of Bank in connection with the
Exchange Contracts and, without limiting any of the terms of
such applications and agreements, Borrower will pay all
standard fees and charges of Bank in connection with the
Exchange Contracts.
(f) Without limiting any of the other terms of this
Agreement or any such standard form applications and agreement
of Bank, Borrower agrees to indemnify Bank and hold it
harmless, from and against any and all claims, debts,
liabilities, demands, obligations, actions, costs and expenses
(including, without limitation, reasonable attorneys' fees of
counsel of Bank's choice), of every nature and description
which it may sustain or incur, based upon, arising out of, or
in any way relating to any of the Exchange Contracts or any
transactions relating thereto or contemplated thereby, other
than claims, debts, liabilities,
4
<PAGE> 27
demands, obligations, actions, costs and expenses arising out
of the gross negligence or willful misconduct of Bank.
3.6 Addition of Second Committed Equipment Line. Section 2.1.4 is
hereby added to the Loan Agreement as follows:
2.1.4 Second Equipment Advances.
(a) At any time from the date hereof through DECEMBER
19, 1997 (the "Second Equipment Availability End Date"),
Borrower may from time to time request advances (each a
"Second Equipment Advance" and collectively, the "Second
Equipment Advances") from Bank in an aggregate amount not to
exceed the Second Committed Equipment Line. To evidence the
Second Equipment Advance or Second Equipment Advances,
Borrower shall deliver to Bank, at the time of each Second
Equipment Advance request, a Payment/Advance Form in
substantially the form of Exhibit B hereto accompanied by an
invoice for the Equipment to be financed. The Second Equipment
Advances shall be used only to finance Equipment purchased
after September 30, 1996 and shall not exceed SEVENTY-FIVE
PERCENT (75%) of the invoice amount of such equipment approved
from time to time by Bank, excluding taxes, shipping, warranty
charges, freight discounts and installation expense.
(b) Interest on Second Equipment Advances shall
accrue from the date of each Equipment Advance at the rate
specified in Section 2.3(a), and shall be payable on the
Payment Date of each month through NOVEMBER, 1997. Any Second
Equipment Advances that are outstanding on DECEMBER 20, 1997
will be payable in THIRTY SIX (36) equal monthly installments
of principal, plus all accrued and unpaid interest, beginning
on the Payment Date of each month starting with JANUARY 1997.
(c) When Borrower desires to obtain a Second
Equipment Advance, Borrower shall notify Bank (which notice
shall be irrevocable) by facsimile transmission to be received
no later than 3:00 p.m. Pacific time one (1) Business Day
before the day on which the Second Equipment Advance is to be
made. Such notice shall be substantially in the form of
Exhibit B. The notice shall be signed by a Responsible Officer
and include a copy of the invoice for the Equipment to be
financed.
3.7 Modifications to Interest Rate Provisions. Section 2.3(a) of the
Loan Agreement is hereby replaced in its entirety with the following:
(a) Interest Rate. Except as set forth in Section
2.3(b), any Revolving Advances shall bear interest on the
average Daily Balance at an annual rate equal to SEVENTY FIVE
ONE-HUNDREDTHS (0.75) percentage points above the Prime Rate,
any Equipment Advances shall bear interest on the average
Daily Balance at a rate equal to ONE AND SEVENTY FIVE
ONE-HUNDREDTHS (1.75) percentage points above the Prime Rate,
and any Second Equipment Advances shall bear interest on the
average Daily Balance at a rate equal to ONE AND FIFTY
ONE-HUNDREDTHS (1.50) percentage points above the Prime Rate.
3.8 Modifications to Financial Reporting Covenants. The seventh
paragraph of Section 6.3 of the Loan Agreement is hereby replaced in its
entirety with the following:
Within TWENTY (20) days after the last day of each month,
Borrower shall deliver to Bank a Borrowing Base Certificate
signed by a Responsible Officer in substantially the form of
Exhibit C hereto, together with aged listings of accounts
receivable and accounts payable.
5
<PAGE> 28
3.9 Deletion of Quick Ratio Covenant. Section 6.8 of the Loan Agreement
is hereby deleted in its entirety.
3.10 Modifications to Tangible Net Worth Covenant. Section 6.9 of the
Loan Agreement is hereby replaced in its entirety with the following:
6.9 Tangible Net Worth. Borrower shall maintain, as of the
last day of each calendar month, a Tangible Net Worth of not
less than EIGHTEEN MILLION DOLLARS ($18,000,000).
3.11 Deletion of Profitability Covenant.Section 6.10 of the Loan
Agreement is hereby deleted in its entirety.
3.12 Modifications to Liquidity Covenant. Section 6.11 of the Loan
Agreement is hereby replaced in its entirety with the following:
6.11 Liquidity. Borrower shall maintain, as of the last
calendar day of each month, liquidity of at least 1.50 to 1.0.
Liquidity is defined as the ratio of cash on hand (and cash
equivalents) plus the RESERVE POSITIVE as shown on Borrower's
most recently submitted Borrowing Base Certificate to total
outstanding Equipment Advances and Second Equipment Advances.
3.13 Modifications to Leverage Covenant. Section 6.12 of the Loan
Agreement is hereby replaced in its entirety with the following:
6.12 Leverage. Borrower shall maintain, as of the last
calendar day of each month, a ratio of Total Liabilities to
Tangible Net Worth of not more than 1.0 to 1.0.
3.14 Modifications to Borrowing Base Certificate. Exhibit C of the Loan
Agreement is hereby replaced in its entirety with Exhibit C to this Loan
Modification Agreement.
3.16 Modification to Borrower's Address. Section 10 of the Loan
Agreement is amended by substituting the following address and fax number for
purposes of giving notices to Borrower:
RF Micro Devices, Inc.
7625 Thorndike Road
Greensboro, NC 27409
Attn: William Priddy, VP-Finance
FAX: 910-664-0839
4. FACILITY FEE. Borrower shall pay to Bank a facility fee of FORTY
FIVE THOUSAND DOLLARS ($45,000), which fee shall be automatically deducted from
any of Borrower's accounts with Bank, including without limitation Account
Number 70069670, in 12 equal monthly installments, each of $3,750, commencing
with December, 1996, and which fee shall be fully earned and non-refundable, as
well as any reasonable out-of-pocket expenses incurred by the Bank through the
date hereof, including reasonable attorneys' fees and expenses, and after the
date hereof, all Bank Expenses, including reasonable attorneys' fees and
expenses, as and when they become due.
5. CONDITIONS PRECEDENT TO FURTHER ADVANCES. The obligation of Bank to
make further advances to Borrower under these lines is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:
(a) this Loan Modification Agreement and the Second Equipment
Line Promissory Note each duly executed by Borrower;
6
<PAGE> 29
(b) payment of the fees and Bank Expenses then due specified
in Section 4 hereof; and
(c) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
6. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described in this Loan Modification
Agreement.
7. NO DEFENSES OF BORROWER. Borrower agrees that as of this date, it
has no defenses against any of the obligations to pay any amounts under the
Indebtedness.
8. CONTINUING VALIDITY. Borrower understands and agrees that (i) in
modifying the Existing Loan Documents, Bank is relying upon Borrower's
representations, warranties and agreements, as set forth in the Existing Loan
Documents, (ii) except as expressly modified pursuant to this Loan Modification
Agreement (including the effects of Section 6 hereof), the Existing Loan
Documents remain unchanged and in full force and effect, (iii) Bank's agreement
to modify the Existing Loan Documents pursuant to this Loan Modification
Agreement shall in no way obligate Bank to make any future modifications to the
Existing Loan Documents, (iv) it is the intention of Bank and Borrower to retain
as liable parties all makers and endorsers of the Existing Loan Documents,
unless a party is expressly released by Bank in writing, (v) no maker, endorser
or guarantor will be released by virtue of this Loan Modification Agreement, and
(vi) the terms of this Section 8 apply not only to this Loan Modification
Agreement but also to all subsequent loan modification agreements, if any.
9. EFFECTIVENESS. This Agreement shall become effective only when it
shall have been executed by Borrower and Bank (provided, however, in no event
shall this Agreement become effective until signed by an officer of Bank in
California).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument as of the date first set forth above.
"Borrower" "Bank"
RF MICRO DEVICES, INC. SILICON VALLEY BANK, doing business
as SILICON VALLEY EAST
By: By:
---------------------------- -----------------------------
William Priddy, VP-Finance James C. Maynard, VP
SILICON VALLEY BANK
By:
--------------------------------
David A. Norbury, President, CEO
By:
---------------------------------
Title:
------------------------------
(Signed in Santa Clara County,
California)
7
<PAGE> 30
Second Equipment Line Promissory Note
$2,000,000 Greensboro, North Carolina
December 20, 1996
FOR VALUE RECEIVED, the undersigned, RF Micro Devices, Inc., a North
Carolina corporation (the "Borrower"), promises to pay to the order of Silicon
Valley Bank, a California-chartered bank ("Bank"), at such place as the holder
hereof may designate, in lawful money of the United States of America, the
aggregate unpaid principal amount of all advances ("Advances") made by Bank to
Borrower in accordance with the terms of the Loan and Security Agreement between
Borrower and Bank dated March 29, 1996, as amended from time to time (the "Loan
Agreement"), up to a maximum principal amount of TWO MILLION Dollars
($2,000,000), until paid in full. Borrower shall also pay interest on the
aggregate unpaid principal amount of such Advances at the rates and in
accordance with the terms of the Loan Agreement. The entire amount of unpaid
principal under this Note and all accrued but unpaid interest shall be due and
payable in accordance with the terms of the Loan Agreement, but no later than
December 19, 2000.
Borrower irrevocably waives the right to direct the application of any
and all payments at any time hereafter received by Bank from or on behalf of
Borrower, and Borrower irrevocably agrees that Bank shall have the continuing
exclusive right to apply any and all such payments against the then due and
owing obligations of Borrower as Bank may deem advisable. In the absence of a
specific determination by Bank with respect thereto, all payments shall be
applied in the following order: (a) then due and payable fees and expenses; (b)
then due and payable interest payments and mandatory prepayments; and (c) then
due and payable principal payments and optional prepayments.
Bank is hereby authorized by Borrower to endorse on Bank's books and
records each Advance made by Bank under this Note and the amount of each payment
or prepayment of principal of each such Advance received by Bank; it being
understood, however, that failure to make any such endorsement (or any error in
notation) shall not affect the obligations of Borrower with respect to Advances
made hereunder, and payments of principal by Borrower shall be credited to
Borrower notwithstanding the failure to make a notation (or any errors in
notation) thereof on such books and records.
Borrower promises to pay Bank all costs and expenses of collection of
this Note and to pay all reasonable attorneys' fees incurred in such collection,
whether or not there is a suit or action, or in any suit or action to collect
this Note or in any appeal thereof. Borrower waives presentment, demand,
protest, notice of protest, notice of dishonor, notice of nonpayment, and any
and all other notices and demands in connection with the delivery, acceptance,
performance, default or enforcement of this Note, as well as any applicable
statutes of limitations. No delay by Bank in exercising any power or right
hereunder shall operate as a waiver of any power or right. Time is of the
essence as to all obligations hereunder.
This Note is issued pursuant to the Loan Agreement, which shall govern
the rights and obligations of Borrower with respect to all obligations
hereunder.
This Note shall be deemed to be made under, and shall be construed in
accordance with and governed by, the laws of the Commonwealth of Massachusetts,
excluding conflicts of laws and principles.
Executed as an instrument under seal.
RF Micro Devices, Inc.
--------------------------------
William Priddy, VP-Finance
ATTEST:
---------------------------------
David A. Norbury, President, CEO
8
<PAGE> 1
EXHIBIT 10.3
1997 KEY EMPLOYEES' STOCK OPTION PLAN
OF
RF MICRO DEVICES, INC.
<PAGE> 2
1997 KEY EMPLOYEES' STOCK OPTION PLAN
OF
RF MICRO DEVICES, INC.
1. PURPOSE
The purpose of the 1997 Key Employees' Stock Option Plan of RF Micro
Devices, Inc. (the "Plan") is to encourage and enable selected key employees
and independent contractors in the service of RF Micro Devices, Inc. (the
"Corporation") or its related corporations to acquire or to increase their
holdings of common stock of the Corporation (the "Common Stock") in order to
promote a closer identification of their interests with those of the
Corporation and its shareholders, thereby further stimulating their efforts to
enhance the efficiency, soundness, profitability, growth and shareholder value
of the Corporation. This purpose will be carried out through the granting of
incentive stock options ("Incentive Options") intended to qualify under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
nonqualified stock options ("Nonqualified Options"). Incentive Options and
Nonqualified Options shall be referred to herein collectively as "Options." To
the extent that any Option is designated as an Incentive Option and such option
does not qualify as an Incentive Option, it shall constitute a Nonqualified
Option.
2. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by a committee (the
"Committee") appointed by the Board of Directors of the Corporation
(the "Board") and comprised solely of members of the Board. The
Committee shall include no fewer than the minimum number of
"non-employee directors," as such term is defined in Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required by Rule 16b-3 or any successor
rule.
(b) Any action of the Committee may be taken by a written
instrument signed by all of the members of the Committee and any
action so taken by written consent shall be as fully effective as if
it had been taken by a majority of the members at a meeting duly held
and called. Subject to the provisions of the Plan, the Committee
shall have full and final authority, in its discretion, to take any
action with respect to the Plan including, without limitation, the
following: (i) to determine the individuals to receive Options, the
nature of each Option as an Incentive Option or a Nonqualified Option,
the times when Options shall be granted, the number of shares to be
subject to each Option, the Option price (determined in accordance
with Section 6), the Option period, the time or times when each Option
shall be exercisable and the other terms, conditions, restrictions and
limitations of an Option; (ii) to prescribe the form or forms of the
agreements evidencing any Options granted under the Plan; (iii) to
establish, amend and rescind rules and regulations for the
administration of the Plan; and (iv) to construe and interpret the
Plan, the rules and regulations, and the agreements evidencing Options
granted under the Plan, and to make all other determinations deemed
necessary or advisable for administering the Plan. In addition, the
Committee shall have complete authority, in its discretion, to
accelerate the date that any Option which is not otherwise exercisable
shall become exercisable in whole or in part, without any obligation
to accelerate such date with respect to any other Option granted to
any person.
(c) Notwithstanding Section 2(b), and subject to the
terms of the Plan herein, the Committee may delegate from time to time
to the Chief Executive Officer of the Corporation the authority to
grant Options, and to make any or all of the determinations reserved
for the Committee in the Plan and summarized in Section 2(b) with
respect to Options that have been granted, to any individual who, at
the time of such grant or other determination, (i) is not an officer
or director of the Corporation subject to Section 16 of the Exchange
Act and (ii) is otherwise eligible to participate in the Plan under
Section 5. The Chief Executive Officer of the Corporation shall
report to the Committee, not less than quarterly, the material terms
of all Options granted since the time of any such immediately
preceding report pursuant to authority delegated pursuant to this
Section 2(c).
3. EFFECTIVE DATE
<PAGE> 3
The effective date of the Plan shall be the date of consummation of an
initial public offering (the "Public Offering Date"). Options may be granted
under the Plan on and after the effective date, but not after the tenth
anniversary of the Public Offering Date. For the purposes herein, the phrase
"consummation of an initial public offering" shall mean the closing of a firm
commitment underwritten public offering of the Corporation's Common Stock
pursuant to a registration statement on Form S-1 filed under the Securities Act
of 1933, as amended (the "Securities Act").
4. OPTIONS; SHARES OF STOCK SUBJECT TO THE PLAN
Both Incentive Options and Nonqualified Options, as designated by the
Committee, may be granted under the Plan. The shares of Common Stock that may
be issued and sold pursuant to Options shall not exceed in the aggregate
1,300,000 shares of authorized but unissued shares of the Common Stock of the
Corporation. The Corporation hereby reserves sufficient authorized shares of
Common Stock to provide for the exercise of Options granted hereunder. Any
shares of Common Stock subject to an Option which, for any reason, expires or
is terminated unexercised as to such shares may again be subject to an Option
granted under the Plan. No Optionee may be granted Options in any calendar
year for more than 500,000 shares of Common Stock.
5. ELIGIBILITY
An Option may be granted only to an individual who satisfies the
following eligibility requirements on the date the Option is granted:
(a) The individual is either (i) a key employee of the
Corporation or a related corporation or (ii) an independent contractor
providing services to the Corporation or a related corporation. For
this purpose, an individual shall be considered to be an "employee"
only if there exists between the individual and the Corporation or a
related corporation the legal and bona fide relationship of employer
and employee. In determining whether such a relationship exists, the
regulations of the United States Treasury Department relating to the
determination of the employment relationship for the purpose of
collection of income tax on wages at the source shall be applied.
Also, for this purpose, a "key employee" is an
employee of the Corporation or a related corporation whom the
Committee determines qualifies as a key employee based on the nature
and extent of such employee's duties, responsibilities, personal
capabilities, performance and potential, or any combination of such
factors.
(b) With respect to the grant of an Incentive Option, the
individual is an employee who does not own, immediately before the
time that the Incentive Option is granted, stock possessing more than
ten percent of the total combined voting power of all classes of stock
of the Corporation or a related corporation; provided, that an
individual owning more than ten percent of the total combined voting
power of all classes of stock of the Corporation or a related
corporation may be granted an Incentive Option if the price at which
such Option may be exercised is greater than or equal to 110% of the
fair market value of the shares on the date the Option is granted and
the Option period does not exceed five years. For this purpose, an
individual will be deemed to own stock which is attributed to him
under Section 424(d) of the Code.
(c) The individual, being otherwise eligible under this
Section 5, is selected by the Committee as an individual to whom an
Option shall be granted (an "Optionee").
6. OPTION PRICE
The price per share at which an Option may be exercised (the "Option
price") shall be established by the Committee at the time the Option is granted
and shall be set forth in the terms of the agreement evidencing the grant of
the Option; provided, that in the case of an Incentive Option, the Option price
shall be equal to or greater than the fair market value per share of the Common
Stock on the date the Option is granted. In addition, the following rules
shall apply:
2
<PAGE> 4
(a) An Incentive Option shall be considered to be granted
on the date that the Committee acts to grant the Option, or on any
later date specified by the Committee as the date of grant of the
Option. A Nonqualified Option shall be considered to be granted on
the date the Committee acts to grant the Option or any other date
specified by the Committee as the date of grant of the Option.
(b) The fair market value of the shares shall be
determined in good faith by the Committee in accordance with the
following provisions: (i) if the shares of Common Stock are listed for
trading on the New York Stock Exchange or the American Stock Exchange
or included in The Nasdaq National Market, the fair market value shall
be the closing sales price of the shares on the New York Stock
Exchange or the American Stock Exchange or as reported in The Nasdaq
National Market (as applicable) on the date immediately preceding the
date the Option is granted, or, if there is no transaction on such
date, then on the trading date nearest preceding the date the Option
is granted for which closing price information is available, and,
provided further, if the shares are quoted on The Nasdaq System but
are not included in The Nasdaq National Market, the fair market value
shall be the mean between the high bid and low asked quotations in The
Nasdaq System on the date immediately preceding the date the Option is
granted for which such information is available; or (ii) if the shares
of Common Stock are not listed or reported in any of the foregoing,
then fair market value shall be determined by the Committee in
accordance with the applicable provisions of Section 20.2031-2 of the
Federal Estate Tax Regulations, or in any other manner consistent with
the Code and accompanying regulations.
(c) In no event shall there first become exercisable by
the Optionee in any one calendar year incentive stock Options granted
by the Corporation or any related corporation with respect to shares
having an aggregate fair market value (determined at the time an
Option is granted) greater than $100,000.
7. OPTION PERIOD AND LIMITATIONS ON THE RIGHT TO
EXERCISE OPTIONS
(a) The period during which an Option may be exercised
(the "Option period") shall be determined by the Committee when the
Option is granted and shall not extend more than ten years from the
date on which the Option is granted. An Option shall be exercisable
on such date or dates, during such period, for such number of shares,
and subject to such conditions as shall be determined by the Committee
and set forth in the agreement evidencing such Option, subject to the
rights granted herein to the Committee to accelerate the time when
Options may be exercised. Any Option or portion thereof not exercised
before the expiration of the Option period shall terminate.
(b) An Option may be exercised by giving written notice
of at least ten days to the Committee or its designee at such place as
the Committee shall direct. Such notice shall specify the number of
shares to be purchased pursuant to an Option and the aggregate
purchase price to be paid therefor, and shall be accompanied by the
payment of such purchase price. Such payment shall be in the form of
(i) cash; (ii) shares of Common Stock owned by the Optionee at the
time of exercise; (iii) shares of Common Stock withheld upon exercise;
(iv) delivery of a properly executed written notice of exercise to the
Corporation and delivery to a broker of written notice of exercise and
irrevocable instructions to promptly deliver to the Corporation the
amount of sale or loan proceeds to pay the Option price; or (v) any
combination of the foregoing methods. Shares tendered or withheld in
payment upon the exercise of an Option shall be valued at their fair
market value on the date of exercise, as determined by the Committee
by applying the provisions of Section 6(b).
(c) No Option granted to an Optionee who was an employee
at the time of grant shall be exercised unless the Optionee is, at the
time of exercise, an employee as described in Section 5(a), and has
been an employee continuously since the date the Option was granted,
subject to the following:
(i) An Option shall not be affected by any change
in the terms, conditions or status of the Optionee's
employment, provided that the Optionee continues to be an
employee of the Corporation or a related corporation.
3
<PAGE> 5
(ii) The employment relationship of an Optionee
shall be treated as continuing intact for any period that the
Optionee is on military or sick leave or other bona fide leave
of absence, provided that the period of such leave does not
exceed ninety days, or, if longer, as long as the Optionee's
right to reemployment is guaranteed either by statute or by
contract. The employment relationship of an Optionee shall
also be treated as continuing intact while the Optionee is not
in active service because of disability. For purposes of this
Section 7(c)(ii), "disability" shall mean the inability of the
Optionee to engage in any substantial gainful activity by
reason of any medically determinable physical or mental
impairment which can be expected to result in death, or which
has lasted or can be expected to last for a continuous period
of not less than twelve months. The Committee shall determine
whether an Optionee is disabled within the meaning of this
paragraph.
(iii) If the employment of an Optionee is
terminated because of disability within the meaning of
subparagraph (ii), or if the Optionee dies while he is an
employee or dies after the termination of his employment
because of disability, the Option may be exercised only to the
extent exercisable on the date of the Optionee's termination
of employment or death while employed (the "termination
date"), except that the Committee may in its discretion
accelerate the date for exercising all or any part of the
Option which was not otherwise exercisable on the termination
date. The Option must be exercised, if at all, prior to the
first to occur of the following, whichever shall be
applicable: (A) the close of the period of twelve months next
succeeding the termination date; or (B) the close of the
Option period. In the event of the Optionee's death, such
Option shall be exercisable by such person or persons as shall
have acquired the right to exercise the Option by will or by
the laws of intestate succession.
(iv) If the employment of the Optionee is
terminated for any reason other than disability (as defined in
subparagraph (ii)) or death or for "cause," his Option may be
exercised to the extent exercisable on the date of such
termination of employment, except that the Committee may in
its discretion accelerate the date for exercising all or any
part of the Option which was not otherwise exercisable on the
date of such termination of employment. The Option must be
exercised, if at all, prior to the first to occur of the
following, whichever shall be applicable: (A) the close of
the period of 90 days next succeeding the termination date; or
(B) the close of the Option period. If the Optionee dies
following such termination of employment and prior to the
earlier of the dates specified in (A) or (B) of this
subparagraph (iv), the Optionee shall be treated as having
died while employed under subparagraph (iii) immediately
preceding (treating for this purpose the Optionee's date of
termination of employment as the termination date). In the
event of the Optionee's death, such Option shall be
exercisable by such person or persons as shall have acquired
the right to exercise the Option by will or by the laws of
intestate succession.
(v) If the employment of the Optionee is
terminated for "cause," his Option shall lapse and no longer
be exercisable as of the effective time of his termination of
employment, as determined by the Committee. For purposes of
this subparagraph (v) and subparagraph (iv), the Optionee's
termination shall be for "cause" if such termination results
from the Optionee's (A) dishonesty; (B) refusal to perform his
duties for the Corporation; or (C) engaging in conduct that
could be materially damaging to the Corporation without a
reasonable good faith belief that such conduct was in the best
interest of the Corporation. The determination of "cause"
shall be made by the Committee and its determination shall be
final and conclusive.
(d) An Option granted to an Optionee who was an
independent contractor of the Corporation or a related corporation at
the time of grant (and who does not thereafter become an employee, in
which case he shall be subject to the provisions of Section 7(c)
herein) may be exercised only to the extent exercisable on the date of
the Optionee's termination of service to the Corporation or a related
corporation (unless the termination was for cause), and must be
exercised, if at all, prior to the first to occur of the following, as
applicable: (A) the close of the period of 90 days next succeeding the
termination date; or (B) the close of the Option period. If the
services of such an Optionee are terminated for cause (as defined in
Section 7(c)(v) herein), his Option
4
<PAGE> 6
shall lapse and no longer be exercisable as of the effective time of
his termination of services, as determined by the Committee.
Notwithstanding the foregoing, the Committee may in its discretion
accelerate the date for exercising all or any part of an Option which
was not otherwise exercisable on the termination date or extend the
Option period, or both.
(e) An Optionee or his legal representative, legatees or
distributees shall not be deemed to be the holder of any shares
subject to an Option unless and until certificates for such shares are
issued to him or them under the Plan.
(f) Nothing in the Plan shall confer upon the Optionee
any right to continue in the service of the Corporation or a related
corporation as an employee or independent contractor, as the case may
be, or to interfere in any way with the right of the Corporation or a
related corporation to terminate the Optionee's service at any time.
8. NONTRANSFERABILITY OF OPTIONS AND SHARES
Incentive Options granted pursuant to the Plan shall not be
transferable (including by pledge or hypothecation) other than by will or the
laws of intestate succession or pursuant to a qualified domestic relations
order, as defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the rules thereunder.
Nonqualified Options granted pursuant to the Plan shall not be transferable
(including by pledge or hypothecation) other than by will or the laws of
intestate succession or pursuant to a qualified domestic relations order, as
defined by the Code or Title I of ERISA or the rules thereunder, except as may
be permitted by the Committee in a manner consistent with the registration
provisions of the Securities Act. An Option shall be exercisable during the
Optionee's lifetime only by him. To the extent required by Section 16 of the
Exchange Act, shares acquired upon the exercise of an Option shall not, without
the consent of the Committee, be transferable (including by pledge or
hypothecation) until the expiration of six months after the date the Option was
granted.
9. DILUTION OR OTHER ADJUSTMENTS
If there is any change in the outstanding shares of Common Stock of
the Corporation as a result of a merger, consolidation, reorganization, stock
dividend, stock split distributable in shares, or other change in the capital
stock structure of the Corporation, the Committee shall make such adjustments
to Options, to the number of shares reserved for issuance under the Plan, and
to any provisions of this Plan as the Committee deems equitable to prevent
dilution or enlargement of Options or otherwise advisable to reflect such
change.
10. WITHHOLDING
The Corporation shall require any recipient of shares pursuant to the
exercise of a Nonqualified Option to pay to the Corporation in cash the amount
of any tax or other amount required by any governmental authority to be
withheld and paid over by the Corporation to such authority for the account of
such Optionee. Notwithstanding the foregoing, the Optionee may satisfy such
obligation in whole or in part, and any other local, state or federal income
tax obligations relating to the exercise of a Nonqualified Option, by electing
(the "Election") to have the Corporation withhold shares of Common Stock from
the shares to which the Optionee is entitled. The number of shares to be
withheld shall have a fair market value (determined in accordance with Section
6(b)) as of the date that the amount of tax to be withheld is determined (the
"Tax Date") as nearly equal as possible to (but not exceeding) the amount of
such obligations being satisfied. Each Election must be made in writing to the
Committee prior to the Tax Date.
11. CERTAIN DEFINITIONS
For purposes of the Plan, the following terms shall have the meaning
indicated:
(a) "Related corporation" means any parent, subsidiary or
predecessor of the Corporation.
5
<PAGE> 7
(b) "Parent" or "parent corporation" shall mean any
corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation if, at the time that the
Option is granted, each corporation other than the Corporation owns
stock possessing fifty percent or more of the total combined voting
power of all classes of stock in another corporation in the chain.
(c) "Subsidiary" or "subsidiary corporation" means any
corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation if, at the time that the
Option is granted, each corporation other than the last corporation in
the unbroken chain owns stock possessing fifty percent or more of the
total combined voting power of all classes of stock in another
corporation in the chain.
(d) "Predecessor" or "predecessor corporation" means a
corporation which was a party to a transaction described in Section
424(a) of the Code (or which would be so described if a substitution
or assumption under that section had occurred) with the Corporation,
or a corporation which is a parent or subsidiary of the Corporation,
or a predecessor of any such corporation.
(e) In general, terms used in the Plan shall, where
appropriate, be given the meaning ascribed to them under the
provisions of the Code applicable to incentive stock Options.
12. STOCK OPTION AGREEMENT
The grant of any Option under the Plan shall be evidenced by the
execution of an agreement (the "Agreement") between the Corporation and the
Optionee. Such Agreement shall set forth the date of grant of the Option, the
Option price, the Option period, the designation of the Option as an Incentive
Option or a Nonqualified Option, and the time or times when and the conditions
upon the happening of which the Option shall become exercisable. Such
Agreement shall also set forth the restrictions, if any, with respect to which
the shares to be purchased thereunder shall be subject, and such other terms
and conditions as the Committee shall determine which are consistent with the
provisions of the Plan and applicable law and regulations.
13. RESTRICTIONS ON SHARES
The Corporation may impose such restrictions on any shares acquired
upon exercise of Options granted under the Plan as it may deem advisable,
including, without limitation, restrictions necessary to ensure compliance with
the Securities Act of 1933, as amended, under the requirements of any
applicable self-regulatory organization and under any blue sky or securities
laws applicable to such shares. The Corporation may cause a restrictive legend
to be placed on any certificate issued pursuant to the exercise of an Option in
such form as may be prescribed from time to time by applicable laws and
regulations or as may be advised by legal counsel.
14. AMENDMENT OR TERMINATION
The Plan may be amended or terminated by action of the Board;
provided, that:
(a) Any amendment which would (i) materially increase
the aggregate number of shares which may be issued under the Plan
(other than changes as described in Section 9), or (ii) materially
change the requirements for eligibility to receive Options under the
Plan shall be made only with the approval of the shareholders of the
Corporation.
(b) No outstanding Option shall be amended or terminated
(i) without the consent of the Optionee if such amendment or
termination would adversely affect the Optionee's rights with respect
to such Option; and (ii) if the Option is an Incentive Option, without
the opinion of legal counsel to the Corporation that such amendment or
termination will not constitute a "modification" within the meaning of
Section 424 of the Code if the Committee determines such an opinion is
necessary.
15. APPLICABLE LAW
6
<PAGE> 8
Except as otherwise provided herein, the Plan shall be construed and
enforced according to the laws of the State of North Carolina.
16. SECTION 16(B) COMPLIANCE
To the extent that participants in the Plan are subject to Section
16(b) of the Exchange Act, it is the intention of the Corporation that
transactions under the Plan shall comply with Rule 16b-3 under the Exchange Act
and, if any Plan provision is later found not to be in compliance with Section
16 of the Exchange Act, the provision shall be deemed null and void, and in all
events the Plan shall be construed in favor of Plan transactions meeting the
requirements of Rule 16b-3 or successor rules applicable to the Plan.
7
<PAGE> 1
EXHIBIT 10.4
1997 KEY EMPLOYEES' STOCK OPTION PLAN
OF
RF MICRO DEVICES, INC.
(EMPLOYEE OPTION AGREEMENT)
THIS AGREEMENT (the "Agreement"), made the ______ day of ____________,
____, between RF MICRO DEVICES, INC., a North Carolina corporation (the
"Corporation"), and __________________________, an employee of the Corporation
or a related corporation (the "Optionee");
R E C I T A L S :
In furtherance of the purposes of the 1997 Key Employees' Stock Option
Plan of RF Micro Devices, Inc., as it may be hereafter amended (the "Plan"),
the Corporation and the Optionee hereby agree as follows:
1. The rights and duties of the Corporation and the Optionee
under this Agreement shall in all respects be subject to and governed by the
provisions of the Plan, a copy of which is delivered herewith or has been
previously provided to the Optionee and the terms of which are incorporated
herein by reference.
2. The Corporation hereby grants to the Optionee pursuant to the
Plan, as a matter of separate inducement and agreement in connection with his
employment or service to the Corporation, and not in lieu of any salary or
other compensation for his services, the right and Option (the "Option") to
purchase all or any part of an aggregate of _______________ (_________) shares
(the "shares") of the Common Stock of the Corporation, at the purchase price of
_____________________________ ($__________) per share. The Option to purchase
_____________ (_____) of the shares shall be designated as an Incentive Option.
The Option to purchase ________________ (_____) of the shares shall be
designated as a Nonqualified Option. To the extent that any Option is
designated as an Incentive Option and such Option does not qualify as an
Incentive Option, it shall be treated as a Nonqualified Option. Except as
otherwise provided in the Plan, the Option will expire if not exercised in full
before ______________, ________.
3. The Option shall become exercisable on the date or dates set
forth on Schedule A attached hereto. To the extent that an Option which is
exercisable is not exercised, such Option shall accumulate and be exercisable
by the Optionee in whole or in part at any time prior to expiration of the
Option. The minimum number of shares that may be purchased under the Option at
one time shall be ten (10). Upon the exercise of an Option in whole or in
part, the Optionee shall pay the Option price to the Corporation in accordance
with the provisions of Section 7 of the Plan, and the Corporation shall as soon
thereafter as practicable deliver to the Optionee a certificate or certificates
for the shares purchased.
4. Nothing contained in this Agreement or the Plan shall require
the Corporation or a related corporation to continue to employ the Optionee for
any particular period of time, nor shall it require the Optionee to remain in
the employ of the Corporation or such related corporation for any particular
period of time. Except as otherwise expressly provided in the Plan, all rights
of the Optionee under the Plan with respect to the unexercised portion of his
Option shall terminate upon termination of the employment of the Optionee with
the Corporation or a related corporation.
5. To the extent that this Option is designated as an Incentive
Option, the Option shall not be transferable (including by pledge or
hypothecation) other than by will or the laws of intestate succession or
pursuant to a qualified domestic relations order (as defined by the Internal
Revenue Code of 1986, as amended (the "Code"), or Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules
thereunder). To the extent that this Option is designated as a Nonqualified
Option, the Option shall not be transferable (including by pledge or
hypothecation) other than by will or the laws of intestate succession or
pursuant to a qualified domestic relations order (as defined by the Code, Title
I of ERISA or the rules thereunder), except as may be permitted pursuant to the
Plan. This Option shall be exercisable during the Optionee's lifetime only by
the Optionee.
6. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective executors, administrators,
next-of-kin, successors and assigns.
<PAGE> 2
7. Except as otherwise provided in the Plan or herein, this
Agreement shall be construed and enforced according to the laws of the State of
North Carolina.
IN WITNESS WHEREOF, this Agreement has been executed in behalf of the
Corporation and by the Optionee on the day and year first above written.
RF MICRO DEVICES, INC.
By:
------------------------------------
David A. Norbury
President and Chief Executive Officer
Attest:
- ---------------------------------------
Secretary
[Corporate Seal]
OPTIONEE
(SEAL)
---------------------------------
<PAGE> 3
1997 KEY EMPLOYEES' STOCK OPTION PLAN
OF
RF MICRO DEVICES, INC.
(EMPLOYEE OPTION AGREEMENT)
SCHEDULE A
Date Option granted: __________________, 19__.
Date Option expires: __________________, 19__.
Number of shares subject to Option: _______ shares.
Option price (per share): $________.
<TABLE>
<CAPTION>
Date Installment Number of Shares Incentive or
First Exercisable in Installment Nonqualified Stock Option
- ----------------- --------------------- -------------------------
<S> <C> <C>
</TABLE>
<PAGE> 4
1997 KEY EMPLOYEES' STOCK OPTION PLAN
OF
RF MICRO DEVICES, INC.
(INDEPENDENT CONTRACTOR AGREEMENT)
THIS AGREEMENT (the "Agreement"), made the ______ day of ____________,
____, between RF MICRO DEVICES, INC., a North Carolina corporation (the
"Corporation"), and __________________________ (the "Optionee");
R E C I T A L S :
In furtherance of the purposes of the 1997 Key Employees' Stock Option
Plan of RF Micro Devices, Inc., as it may be hereafter amended (the "Plan"),
the Corporation and the Optionee hereby agree as follows:
1. The rights and duties of the Corporation and the Optionee
under this Agreement shall in all respects be subject to and governed by the
provisions of the Plan, a copy of which is delivered herewith or has been
previously provided to the Optionee and the terms of which are incorporated
herein by reference.
2. The Corporation hereby grants to the Optionee pursuant to the
Plan, as a matter of separate inducement and agreement in connection with his
services to the Corporation or a related corporation, and not in lieu of any
salary or other compensation for his services, the right and Option (the
"Option") to purchase all or any part of an aggregate of _______________
(_________) shares (the "shares") of the Common Stock of the Corporation, at
the purchase price of _____________________________ ($__________) per share.
The Option shall be designated as a Nonqualified Option. Except as otherwise
provided in the Plan, the Option will expire if not exercised in full before
____________, ______.
3. The Option shall become exercisable on the date or dates shown
on Schedule A. To the extent that an Option which is exercisable is not
exercised, such Option shall accumulate and be exercisable by the Optionee in
whole or in part at any time prior to expiration of the Option. The minimum
number of shares that may be purchased under the Option at one time shall be
ten (10). Upon the exercise of an Option in whole or in part, the Optionee
shall pay the Option price to the Corporation in accordance with the provisions
of Section 7 of the Plan, and the Corporation shall as soon thereafter as
practicable deliver to the Optionee a certificate or certificates for the
shares purchased.
4. Nothing contained in this Agreement or the Plan shall require
the Corporation or a related corporation to continue to require the services of
the Optionee for any particular period of time, nor shall it require the
Optionee to remain in service to the Corporation or such related corporation
for any particular period of time. Except as otherwise expressly provided in
the Plan, all rights of the Optionee under the Plan with respect to the
unexercised portion of his Option shall terminate upon termination of the
service of the Optionee with the Corporation or a related corporation.
5. Except as may be permitted pursuant to the Plan, this Option
shall not be transferable (including by pledge or hypothecation) other than by
will or the laws of intestate succession or pursuant to a qualified domestic
relations order (as defined by the Internal Revenue Code of 1986, as amended,
or Title I of the Employee Retirement Income Security Act of 1974, as amended,
or the rules thereunder). This Option shall be exercisable during the
Optionee's lifetime only by the Optionee.
6. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective executors, administrators,
next-of-kin, successors and assigns.
7. Except as otherwise provided herein or in the Plan, this
Agreement shall be construed and enforced according to the laws of the State of
North Carolina.
<PAGE> 5
IN WITNESS WHEREOF, this Agreement has been executed in behalf of the
Corporation and by the Optionee on the day and year first above written.
RF MICRO DEVICES, INC.
By:
------------------------------------
David A. Norbury
President and Chief Executive Officer
Attest:
- --------------------------------------
Secretary
[Corporate Seal]
OPTIONEE
(SEAL)
---------------------------------
<PAGE> 6
1997 KEY EMPLOYEES' STOCK OPTION PLAN
OF
RF MICRO DEVICES, INC.
(INDEPENDENT CONTRACTOR AGREEMENT)
SCHEDULE A
Date Option granted: __________________, 19__.
Date Option expires: __________________, 19__.
Number of shares subject to Option: _______ shares.
Option price (per share): $________.
<TABLE>
<CAPTION>
Date Installment Number of Shares
First Exercisable in Installment
----------------- ---------------------
<S> <C>
</TABLE>
<PAGE> 1
EXHIBIT 10.5
NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
OF
RF MICRO DEVICES, INC.
<PAGE> 2
NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
OF
RF MICRO DEVICES, INC.
1. PURPOSE.
The purposes of the Nonemployee Directors' Stock Option Plan of RF
Micro Devices, Inc. (the "Plan") are to compensate nonemployee members of the
Board of Directors (the "Board") of RF Micro Devices, Inc. (the "Corporation")
for their service on the Board, encourage and enable such members to acquire or
to increase their holdings of common stock of the Corporation (the "Common
Stock") in order to promote a closer identification of their interests with
those of the Corporation and its shareholders, thereby further stimulating
their efforts to enhance the efficiency, soundness, profitability, growth and
shareholder value of the Corporation, and allow the Corporation to attract and
retain qualified nonemployee members of the Board. These purposes will be
carried out through the granting of stock options to nonemployee Directors.
Such options include options granted to nonemployee Directors upon consummation
of an initial public offering (as provided in Section 6(a) herein), and, with
respect to nonemployee Directors elected to the Board after consummation of an
initial public offering, upon the initial election to the Board (collectively,
"Initial Awards"), and options granted to nonemployee Directors on an annual
basis after consummation of an initial public offering ("Annual Awards").
Initial Awards and Annual Awards are referred to collectively herein as
"Options" and individually as an "Option." Such Options are not intended to
qualify for treatment as incentive stock options described in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"). For the purposes
herein, a "nonemployee Director" shall mean a Director who is not at the time
an option is granted an employee of the Corporation or a related corporation.
2. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Compensation
Committee of the Board (the "Committee"). The Committee shall include
no fewer than the minimum number of "non-employee directors," as such
term is defined in Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as may be
required by Rule 16b-3 or any successor rule.
(b) Any action of the Committee may be taken by a written
instrument signed by all of the members of the Committee and any
action so taken by written consent shall be as fully effective as if
it had been taken by a majority of the members at a meeting duly held
and called. Subject to the provisions of the Plan, the Committee
shall have full and final authority, in its discretion, to establish,
amend and rescind rules and regulations for the administration of the
Plan; to construe and interpret the Plan, the rules and regulations,
and the agreements evidencing Options granted under the Plan; and to
make all other determinations deemed necessary or advisable for
administering the Plan. In addition, the Committee shall have
complete authority, in its discretion, to accelerate the date that any
Option shall become exercisable in whole or in part, even if such
Option was not otherwise exercisable, without any obligation to
accelerate any other Option granted to any person.
3. EFFECTIVE DATE; TERM OF THE PLAN.
The effective date of the Plan shall be the date of consummation of an
initial public offering (as provided in Section 6(a)(i) herein) (the "Public
Offering Date"). Options may be granted under the Plan on or after the
effective date, but not after the tenth anniversary of the Public Offering
Date.
<PAGE> 3
4. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
The number of shares of Common Stock that may be issued pursuant to
Options shall not exceed in the aggregate 200,000 shares of authorized but
unissued Common Stock. The Corporation hereby reserves sufficient authorized
shares to provide for the exercise of Options granted under the Plan. Any
shares subject to an Option which, for any reason, expires or is terminated
unexercised as to such shares may again be subject to an Option granted under
the Plan. If there is any change in the shares of Common Stock because of a
merger, consolidation or reorganization involving the Corporation or a related
corporation, or if the Board declares a stock dividend or stock split
distributable in shares of Common Stock, or if there is a change in the capital
structure of the Corporation or a related corporation affecting the Common
Stock, the number of shares of Common Stock reserved for issuance under the
Plan shall be correspondingly adjusted, and the Committee shall make such
adjustments to Options or to any provisions of the Plan as the Committee deems
equitable to prevent dilution or enlargement of Options.
5. ELIGIBILITY.
An Option may be granted only to an individual who is a nonemployee
Director on the date the Option is granted. An eligible participant in the
Plan is referred to herein as a "nonemployee Director" or a "Director."
6. GRANT OF OPTIONS, ETC.
(a) Initial Awards.
(i) Initial Awards Upon Completion of Initial
Public Offering. Each non-employee Director in service at the
time of consummation of an initial public offering of the
Common Stock shall receive an Option for 10,000 shares of
Common Stock. The grant of such Initial Award shall be
effective concurrently with the consummation of such initial
public offering. For the purposes of the Plan, the phrase
"consummation of an initial public offering" shall mean the
closing of a firm commitment underwritten public offering of
the Company's Common Stock pursuant to a registration
statement on Form S-1 filed under the Securities Act of 1933,
as amended (the "Securities Act").
(ii) Initial Awards Upon Initial Election or
Appointment to the Board. Each nonemployee Director who is
first elected or appointed to the Board after consummation of
an initial public offering shall receive an Option to purchase
10,000 shares of Common Stock. The date of grant of such an
Initial Award shall be the fifth business day after the date
of the Annual Meeting of Shareholders as to those nonemployee
Directors who are first elected at an Annual Meeting of
Shareholders and the fifth business day after the date of
election or appointment to the Board as to those nonemployee
Directors who are first elected or appointed to the Board
other than at an Annual Meeting of Shareholders.
(b) Annual Awards. Each nonemployee Director who is
re-elected to the Board by the shareholders of the Company at an
Annual Meeting of the Shareholders occurring after consummation of an
initial public offering shall be granted, on an annual basis, an
option to purchase 5,000 shares of Common Stock. The date of grant of
such an Annual Award shall be the fifth business day after the date of
the Annual Meeting of Shareholders at which such Director is
re-elected.
7. OPTION PRICE.
The price per share of Common Stock at which an Option may be
exercised (the "Option Price") shall be the fair market value per share of the
Common Stock on the date the Option is granted. For this purpose, "fair market
value" shall mean (i) if the shares of Common Stock are listed for trading on
the New York Stock Exchange
- 2-
<PAGE> 4
or the American Stock Exchange or included in The Nasdaq National Market, the
closing sales price of the shares on the New York Stock Exchange or the
American Stock Exchange or as reported in The Nasdaq National Market (as
applicable) on the date immediately preceding the date the Option is granted,
or, if there is no transaction on such date, then on the trading date nearest
preceding the date the Option is granted for which closing price information is
available, and, provided further, if the shares are quoted on The Nasdaq System
but are not included in The Nasdaq National Market, fair market value shall be
the mean between the high bid and low asked quotations in The Nasdaq System on
the date immediately preceding the date the Option is granted for which such
information is available; or (ii) if the shares of Common Stock are not listed
or reported in any of the foregoing, then fair market value shall be determined
in accordance with the applicable provisions of Section 20.2031-2 of the
Federal Estate Tax Regulations, or in any other manner consistent with the Code
and accompanying regulations.
8. OPTION PERIOD AND LIMITATIONS ON THE RIGHT TO EXERCISE OPTIONS.
(a) The period during which an Option may be exercised
(the "Option Period") shall be ten years from the date of grant.
Initial Awards may be exercised as provided in Section 8(a)(i) below,
and Annual Awards may be exercised as provided in Section 8(a)(ii)
below. To the extent that all or part of an Option becomes
exercisable but is not exercised, such Option shall accumulate and be
exercisable by the Director in whole or in part at any time before the
expiration of the Option Period. The total number of shares that may
be acquired upon the exercise of an Initial Award or Annual Award
shall be rounded down to the nearest whole share. No fractional
shares shall be issued. Any Option or portion thereof not exercised
before expiration of the Option Period shall terminate.
(i) Initial Awards. Initial Awards that are
granted upon consummation of an initial public offering shall
vest and become exercisable in full immediately upon the date
of grant. Initial Awards that are granted after consummation
of an initial public offering shall vest and become
exercisable in three equal installments on each of the first
three anniversaries of the date of grant.
(ii) Annual Awards. An Annual Award shall vest
and become exercisable in three equal installments on each of
the first three anniversaries of the date of grant.
(b) No Option shall be exercised unless the Director is,
at the time of exercise, a nonemployee Director and has been a
Director continuously since the date the Option was granted.
Notwithstanding the foregoing, (i) if a Director dies while serving as
a Director, any portion of his Options which were exercisable
immediately before his death may be exercised at any time within 180
days of the date of death by such person or persons as shall have
acquired the right to exercise the Option by will or the laws of
intestate succession; and (ii) if a Director's service on the Board
terminates for any reason other than death, that portion of his
Options which were exercisable immediately before such termination may
be exercised at any time within 30 days following the date of such
termination, and after such 30-day period, such Options shall
terminate.
(c) An Option shall be exercised by giving written notice
to the Committee or its designee at such time and place as the
Committee shall direct. Such notice shall specify the number of
shares to be purchased pursuant to an Option and the aggregate
purchase price to be paid therefor, and shall be accompanied by the
payment of such purchase price. Such payment shall be in the form of
(i) cash; (ii) shares of Common Stock owned by the Director at the
time of exercise; (iii) shares of Common Stock withheld upon exercise;
(iv) delivery of written notice of exercise to the Committee and
delivery to a broker of written notice of exercise and irrevocable
instructions to promptly deliver to the Corporation the amount of sale
or loan proceeds to pay the Option Price; or (v) a combination of such
methods. Shares of Common Stock tendered or withheld in payment upon
the exercise of an Option shall be valued at their fair market value
on the date of exercise, as determined in accordance with Section 7
herein.
- 3-
<PAGE> 5
(d) A Director or his legal representative,
legatees or distributees shall not be deemed to be the holder of any
shares subject to an Option unless and until certificates for such
shares are issued to him or them under the Plan.
9. NONTRANSFERABILITY OF OPTIONS.
(a) An Option shall not be transferable other than by
will, the laws of intestate succession or pursuant to a qualified
domestic relations order (as defined by the Code, or Title I of the
Employee Retirement Income Security Act ("ERISA"), or the rules
thereunder), except as may be permitted by the Committee in a manner
consistent with the registration provisions of the Securities Act. An
Option shall be exercisable during the Director's lifetime only by him
or by his guardian or legal representative.
(b) To the extent required by Rule 16b-3, shares of
Common Stock acquired upon exercise of an Option shall not, without
the consent of the Committee, be disposed of by the Director until the
expiration of six months after the date the Option was granted.
10. CERTAIN DEFINITIONS.
For purposes of the Plan, the following terms shall have the meaning
indicated:
(a) "Related corporation" means any parent, subsidiary or
predecessor of the Corporation.
(b) "Parent" or "parent corporation" shall mean any
corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation if, at the time as of which a
determination is being made, each corporation other than the
Corporation owns stock possessing fifty percent or more of the total
combined voting power of all classes of stock in another corporation
in the chain.
(c) "Subsidiary" or "subsidiary corporation" means any
corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation if, at the time as of
which a determination is being made, each corporation other than the
last corporation in the unbroken chain owns stock possessing fifty
percent or more of the total combined voting power of all classes of
stock in another corporation in the chain.
(d) "Predecessor" or "predecessor corporation" means a
corporation which was a party to a transaction described in Section
424(a) of the Code (or which would be so described if a substitution
or assumption under that section had occurred) with the Corporation,
or a corporation which is a parent or subsidiary of the Corporation,
or a predecessor of any such corporation.
11. STOCK OPTION AGREEMENT.
The grant of any Option under the Plan shall be evidenced by the
execution of an agreement (the "Agreement") between the Corporation and the
Director, a specimen of which is attached to the Plan. Each such Agreement
shall set forth the date of grant of the Option, the Option Price, the Option
Period and any other applicable terms and conditions.
12. RESTRICTIONS ON SHARES.
The Corporation may impose such restrictions on any shares issued
pursuant to the exercise of Options granted hereunder as it may deem advisable,
including without limitation restrictions under the Securities Act, the
requirements of any applicable self-regulatory organization, and any blue sky
or securities laws applicable to such shares. The Corporation may cause a
restrictive legend to be placed on any certificate issued pursuant to the
- 4-
<PAGE> 6
exercise of an Option granted hereunder in such form as may be prescribed from
time to time by applicable laws and regulations or as may be advised by legal
counsel to the Corporation.
13. AMENDMENT OR TERMINATION.
The Plan may be amended or terminated by action of the Board;
provided, that such amendment or termination shall not, without the consent of
a nonemployee Director, adversely affect the rights of such nonemployee
Director with respect to an outstanding Option held by such nonemployee
Director. The term of the Plan shall end on the earlier of: (i) the effective
date of termination of the Plan by the Board or (ii) that date Options have
been granted to purchase all of the aggregate shares which are available for
Options hereunder. Any Options outstanding at the end of the term shall
continue to be outstanding and exercisable for the remainder of the applicable
Option Period.
14. SECTION 16(B) COMPLIANCE.
It is the intention of the Corporation that transactions under the
Plan shall comply in all respects with Rule 16b-3 under the Exchange Act, and,
if any Plan provision is later found not to be in compliance with Section 16 of
the Exchange Act, the provision shall be deemed null and void, and in all
events the Plan shall be construed in favor of Plan transactions meeting the
requirements of Rule 16b-3 or successor rules applicable to the Plan.
15. APPLICABLE LAW.
Except as otherwise provided herein, the Plan shall be construed and
enforced according to the laws of the State of North Carolina.
- 5-
<PAGE> 1
EXHIBIT 10.6
NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
OF
RF MICRO DEVICES, INC.
(OPTION AGREEMENT)
THIS AGREEMENT (the "Agreement"), made the ____ day of ____________,
____, between RF MICRO DEVICES, INC., a North Carolina corporation (the
"Corporation"), and ______________ (the "Director");
R E C I T A L S :
In furtherance of the purposes of the Nonemployee Directors' Stock
Option Plan of RF Micro Devices, Inc., as it may be hereafter amended (the
"Plan"), the Corporation and the Director hereby agree as follows:
1. The rights and duties of the Corporation and the Director
under this Agreement shall in all respects be subject to and governed by the
provisions of the Plan, a copy of which is delivered herewith or has been
previously provided to the Optionee and the terms of which are incorporated
herein by reference.
2. The Corporation hereby grants to the Director pursuant to the
Plan, as a matter of separate inducement and agreement in connection with his
services to the Corporation, the right and option (the "Option") to purchase
all or any part of an aggregate of _____________ (____) shares of the Common
Stock of the Corporation (the "shares"), at the purchase price of $_________
per share. The Option will expire if not exercised in full on or before the
_____ day of _____________________, _____.
3. Except as otherwise provided in the Plan, the period during
which the Option may be exercised shall be ten years from the date hereof. To
the extent that an Option which is exercisable is not exercised, such Option
shall accumulate and be exercisable by the Director in whole or in part at any
time prior to expiration of the Option. Upon the exercise of an Option in
whole or in part, the Director shall pay the purchase price to the Corporation
in accordance with the provisions of Section 8 of the Plan, and the Corporation
shall as soon thereafter as practicable deliver to the Director a certificate
or certificates for the shares purchased.
4. Nothing contained in this Agreement or the Plan shall require
the Corporation to continue the services of the Director as a director for any
particular period of time, nor shall it require the Director to remain in
service to the Corporation as a director for any particular period of time.
Except as otherwise expressly provided in the Plan, all rights of the Director
under the Plan with respect to the unexercised portion of his Option shall
terminate immediately upon termination of the services of the Director with the
Corporation as a director.
5. This Option shall not be transferable (including by pledge or
hypothecation) other than by will, the laws of intestate succession or pursuant
to a qualified domestic relations order (as defined by the Internal Revenue
Code of 1986, as amended, or Title I of the Employee Retirement Income Security
Act of 1974, as amended, or the rules thereunder), except as may be permitted
by the Plan. This Option shall be exercisable during the Director's lifetime
only by the Director or by his guardian or legal representative.
6. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective executors, administrators,
next-of-kin, successors and assigns.
7. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
IN WITNESS WHEREOF, this Agreement has been executed in behalf of the
Corporation and by the Director on the day and year first above written.
<PAGE> 2
RF MICRO DEVICES, INC.
By:
David A. Norbury
President and Chief Executive Officer
Attest:
[________________________]
Secretary
[Corporate Seal]
DIRECTOR
Printed Name:
<PAGE> 3
NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
OF
RF MICRO DEVICES, INC.
(OPTION AGREEMENT)
SCHEDULE A
Date Option granted: __________________, 19__.
Date Option expires: __________________, 19__.
Number of shares subject to Option: _______ shares.
Option price (per share): $________.
Date Installment Number of Shares
First Exercisable in Installment
----------------- -------------------
<PAGE> 1
EXHIBIT 10.9
THE REGISTRANT HAS REQUESTED THAT CERTAIN PORTIONS OF THIS EXHIBIT BE
GIVEN CONFIDENTIAL TREATMENT
LICENSE AND TECHNICAL ASSISTANCE
AGREEMENT
BY AND BETWEEN
ELECTRONICS SYSTEMS & TECHNOLOGY DIVISION
TRW SPACE & ELECTRONICS GROUP
ONE SPACE PARK
REDONDO BEACH, CALIFORNIA 90278
AND
RF MICRO DEVICES, INC.
7341-D WEST FRIENDLY AVENUE
GREENSBORO, NORTH CAROLINA
<PAGE> 2
LICENSE AND TECHNICAL ASSISTANCE AGREEMENT
THIS AGREEMENT, made and entered into as the 6th day of June, 1996 by
and between the Electronics Systems & Technology Division of TRW Inc., an Ohio
corporation, having offices at One Space Park, Redondo Beach, California 90278
(hereinafter "Licensor") and RF Micro Devices, Inc., a North Carolina
corporation, having offices at 7341-D West Friendly Avenue, Greensboro, North
Carolina 27410 (hereinafter "Licensee").
WHEREAS, Licensor has developed, designed and manufactured certain
kinds of gallium arsenide heterojunction bipolar transistors, and has utilized
molecular beam epitaxy processes in the production of such transistors, and
possesses patents rights and technical information and know-how relating
thereto; and
WHEREAS, Licensee intends to design, manufacture and sell GaAs
heterojunction bipolar transistors and products incorporating such GaAs
heterojunction bipolar transistors and, to that end, desires to obtain from
Licensor certain rights to Licensor's patent rights relating thereto and to
receive technical assistance from Licensor to assist in enabling Licensee to
manufacture such heterojunction bipolar transistors.
THEREFORE, in consideration of the mutual promises herein contained
and the mutual benefits to be derived therefrom, Licensor and Licensee agree as
follows:
ARTICLE 1
DEFINITIONS
The following words and phrases shall have the meanings set forth
below unless the context requires a different meaning:
1.1 AGREEMENT: This Agreement and the following Schedules hereto:
Schedule 1.6 Existing RFMD Products
Schedule 1.7 Existing TRW GaAs HBT Patent Rights
Schedule 1.8 Existing TRW MBE Patent Rights
Schedule 1.13 HBT Technical Information
Schedule 1.18 MBE Technical Information
Schedule 2.8.2 Licensor Contractual Obligations
Schedule 3.1 Technical Assistance
1.2 ASSET SALE: the sale of all or substantially all the assets of
Licensee.
1.3 COMMERCIAL: Involving the transfer or sale of products where
the transaction does not require qualification of the product to relevant
specifications in of mil-m-38510, mil-std-883, mil-i-38534, mil-i-38535 or
similar specifications and subsequent versions issued by any agency of the
United States government.
1.4 COMMERCIAL WIRELESS COMMUNICATION APPLICATIONS: The sale or
transfer to Commercial customers of products that provide, facilitate,
support or are otherwise directly related to one or more aspects of Wireless
Communication .
1.5 EFFECTIVE DATE: June 6, 1996.
1.6 EXISTING RFMD PRODUCTS: The products listed on Schedule 1.6.
1.7 EXISTING TRW GAAS HBT PATENT RIGHTS: Licensor's patents and
patent applications, listed in
<PAGE> 3
Schedule 1.7, and any patent and patent applications filed by Licensor after
the Effective Date to protect inventions relating to GaAs HBTs conceived or
first actually reduced to practice prior to the Effective Date, and any United
States and foreign patents which issue from any continuations,
continuations-in-part, divisionals or substitutions thereof, and all
extensions, reexaminations, renewals and reissues therefrom, and all rights to
bring an action against any person to recover damages or profits resulting from
infringement of the foregoing.
1.8 EXISTING TRW MBE PATENT RIGHTS: Licensor's patents and patent
applications, listed in Schedule 1.8, and any patent and patent applications
filed by Licensor after the Effective Date to protect inventions relating to
TRW's MBE processes conceived or first actually reduced to practice prior to
the Effective Date, and any United States and foreign patents which issue from
any continuations, continuations-in-part, divisionals or substitutions thereof,
and all extensions, reexaminations, renewals and reissues therefrom, and all
rights to bring an action against any person to recover damages or profits
resulting from infringement of the foregoing.
1.9 FOUNDRY: A business concern which provides wafer processing
services including: design rules; design support; photomask layout and
fabrication; wafer processing (including in-process testing); wafer dicing and
inspection; and wafer delivery.
1.10 FUTURE TRW GAAS HBT PATENT RIGHTS: Licensor's United States
and foreign patents and patent applications filed by Licensor to protect
inventions relating to GaAs HBTs conceived subsequent to the Effective Date,
and any United States and foreign patents which issue from any continuations,
continuations-in-part, divisionals or substitutions thereof, and all
extensions, reexaminations, renewals and reissues therefrom, and all rights to
bring an action against any person to recover damages or profits resulting from
infringement of the foregoing.
1.11 FUTURE TRW MBE PATENT RIGHTS: Licensor's United States and
foreign patents and patent applications filed by Licensor to protect inventions
relating to MBE processes conceived subsequent to the Effective Date, and any
United States and foreign patents which issue from any continuations,
continuations-in-part, divisionals or substitutions thereof, and all
extensions, reexaminations, renewals and reissues therefrom, and all rights to
bring an action against any person to recover damages or profits resulting from
infringement of the foregoing.
1.12 GAAS HBT: A heterojunction bipolar transistor having a base,
emitter and collector formed on a substrate of gallium arsenide, and the
manufacturing process utilized for forming such transistors on the gallium
arsenide substrate.
1.13 HBT TECHNICAL INFORMATION: All documentation, know-how,
software or other information of Licensor relating to Licensor's GaAs HBT,
whether or not it is considered proprietary or a trade secret by Licensor,
including, without limitation, data and information contained in reports,
documents, computer programs, drawings and graphs, schematics, manuals, files
and notes in any medium or representation, electronic or otherwise, including
but not limited to those items specified in Schedule 1.13.
1.14 IPO: an underwritten initial public offering of Licensee's
common stock to be registered under the Securities Act of 1933, as amended.
1.15 LICENSED FIELD: The design, development, manufacture,
testing, sale, marketing, , service, and repair of Licensed Products, including
the sale of spare parts for or spare complete Licensed Products by Licensee,
for Commercial Wireless Communication Applications where the Licensed Products
operate on signals having a frequency of less than ten (10) gigahertz.
1.16 LICENSED PRODUCTS: Any GaAs HBT products where the emitter of
the GaAs HBT has a width of between One (1) and Three (3) microns inclusive.
1.17 MBE: An epitaxial process for manufacturing the starting
wafers for GaAs HBTs utilizing molecular beam technology.
2
<PAGE> 4
REDACTED
1.18 MBE TECHNICAL INFORMATION: All documentation, know-how,
software or other information of Licensor relating to Licensor's MBE
processes for use in connection with the production of GaAs HBTs, whether or
not it is considered proprietary or a trade secret by Licensor, including,
without limitation, data and information contained in reports, documents,
computer programs, drawings and graphs, schematics, manuals, files and notes in
any medium or representation, electronic or otherwise, including but not
limited to those items specified in Schedule 1.18.
1.19 MERGER: the participation of a party as a constituent
corporation in a merger in which it is not the surviving corporation if its
stockholders immediately prior to the effective time of the merger own less
than fifty percent (50%) of the outstanding voting securities of the surviving
corporation immediately after the effective time of the merger.
1.20 OPERATIONAL FOUNDRY: A Foundry shall be considered
operational for purposes of this Agreement when (a) all of the conditions set
forth in Sections 1.20.1 through 1.20.4 are met; or, (b) when the parties
mutually agree that the Foundry is operational.
1.20.1 EQUIPMENT AND PROCESS DOCUMENTATION - all equipment
is installed and in operation and manufacturing flow documents (Licensor
MF1-type documents) on all major process steps are in place
1.20.2 LINE YIELD (NUMBER OF WAFERS COMPLETED MEETING
PROCESS CONTROL MONITOR [PCM] YIELDS) - exceeds ***** at a throughput rate of
***** wafer starts per *****
1.20.3 OVERALL YIELD (THROUGH PACKAGED CHIP TEST) ON 2
STANDARD EVALUATION CIRCUITS (SEC) [to be selected from existing Licensee chip
products now manufactured by Licensor in its GaAs foundry] - exceeds ***** of
the prior overall yield for that sec product currently in production by
Licensor; this yield must be achieved from at least ***** wafer lots, with a
minimum ***** interval between the start of the ***** and ***** wafer lot.
1.20.4 PACKAGED CHIP RELIABILITY YIELDS - equivalent to
current reliability levels achieved through testing by Licensee using
Licensee's standard packaged chip reliability testing procedures.
1.21 PATENT RIGHTS: Existing TRW GaAs HBT Patent Rights, Future
TRW GaAs HBT Patent Rights, Existing TRW MBE Patent Rights, and Future TRW MBE
Patent Rights.
1.22 RESTRICTED STOCK: Those 2,683,930 shares of Licensee's
common stock, no par value, issued to Licensor pursuant to the Restricted Stock
Agreement of even date herewith.
1.23 STOCK SALE: the sale by a party or its stockholders in a
single transaction or series of substantially contemporaneous related
transactions of more than fifty percent (50%) of the party's outstanding voting
securities entitled to vote in the election of directors.
1.24 TECHNICAL INFORMATION: HBT Technical Information and MBE
Technical Information.
1.25 TRANSFER: any mortgage, pledge, transfer, sale, assignment or
other disposition, whether voluntary, by operation of law or otherwise, of a
party's rights hereunder, including any delegation or subcontracting of duties
and specifically including (i) a Stock Sale; and (ii) a Merger.
1.26 WIRELESS COMMUNICATION: The transmission of voice, data or
other information via the transmission or reception of electromagnetic energy
propagating through the air with a frequency of less than 10 gigahertz.
3
<PAGE> 5
ARTICLE 2
LICENSE
2.1 HBT LICENSE: Licensor hereby grants to Licensee, subject to
the terms and conditions of this Agreement, a fully paid up, royalty free
worldwide right and license under Existing TRW GaAs HBT Patent Rights, Future
TRW GaAs HBT Patent Rights and to HBT Technical Information to design, develop,
manufacture, have manufactured, use, test, sell, market, service, and repair
Licensed Products and Existing RFMD Products in the Licensed Field.
2.1.1 Subject to the provisions of Sections 2.8 and 5.2
herein, the license granted in this Section 2.1 shall be exclusive as to all
persons including Licensor for Licensed Products and Existing RFMD Products in
the Licensed Field.
2.1.2 The license granted in this Section 2.1 may , at
Licensor's sole option and sole discretion, be converted to a non-exclusive
license under the circumstances set forth in Section 5.2 of this Agreement.
2.1.3 The license granted in this Section 2.1 shall be
perpetual, subject to the provisions of Article 8 relating to termination or
expiration of this Agreement.
2.1.4 The license granted in this Section 2.1 is effective
as of the Effective Date.
2.1.5 Licensee shall have the right to assign in whole or
in part or to grant sublicenses under the licenses to utilize Existing TRW GaAs
HBT Patent Rights, Future TRW HBT Patent Rights and HBT Technical Information
granted in this Section 2.1 to responsible parties, but only in accordance with
the provisions of Article 13 herein.
2.1.6 The license granted in this Section 2.1 to utilize
HBT Technical Information in the Licensed Field is a continuing license that
extends automatically without any further action on the part of Licensor or
Licensee to (i) any modification, update, change or other improvement to the
HBT Technical Information that is made by Licensor after the Effective Date and
is delivered to Licensee in accordance with Section 3.5; and (ii) any
discovery, development or other invention made by Licensor after the Effective
Date that constitutes new HBT Technical Information and is required to be
delivered to Licensee in accordance with Section 3.5.
2.2 MBE LICENSE: Licensor hereby agrees to grant to Licensee,
subject to the terms and conditions of this Agreement, a fully paid up, royalty
free, worldwide right and license under Existing TRW MBE Patent Rights, Future
TRW MBE Patent Rights and to MBE Technical Information to design, develop,
manufacture, have manufactured but only in accordance with Section 2.2.6 and
Article 13, use, test, sell, market, service, and repair Licensed Products and
Existing RFMD Products in the Licensed Field.
2.2.1 Subject to the provisions of Sections 2.8 and 5.2
herein, the license granted in this Section 2.2 shall be exclusive as to all
persons including Licensor for Licensed Products and Existing RFMD Products in
the Licensed Field.
2.2.2 The license granted in this Section 2.2 may, at
Licensor's sole option and sole discretion, be converted to a non-exclusive
license under the circumstances set forth in Section 5.2 of this Agreement.
2.2.3 The license granted in this Section 2.2 shall be
perpetual, subject to the provisions of Article 8 relating to termination or
expiration of this Agreement.
2.2.4 The license granted in this Section 2.2 shall be
effective as of the date that Licensee has an Operational Foundry for the
manufacture of Licensed Products.
4
<PAGE> 6
2.2.5 Licensee shall have the right to assign, in whole or
in part, or grant sublicenses under the Existing TRW MBE Patent Rights, Future
TRW MBE Patent Rights and MBE Technical Information granted in this Section 2.2
only in accordance with Article 13. .
2.2.6 Licensee shall have the right to have Licensed
Products and Existing RFMD Products manufactured on its behalf by a third party
under the license granted in this Section 2.2 only upon the prior written
approval of an authorized representative of Licensor, which approval may be
given, withheld or conditioned at the sole discretion of Licensor.
2.2.7 The license granted in this Section 2.2 to utilize
MBE Technical Information in the Licensed Field is a continuing license that
extends automatically without any further action on the part of Licensor or
Licensee to (i) any modification, update, change or other improvement to the
MBE Technical Information that is made by Licensor after the Effective Date and
is delivered to Licensee in accordance with Section 3.5; and (ii) any
discovery, development or other invention made by Licensor after the Effective
Date that constitutes new MBE Technical Information and is required to be
delivered to Licensee in accordance with Section 3.5.
2.3 EXISTING RFMD PRODUCTS HBT LICENSE: Licensor hereby grants to
Licensee, subject to the terms and conditions of this Agreement, a fully paid
up, royalty free worldwide right and license under Existing TRW GaAs HBT Patent
Rights and to HBT Technical Information to design, develop, manufacture, have
manufactured, use, test, sell, market, service, and repair the following
Existing RFMD Products outside the Licensed Field:
RF 2310 HBT Gain Block, RFMD design
RF 2311 HBT Gain Block, RFMD design
RF 2312 HBT Gain Block, RFMD design - CATV broadband amp
RF 2313 HBT Gain Block
RF 2314 HBT Gain Block
RF 2315 HBT Gain Block
RF 2316 HBT TV Distr Amp (Balanced)
RF 2317 HBT TV Distr Amp (Unbalanced)(G=15dB).
2.3.1 The license granted in this Section 2.3 shall be
non-exclusive.
2.3.2 The license granted in this Section 2.3 shall be
perpetual, subject to the provisions of Article 8 relating to termination or
expiration of this Agreement.
2.3.3 The license granted in this Section 2.3 is effective
as of the Effective Date.
2.3.4 Licensee shall have the right to assign in whole or
in part or to grant sublicenses under the licenses to utilize Existing TRW GaAs
HBT Patent Rights and HBT Technical Information granted in this Section 2.3 but
only in accordance with the provisions of Article 13.
2.3.5 The license granted in this Section 2.3 to use HBT
Technical Information is a continuing license that extends automatically
without any further action on the part of Licensor or Licensee to (i) any
modification, update, change or other improvement to the HBT Technical
Information that is made by Licensor after the Effective Date and is delivered
to Licensee in accordance with Section 3.5; and (ii) any discovery, development
or other invention made by Licensor after the Effective Date that constitutes
new HBT Technical Information and is delivered to Licensee in accordance with
Section 3.5.
2.4 EXISTING RFMD PRODUCTS MBE LICENSE: Licensor hereby agrees to
grant to Licensee, subject to the terms and conditions of this Agreement, a
fully paid up, royalty free worldwide right and license under Existing TRW MBE
Patent Rights and to MBE Technical Information to design, develop, manufacture,
use, test, sell, market, service, and repair the following Existing RFMD
Products outside the Licensed Field:
5
<PAGE> 7
RF 2310 HBT Gain Block, RFMD design
RF 2311 HBT Gain Block, RFMD design
RF 2312 HBT Gain Block, RFMD design - CATV broadband amp
RF 2313 HBT Gain Block
RF 2314 HBT Gain Block
RF 2315 HBT Gain Block
RF 2316 HBT TV Distr Amp (Balanced)
RF 2317 HBT TV Distr Amp (Unbalanced)(G=15dB).
2.4.1 The license granted in this Section 2.4 shall be
non-exclusive.
2.4.2 The license granted in this Section 2.4 shall be
perpetual, subject to the provisions of Article 8 relating to termination or
expiration of this Agreement.
2.4.3 The license granted in this Section 2.4 shall be
effective as of the date that the parties hereto mutually agree that Licensee
has an Operational Foundry for the manufacture of Licensed Products.
2.4.4 Licensee shall have the right to assign, in whole or
in part, or to grant sublicenses under the Existing TRW MBE Patent Rights and
MBE Technical Information for Existing RFMD Products granted in this Section
2.4 only in accordance with Article 13.
2.4.5 The license granted in this Section 2.4 to utilize
MBE Technical Information is a continuing license that extends automatically
without any further action on the part of Licensor or Licensee to (i) any
modification, update, change or other improvement to the MBE Technical
Information that is made by Licensor after the Effective Date and is delivered
to Licensee in accordance with Section 3.5; and (ii) any discovery, development
or other invention made by Licensor after the Effective Date that constitutes
new MBE Technical Information and is delivered to Licensee in accordance with
Section 3.5.
2.5 FUTURE TECHNOLOGIES: Except for the Future TRW GaAs HBT
Patent Rights, Future TRW MBE Patent Rights, or as specified in Sections 2.1.6,
2.2.7, 2.3.6 and 2.4.6, rights and licenses to future TRW technologies
applicable to the Licensed Field and/or Licensed Products are not granted to
Licensee by this Agreement. Commencing on the Effective Date and continuing
until ten (10) years from the date that the parties hereto mutually agree that
Licensee has an Operational Foundry for the manufacture of Licensed Products,
rights and licenses to other TRW future technologies applicable to the Licensed
Field and/or Licensed Products not granted to Licensee by this Agreement shall
be offered to Licensee by Licensor on the following terms and conditions:
2.5.1 Licensor shall deliver a notice to Licensee stating
its bona fide intention to grant rights and/or licensees to a third party for
technologies applicable to the Licensed Field and/or Licensed Products, and
identify the specific technology it desires to license (the "Offered
Technology") and the terms and conditions by which it proposes to license the
Offered Technology.
2.5.2 Within forty-five (45) days after the date of such
notice, Licensee shall inform Licensor whether or not it is willing to license
the Offered Technology upon the same terms and conditions which Licensor
proposes to license the Offered Technology to the third party. If Licensor has
not received Licensee's decision by the end of the forty-five (45) day period,
it will be deemed that Licensee has decided not to license the Offered
Technology.
2.5.3 If Licensee does not elect to license the Offered
Technology in accordance with Section 2.5.2, Licensor may license the Offered
Technology to any third party upon terms which in their entirety are no more
favorable to the prospective third party than those specified to Licensee,
provided that the license is consummated within ninety (90) days of the date of
the notice to Licensee. Licensor may, at its discretion, alter the final terms
of the license to the third party from those notified to Licensee such that,
though individual terms may be more
6
<PAGE> 8
favorable to the third party, the overall license terms and conditions are in
their entirety no more favorable to the third party than those notified. If
the final terms and conditions are, in their entirety, considered to be more
favorable to the third party than those notified to Licensee, then Licensor
must offer those terms to Licensee in accordance with Section 2.5.2, and
Licensee shall have forty-five (45) days to elect to license the Offered
Technology.
2.5.4 All obligations to grant licenses to future TRW
technologies under this Section 2.5 shall terminate ten (10) years from the
date that the parties hereto mutually agree that Licensee has an Operational
Foundry for the manufacture of Licensed Products.
2.6 EXCLUSION: Except as otherwise provided in this Agreement,
the license and rights granted hereunder shall not be interpreted as granting
or implying the grant of rights in any other invention or technical information
of either party. Licensor specifically reserves to itself the right to utilize
Existing TRW GaAs HBT Patent Rights, Future TRW GaAs HBT Patent Rights, Future
TRW MBE Patent Rights, Existing TRW MBE Patent Rights, HBT Technical
Information, and MBE Technical Information for any and all purposes other than
as set forth in this Article 2.
2.7 MARKINGS: To the extent practical, Licensee shall provide on
any Licensed Product or component parts thereof, or on any Existing RFMD
Product manufactured, used or sold utilizing any of the rights or licenses
granted under this Agreement, or on the packaging or data sheets related
thereto so long as the marking is in accordance with applicable marking
provisions of United States or foreign patent laws, a legible notice that such
Licensed Product or component part or Existing RFMD Product is manufactured
under a license granted by Licensor. Licensee shall submit to Licensor prior
to marking any Licensed Product or component part thereof or Existing RFMD
Product the full copy of such proposed marking for written approval by
Licensor, which approval will not be unreasonably withheld and will be deemed
given unless Licensor responds to the contrary within ten (10) business days of
such submission. No rights are granted hereunder by either party to the other
regarding their respective trade names or trademarks.
2.8 LICENSOR RESERVATIONS: Licensor reserves unto itself the
rights to utilize Existing TRW GaAs HBT Patent Rights, Future TRW GaAs HBT
Patent Rights, Existing TRW MBE Patent Rights, Future TRW MBE Patent Rights,
HBT Technical Information, and MBE Technical Information to manufacture, have
manufactured, use, test, sell, service, and repair Licensed Products in the
Licensed Field, but only in accordance with the following:
2.8.1 Licensor may provide Foundry services for any
customers but limited solely to the provision of the following services:
Design Rule Manual
Element Library (GDSII tape)
Model & Design Rule Technical Consultation
Design Rule Check & Circuit Layout Verification
Maskset Procurement and Storage
Three (3) inch MBE profile wafers
HBT or HEMT wafer processing with full backside metallization
Status Reports
Delivery of a minimum of 3 wafers per lot that pass PCM
specifications; and
2.8.2 Licensor is permitted production of Licensed Products
for use in the Licensed Field in order to fulfill any and all contractual
obligations Licensor has as of the Effective Date. A listing of such
contractual obligations is set forth in Schedule 2.8.2.
2.9 MAINTENANCE OF PATENTS: Licensor shall retain the right to
manage and control the prosecution and
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<PAGE> 9
maintenance of patent applications and patents included in the Patent Rights,
and shall have sole financial responsibility for patent acquisition or
maintenance of the Patent Rights to the extent it elects, in its sole
discretion, to pursue the same. From time to time at the reasonable request of
Licensee, Licensor shall furnish Licensee with a written report setting forth
in reasonable detail the identity and status of each patent and patent
application included in the Patent Rights. In the event Licensor determines
that it no longer deems it necessary or desirable to prosecute a patent
application or maintain a patent included in the Patent Rights in any country,
Licensor shall notify Licensee not less than thirty (30) days prior to the
abandonment of the patent application or the final due date for the payment of
the maintenance fee. In such event, Licensee may obtain an assignment of the
patent application or patent by notifying Licensor and providing it with
appropriate assignment documents in a form ready to be executed by it, and
thereafter Licensee shall own the same and shall have the right to (and the
sole financial responsibility for) management and control of the prosecution
and maintenance of such patent applications and patents. Any assignment of any
patent or patent application pursuant to this Section 2.9 shall include a
royalty-free, fully paid up non-exclusive license to Licensor under such patent
or application to design, develop, manufacture, have manufactured, use, test,
sell, market, service, and repair any products outside of Licensed Field.
2.10 ENFORCEMENT OF PATENT RIGHTS:
2.10.1 If either party hereto learns at any time of any
infringement or threatened infringement by any other person of any enforceable
Patent Rights owned by or licensed to the other party after the Effective Date,
that party shall give notice of that infringement or threatened infringement to
the other party. The parties shall then consult together as to the best course
of action to pursue in response to such potential infringement, but neither
party shall be obligated to institute legal action at its own expense. A good
faith failure by one party to provide such notice to the other party shall not
be deemed a breach of this Agreement and shall not give rise to a right of
action by other party.
2.10.2 In the event that the parties do not reach an
agreement as contemplated by Section 2.10.1 hereof as to the best course of
action to pursue with respect to a potential infringement (i) Licensor shall
have the right, but not the obligation, to institute legal action, through
counsel of its own choosing and at its sole expense, to restrain any
infringement or threatened infringement, or to recover damages therefor, of its
enforceable Patent Rights, and (ii) Licensee shall have the right, but not the
obligation, to institute legal action, through counsel of its own choosing and
at its sole expense, to restrain any infringement or threatened infringement,
or to recover damages therefor, of its enforceable Patent Rights in the
Licensed Field. The party that bears the expenses of pursuing legal action
against a third party infringer shall be entitled to any damages, lost profits
or other monies recovered by judgment, decree, settlement, arbitration or
otherwise, resulting from such legal action.
2.10.3 In the event that one party elects to institute legal
action against a third party infringer, the other party shall fully cooperate
in the prosecution of such action including joining as a party in suit when
necessary to acquire standing to institute legal action pursuant to this
Section 2.10; provided, however, that such other party shall be reimbursed for
all reasonable out-of-pocket expenses incurred in providing such cooperation
including its reasonable legal fees and expenses. The electing party shall
reimburse the other party for all such expenses within thirty (30) days after
its receipt of an invoice from the other party that describes such expenses in
reasonable detail, with supporting documentation as appropriate.
ARTICLE 3
TECHNICAL ASSISTANCE AND EQUIPMENT
3.1 TECHNICAL ASSISTANCE AND TRAINING: Licensor shall use
reasonable efforts to provide Licensee with such technical assistance, training
and instruction as may be necessary to enable Licensee or its permitted
sublicensee to design, construct, start-up, test and operate an Operational
Foundry, and to utilize the MBE process in such Operational Foundry, in
accordance with the implementation plan set forth in Schedule 3.1.
8
<PAGE> 10
3.1.1 Licensor shall assist Licensee in the design and
upfit of a Foundry (if Licensee elects to operate its own Foundry), including
the provision of such information within its possession as may reasonably be of
use to Licensee (as determined solely by Licensor) with respect to site
selection, building specifications, plant layout, equipment specifications and
sourcing, manufacturing process flows, chemical and physical parameters and
conditions, raw material and intermediate material requirements, waste
generation and treatment, consumable items and materialsand all other
engineering, scientific or technical assistance appropriate for the design and
construction of a Foundry.
3.1.2 Licensor shall assist Licensee in the start-up phase
of the Foundry, including technical assistance, instruction and training of
Licensee personnel to operate, adjust, modify, control and optimize the
manufacturing process to be undertaken at the foundry to the point where it can
become an Operational Foundry.
3.1.3 The instruction and technical assistance to be
rendered by Licensor shall be at Licensee's Foundry location unless otherwise
agreed by the parties. All travel and living expenses incurred by Licensor
personnel in traveling to and from Licensee's Foundry and while on site shall
be borne by Licensor.
3.1.4 Notwithstanding the provisions set forth above in
this Section 3.1, Licensor shall be under no obligation to provide technical
assistance to Licensee once the expense limit set forth in Schedule 3.1 has
been reached. In no event will Licensor be obligated to spend more money than
is set forth in Schedule 3.1.
3.1.5 If Licensee requests Licensor to perform, prior to
December 31, 1998, additional technical assistance beyond that specified in
Schedule 3.1, then Licensor shall provide such additional technical assistance
at Licensor's then existing labor rates, including burden and reasonable
margin. If such additional technical assistance is requested, then Licensee
shall also reimburse Licensor for all expenses incurred by Licensor and its
employees in connection with the performance of such services (including but
not limited to travel, lodging and meal expenses). Licensee shall be
responsible for all expenses incurred by Licensee's representatives in
connection with the performance of all technical assistance (including but not
limited to travel, lodging and meal expenses). Additional Technical Assistance
beyond that specified in Schedule 3.1 to be performed after December 31, 1998
will be subject to the mutual agreement of the parties.
3.2 TECHNICAL INFORMATION: Licensor shall not be obligated to
reduce to a tangible medium of expression any Technical Information; provided,
that nothing in this Section shall be construed to diminish the scope of
Licensee's licenses or the obligation of Licensor to deliver Technical
Information to Licensee.
3.3 DELIVERY OF TECHNICAL INFORMATION: Licensor shall deliver to
Licensee HBT Technical Information and MBE Technical Information related to
Licensed Products in the same form as is used in Licensor's own business. Both
source code and object code for software included in the HBT Technical
Information or the MBE Technical Information shall be delivered to Licensee.
Licensor shall deliver HBT Technical Information as soon as practical and in
any event within thirty (30) days of the Effective Date. Licensor shall
deliver MBE Technical Information as soon as practical and in any event within
thirty (30) days of the date of Licensee's written request for such MBE
Technical Information, which request may be made no earlier than the date upon
which the MBE License becomes effective as set forth in Section 2.2.4.
Licensor shall deliver to Licensee one legible copy of each issued patent and
all patent applications included in the Patent Rights as soon as practical
after the Effective Date. Licensor shall also promptly furnish Licensee a copy
of all patent applications filed and patents issued after the Effective Date
that are included in the Patent Rights.
3.4 USE AND NONDISCLOSURE: Licensee shall not use or permit the
use of Technical Information for any purpose not authorized by this Agreement.
Licensee shall hold in confidence, and shall not disclose or communicate or
permit to be disclosed or communicated to any third person, any Technical
Information which is furnished to Licensee hereunder except in accordance with
Sections 3.6 and 3.7. Licensee shall take or cause to be taken all necessary
precautions to the same extent that it would with its own technical
information, but in no event less than a reasonable standard of care, to
prevent the disclosure or communication of Technical Information to third
persons.
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<PAGE> 11
3.5 UPDATES OF TECHNICAL INFORMATION: Except as specified in this
Section 3.5, Licensor shall be under no obligation to deliver to Licensee any
modifications or additions to Technical Information.
3.5.1 Licensor shall provide to Licensee updated HBT
Technical Information related to improvements to or new discoveries of HBT
Technical Information, but only as such updated HBT TechnicalInformation
relates to GaAs HBTs having an emitter width between Two (2) and Three (3)
microns inclusive and only until three (3) years from the date that Licensee
has an Operational Foundry or this Agreement is terminated in accordance with
Article 8, whichever occurs first.
3.5.2 Licensor shall provide to Licensee updated HBT
Technical Information related to improvements to or new discoveries of HBT
Technical Information, but only as such updated HBT Technical Information
relates to GaAs HBTs having an emitter width of One (1) micron and only for a
period of eight (8) years after the date Licensee has an Operational Foundry or
this Agreement is terminated in accordance with Article 8, whichever occurs
first.
3.5.3 Licensor shall provide to Licensee updated MBE
Technical Information related to improvements to or new discoveries of MBE
Technical Information as it relates to the processing of GaAs HBTs having an
emitter width between One (1) and Three (3) microns, only if the licenses
granted in Sections 2.2 and 2.4 have become effective, and only for a period of
eight (8) years after the date that the licenses granted in Sections 2.2 and
2.4 become effective or this Agreement is terminated in accordance with Article
8, whichever occurs first.
3.5.4 The updated Technical Information specified in this
Section 3.5 shall be delivered to Licensee in the same form as is used in
Licensor's own business (including both source code and object code in the case
of software), and will be delivered as soon as practical after the same becomes
available.
3.5.5 Licensor's obligations to provide updated Technical
Information according to this Section 3.5 is subject to the limitation of
expense set forth in Schedule 3.1. After such limitation of expense is met,
Licensor's provision of updated Technical Information shall be at Licensee's
expense.
3.6 HBT EXCEPTIONS: Licensee may disclose HBT Technical
Information to its employees, sublicensees, consultants, and subcontractors to
the extent that each such disclosure is reasonably necessary for purposes of
designing, developing, constructing, manufacturing, marketing, selling,
installing, repairing and/or servicing Licensed Products or procuring goods and
services required in connection therewith; provided that (i) Licensee clearly
marks any document or other material containing any HBT Technical Information
so disclosed to indicate that such documents or materials contain confidential
and proprietary information of Licensor; (ii) Licensee requires each person to
whom such documents or materials are disclosed to sign a written agreement
limiting use thereof to the purpose stated in such agreement, prohibiting the
reproduction thereof and the disclosure thereof to any such person and
requiring the prompt return thereof when no longer needed or such agreement is
terminated; and (iii) providing that any reproduction, note or summary of such
documents or materials immediately upon the making thereof shall become the
property of Licensor and shall be delivered to Licensor with the return of
Technical Information or otherwise destroyed.
3.7 MBE EXCEPTIONS: Licensee may disclose MBE Technical
Information only to its employees and any permitted sublicensee or assignee
under Article 13 to the extent that each such disclosure is reasonably
necessary for purposes of designing, developing, constructing, manufacturing,
marketing, selling, installing, repairing and/or servicing Licensed Products or
procuring goods and services required in connection therewith; provided that
(i) Licensee clearly marks any document or other material containing any MBE
Technical Information so disclosed to indicate that such documents or materials
contain confidential and proprietary information of Licensor; (ii) Licensee
requires each employee to whom such documents or materials are disclosed to
sign a written agreement limiting use thereof to the purpose stated in such
agreement, prohibiting the reproduction thereof and the disclosure thereof to
any other person; and (iii) providing that any reproduction, note or summary of
such documents or materials immediately upon the making thereof shall become
the property of Licensor and shall be delivered to Licensor with
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<PAGE> 12
the return of Technical Information.
3.8 RESTRICTIONS: The rights granted Licensee herein cover only
Licensed Products for use as licensed hereunder, and Licensee agrees that it
shall not, during the terms of this Agreement, manufacture, sell, lease or
otherwise dispose of any Licensed Products or parts thereof embodying any of
the Patent Rights except insofar as the application thereof is expressly
provided for under this Agreement.
ARTICLE 4
CONSIDERATION
In consideration of all rights, licenses, technical assistance and
Technical Information and benefits conferred to Licensee hereunder, Licensee
has issued to Licensor Two Million Six Hundred Eighty-Three Thousand, Nine
Hundred and Thirty (2,683,930) shares of Restricted Stock.
ARTICLE 5
MANUFACTURE OF LICENSED PRODUCTS
5.1 SUPPLY OF LICENSED PRODUCTS: Once Licensee has provided an
Operational Foundry, Licensee agrees to use commercially reasonable efforts to
place itself in, and to maintain, a position to manufacture, test, sell,
service, repair, and maintain Licensed Products for application in the Licensed
Field in the manner necessary to supply effectively the demand therefor.
5.2 PERFORMANCE GOALS: If the following gross revenue goals are
not reached by Licensee by the date specified, Licensor may, at its sole option
and upon thirty (30) days prior written notice, convert any or all of the
licenses granted in Article 2 to non-exclusive licenses. For purposes of this
Article, the date upon which Licensee has an Operational Foundry shall be
called the "Target Date."
<TABLE>
<CAPTION>
DATE GROSS REVENUES WITHIN
---- ---------------------
PRECEDING 12 MONTH PERIOD
-------------------------
<S> <C>
Target Date Plus One Year $30,000,000
Target Date Plus Two Years $65,000,000
Target Date Plus Three Years $125,000,000
</TABLE>
Licensee's gross revenues shall be calculated in accordance with generally
accepted accounting principles.
ARTICLE 6
IMPROVEMENTS
Licensee agrees that any modifications or improvements in the Licensed
Products, Patent Rights or the Technical Information made by Licensee,
including any inventions, shall be promptly made known to Licensor in the form
of drawings, written descriptions, or other data, and Licensor shall have a
royalty free, non-exclusive right to use such modifications or improvements,
including any inventions outside the Licensed Field or in accordance with
Section 2.8. Licensee further agrees to inform Licensor from time to time in
writing of any of Licensee's patents and patent applications relating to such
modifications, improvements or inventions. If, in countries selected by
Licensor, Licensee decides it shall not file applications for, or maintain
11
<PAGE> 13
patents upon, Licensee's modifications, improvements or inventions, then
Licensor shall have the right to do so at its expense and such applications and
patents shall be and become its property, provided Licensee shall continue to
have the right to make use thereof on an exclusive basis in the Licensed Field.
Licensee shall use its best efforts to have executed such application papers
and assignments as Licensor may request in connection with such patents. The
provisions of this Article 6 shall survive termination or expiration of this
Agreement insofar as the rights of the parties to use such improvements,
modifications, inventions and patents are concerned.
ARTICLE 7
REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION
7.1 REPRESENTATIONS AND WARRANTIES OF LICENSOR: Except as
provided for or otherwise described in this Agreement, Licensor represents and
warrants to Licensee as follows:
7.1.1 As of the Effective Date, Licensor is the owner of
all Patent Rights and Technical Information licensed in this Agreement in
existence as of the Effective Date.
7.1.2 As of the Effective Date, Licensor has all requisite
power and authority to enter into and execute this Agreement, to grant the
licenses provided herein and to perform its obligations hereunder.
7.1.3 This Agreement constitutes a legal, valid and binding
obligation of Licensor, enforceable against Licensor in accordance with its
terms.
7.1.4 Licensor has not entered into any agreement with
third parties that would conflict with the terms and conditions herein.
Neither the execution and delivery of this Agreement nor the performance by
Licensor of any of its obligations hereunder will conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default
under, the Articles of Incorporation or By-Laws of Licensor, as amended.
7.1.5 No royalties or fees have been paid by Licensor to
other persons by reason of its ownership of the Patent Rights or Technical
Information.
7.1.6 As of the Effective Date there is no pending or, to
the actual knowledge of Licensor, threatened claim, litigation or rendered
decision, judgment or holding against Licensor concerning: (i) any claims of
ownership by Licensor to any of the Patent Rights or Technical Information;
(ii) the validity, registrability or enforceability of any intellectual
property rights of Licensor associated with any of the Patent Rights or
Technical Information; (iii) the license of any Patent Rights or Technical
Information to Licensee; or (iv) that the Commercial manufacture, use or sale
of any Licensed Product violates the intellectual property rights of any other
person.
7.1.7 The documentation relating to the Technical Information
to be transferred and disclosed by Licensor to Licensee pursuant to this
Agreement will constitute actual Technical Information used by Licensee prior
to the Effective Date.
7.2 LICENSOR'S RIGHTS: Licensor does not make any representation
or warranty as to the validity of the Patent Rights or that the manufacture,
use or sale of Licensed Products shall not infringe the intellectual property
rights of third parties.
7.3 REPRESENTATIONS AND WARRANTIES OF LICENSEE: Except as
provided for or otherwise described in this Agreement, Licensee represents and
warrants to Licensor as follows:
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<PAGE> 14
7.3.1 Licensee has all requisite power and authority to
enter into and execute this Agreement and to perform its obligations hereunder.
7.3.2 This Agreement constitutes a legal, valid and binding
obligation of Licensee, enforceable against Licensee in accordance with its
terms.
7.3.3 Licensee has not entered into any agreements with
third parties that would conflict with the terms and conditions herein.
Neither the execution and delivery of this Agreement nor the performance by
Licensee of its obligations hereunder will conflict with or result in a breach
of the terms, conditions or provisions of, or constitute a default, under the
Articles of Incorporation or By-Laws of Licensee, as amended.
7.4 VISITS: With respect to all visits of personnel of one party to
the facilities of the other party, the visiting party shall defend and
indemnify the other party from all liability, claim or loss for injury to or
death of any visiting party's employees or agents which such persons are
present at the plant of the other party, and also for damage to the visiting
party's property or to the property of any employee or agent of the visiting
party which may occur during the presence of any such person at the plant of
the other party, regardless of how much damage occurs.
7.5 LIMITATION OF LIABILITY: Licensor does not assume any
responsibility, nor does Licensor give any warranties to Licensee, of any
nature whatsoever, with respect to the ability of Licensee to construct
successfully Licensed Products using the Technical Information or Patent
Rights. LICENSOR'S WARRANTY OBLIGATIONS AND LICENSEE'S REMEDIES THEREUNDER ARE
SOLELY AND EXCLUSIVELY AS STATED HEREIN.
7.6 EXCLUSION: THE WARRANTIES PROVIDED IN THIS ARTICLE 7 ARE IN
LIEU OF ALL OTHER WARRANTIES, WHETHER STATUTORY, EXPRESS OR IMPLIED, AT LAW OR
IN EQUITY, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE EXPRESSLY EXCLUDED.
LICENSOR'S WARRANTY OBLIGATIONS AND LICENSEE'S REMEDIES ARE SOLELY AND
EXCLUSIVELY AS STATED IN THIS ARTICLE 7. IN NO CASE SHALL LICENSOR OR LICENSEE
BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES,
WHETHER ARISING IN CONTRACT, WARRANTY, TORT, INCLUDING NEGLIGENCE, STRICT
LIABILITY, OR OTHER LEGAL OR EQUITABLE THEORY. LICENSOR DOES NOT MAKE ANY
WARRANTY AS TO THE VALIDITY OR ENFORCEABILITY OF THE PATENT RIGHTS.
ARTICLE 8
TERM AND TERMINATION
8.1 TERM: This Agreement shall commence on the Effective Date,
and shall remain in effect until this Agreement is terminated in accordance
with Sections 8.2 or 11.2.
8.2 TERMINATION:
8.2.1 Licensee agrees to use its reasonable best efforts to
obtain written commitments from one or more banks, institutional investors or
financing sources for debt, lease or equity funds in an aggregate amount which,
when added to the cash on hand held by Licensee, will be sufficient to enable
Licensee to purchase and reconfigure and upfit, or design, construct, install
and start-up, a Foundry to be used to manufacture Licensed Products (the
"Financing"). In lieu of securing the Financing and subject to Article 13
hereof, Licensee may elect to sublicense a third party in order to enable such
third party to manufacture Licensed Products for Licensee. If Licensee is
unable to secure the Financing or enter into a definitive sublicense agreement
with a third party for the manufacture of Licensed Products, by March 1, 1997,
then this
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<PAGE> 15
Agreement, and the licenses and rights granted herein, shall terminate and be
of no force or effect unless both parties agree to extend such date. If the
Agreement is terminated in accordance with this Section 8.2.1, then:
8.2.1.1 Licensee shall return to Licensor all
Technical Information which has been delivered to Licensee in accordance with
Article 3; and
8.2.1.2 The licenses granted to Licensee in
accordance with Article 2 shall be automatically terminated as of such date and
shall be of no force or effect.
8.2.2 In the event that Licensee has been unable to construct
or sublicense an Operational Foundry by December 31, 1998 despite all
reasonable efforts of the parties, then this Agreement, and the licenses and
rights granted herein, shall terminate unless both parties agree to extend such
date. If the Agreement is terminated in accordance with this Section 8.2.2,
then:
8.2.2.1 Licensee shall return to Licensor all
Technical Information which has been delivered to Licensee in accordance with
Article 3; and
8.2.2.2 The licenses granted to Licensee in
accordance with Article 2 shall be automatically terminated as of such date and
shall be of no force and effect.
ARTICLE 9
EXCUSABLE DELAY
9.1 NOTICE: If either Licensor or Licensee is unable to perform
any of their respective obligations as herein provided then the party whose
performance is prevented or delayed shall give the other party notice thereof
as soon as reasonably possible under the circumstances and information
regarding the cause or reason therefor.
9.2 EXCUSABLE DELAY: If either Licensor or Licensee is unable to
perform any of their respective obligations as herein provided due to any
circumstances beyond its reasonable control, but not due to its negligence
(including but not limited to strikes, war, an act of God, a public enemy,
interference by any civil or military authority, inability to secure
governmental approval, materials or services or similar cause) and gives notice
to the other as provided in Section 9.1, then the time of performance of any
such obligation shall be extended for a period equal to the number of days
during which performance thereof was delayed due to such circumstances, and
during such period such party shall not be deemed in default of this Agreement.
ARTICLE 10
NOTICES AND LEGAL ADDRESSES
Except as otherwise expressly provided, all notices under this
Agreement shall be made by fax, confirmed by letter, to the fax numbers and
addresses below:
Licensee: RF Micro Devices, Inc.
7341-D West Friendly Avenue
Greensboro, North Carolina 27410
Telecopy: 910-855-3101
Attention: President
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<PAGE> 16
Licensor: TRW Inc.
Electronics Systems & Technology Division
One Space Park
Redondo Beach, California 90278
Telecopy: 310.
Attention: Vice President and General Manager
ARTICLE 11
DEFAULT
11.1 DEFAULT: The occurrence of one or more of the following shall
constitute a default hereunder:
11.1.1 In the event a party fails to pay any sum due and
payable hereunder within ten (10) days after same has become due and payable
and such failure continues for fifteen (15) days after written notice from the
payee;
11.1.2 In the event Licensor is unable to fulfill its
obligations under this Agreement as a result of: (a) liens, claims, charges or
encumbrances in existence as of the Effective Date or arising as a result of
Licensor's execution or performance of this Agreement; (b) Licensor's failure
to obtain all consents, approvals or authorizations of other persons necessary
as of the Effective Date in order to grant the licenses provided for herein;
(c) Licensor's failure to make all filings, notifications and registrations
with all governmental authorities, if any, necessary as of the Effective Date
in order to grant the licenses provided for herein; or (d) any federal, state
or local judgment, writ, decree, order, statute, rule or regulation applicable
as of the Effective Date to Licensor, the Patent Rights or Technical
Information, and such inability continues for a period of thirty (30) days
after written notice from Licensee specifying such failure, provided that if
the failure be such that it cannot with due diligence be cured within such
thirty (30) day period, then Licensor shall have such longer period, not to
exceed thirty (30) additional days, as shall be reasonably necessary to cure
such failure so long as Licensor is acting in good faith and with due
diligence;
11.1.3 In the event a party fails to perform any other
material covenant or obligation required to be performed by such party
hereunder and such failure continues for a period of thirty (30) days after
written notice from the nondefaulting party specifying such failure, provided
that if the failure be such that it cannot be cured solely by the payment of
money and cannot with due diligence be cured within such thirty (30) day
period, then the notified party shall have such longer period, not to exceed
thirty (30) additional days, as shall be reasonably necessary to cure such
failure so long as such party is acting in good faith and with due diligence;
11.1.4 In the event a party (i) shall commence a voluntary
case or other proceeding seeking dissolution, liquidation or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
receiver, trustee, liquidator, custodian or other similar official, or (ii)
shall consent to any such relief or to the appointment of, or taking possession
by, such official in any voluntary case or other proceeding commenced against
it; or
11.1.5 In the event any involuntary case or other proceeding
shall be commenced against a party seeking dissolution, liquidation or other
relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
receiver, trustee, liquidator, custodian or other similar official of it or any
substantial part of its property, if such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of sixty (60) days.
11.2 REMEDY: If any party is in default as specified in Section
11.1, the party not in default may
15
<PAGE> 17
terminate this Agreement by giving the other party thirty (30) days prior
written notice of termination and pursue any other remedy hereunder or
otherwise available to it at law or in equity.
11.3 COMPENSATION: Each party hereby expressly agrees and
acknowledges that termination of this Agreement by either party for default
shall not entitle the other party to any termination compensation or to any
payment in respect of any goodwill established during the term of this
Agreement or render the party liable for damages on account of any loss of
prospective profits or on account of any expenditure, investment or obligation
incurred or made by the parties, or otherwise.
11.4 PERFORMANCE AFTER DEFAULT TERMINATION: If this Agreement is
terminated for default, whether due to the default of Licensor or otherwise,
Licensee shall discontinue the use of the Patent Rights, and Technical
Information and shall return to Licensor all Technical Information furnished to
or otherwise made available to Licensee hereunder.
ARTICLE 12
SURVIVAL OF OBLIGATIONS
Other provisions hereof notwithstanding, the obligations of Licensor
and Licensee under Articles 6 and 7 and Sections 3.4 and 3.8 shall survive the
termination and expiration of this Agreement.
ARTICLE 13
SUBLICENSES, ASSIGNMENTS AND TRANSFERS
13.1 Neither party may sublicense or Transfer any of its rights or
obligations under this Agreement in whole or in part or delegate any of its
obligations or duties hereunder to any person except upon compliance with this
Article 13.
13.2 Prior to the date Licensee constructs or sublicenses an
Operational Foundry, Licensor may Transfer its rights hereunder only with the
prior written consent of Licensee, which consent will not be unreasonably
withheld. From and after the date Licensee certifies that it has an
Operational Foundry, Licensor may Transfer its rights hereunder to any person
upon prior written notice to Licensee.
13.3 Licensee may sublicense its license rights under Section 2.2 to
any person with the prior written consent of Licensor, which consent may be
given, withheld or conditioned at the sole discretion of Licensor.
13.4 Licensee may Transfer its license rights under Section 2.2 only
as follows:
13.4.1 If the proposed Transfer would occur prior to an IPO,
Licensee may Transfer such rights only with the prior written consent of
Licensor, which consent may be given, withheld or conditioned at the sole
discretion of Licensor;
13.4.2 If the proposed Transfer is after the closing of an
IPO and not in conjunction with a Stock Sale, Merger or Asset Sale, Licensee
may Transfer such rights only with the prior written consent of Licensor, which
consent may be given, withheld or conditioned at the sole discretion of
Licensor;
13.4.3 If the proposed Transfer is after the closing of an
IPO and in conjunction with a Stock Sale, Merger or Asset Sale, Licensee may
Transfer such rights by delivering to Licensor a written undertaking executed
by the transferee under which such transferee acknowledges that the rights it
is acquiring from Licensee are limited to the Licensed Field in accordance with
this Agreement.
16
<PAGE> 18
13.5 Prior to the closing of an IPO, Licensee may sublicense or
Transfer its license rights under Section 2.1, and may Transfer all its other
rights under this Agreement except its license rights under Section 2.2, to any
person with the prior written consent of Licensor, which consent shall not be
unreasonably withheld.
13.6 After the closing of an IPO, Licensee may sublicense or Transfer
its license rights under Section 2.1, and may Transfer all its rights under
this Agreement except its license rights under Section 2.2, to any person by
delivering to Licensor a written undertaking executed by the transferee under
which such transferee acknowledges that the rights it is acquiring from
Licensee are limited to the Licensed Field in accordance with this Agreement.
13.7 Any purported sublicense or Transfer in contravention of this
Agreement shall be null and void and of no force or effect.
ARTICLE 14
MISCELLANEOUS
14.1 HEADINGS: The headings and titles to the Articles and
Sections of this Agreement are inserted for convenience only and shall not be
deemed a part hereof or affect the construction or interpretation of any
provision hereof.
14.2 REMEDIES: Unless otherwise expressly provided herein, the
rights and remedies hereunder are in addition to, and not in limitation of,
other rights and remedies under the Agreement, and exercise of one right or
remedy shall not be deemed a waiver of any other right or remedy.
14.3 MODIFICATION - WAIVER: No cancellation, modification,
amendment, deletion, addition or other change in this Agreement or any
provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless specifically set forth in a writing signed by
the party to be bound thereby and specifically referencing this Agreement. No
waiver of any right or remedy in respect of any occurrence or event on one
occasion shall be deemed a waiver of such right or remedy in respect of such
occurrence or event on any other occasion.
14.4 ENTIRE AGREEMENT: This Agreement supersedes all other
agreements, oral or written, heretofore made with respect to the subject hereof
and the transactions contemplated hereby and, with the Schedules hereto and, in
conjunction with the Securities Purchase Agreement, Restricted Stock Agreement,
Subordinated Convertible Promissory Note, Warrant, Deficit Warrant, and Supply
Agreements of even date herewith, contains the entire agreement of the parties.
14.5 CONTROLLING LAW: All questions concerning the validity and
operation of this Agreement and the performance of the obligations imposed upon
the parties hereunder shall be governed by and construed in accordance with the
laws of the State of California, United States of America applicable to
contracts entered into and wholly to be performed in the State of California.
14.6 SUCCESSORS AND ASSIGNS: The provisions of this Agreement
shall be binding upon and inure to the benefit of Licensor and Licensee and
their respective successors and assigns, but this provision shall not be deemed
to expand or otherwise affect the limitations on assignment and sublicensing
set forth in Article 13 .
14.7 COUNTERPARTS: This Agreement has been executed in several
counterparts, each of which shall be deemed to be an original copy hereof.
14.8 SCHEDULES: The Schedules hereto shall form an integral part
of this Agreement and shall
17
<PAGE> 19
have the same effectiveness as the Agreement itself. In the event of any
conflict between the terms of the Agreement and any Schedule, the Agreement
shall be controlling.
14.9 GOVERNMENT REGULATIONS: This Agreement is subject to all the
laws and regulations, and other administrative acts, now or hereinafter in
effect, of the United States Government and its departments and agencies.
Technical Information, any Licensed Product, component, or spare part, are not
authorized to be directly or indirectly sold, leased, released, assigned,
transferred, conveyed, or in any manner disposed of in or to any country where
such sale, lease, assignment, transferal, conveyance or use, is regulated by
the United States Government without first obtaining any necessary approvals of
the United States Government.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first set forth above.
TRW Inc.
Electronics Systems & Technology Division
By: ___________________________________
RF Micro Devices, Inc.
By: ___________________________________
18
<PAGE> 20
SCHEDULE 1.6
EXISTING RFMD PRODUCTS
RFMD HBT PRODUCT LIST
Part No. Description
RF2132A JDC-1500 PA
RF2133 DAMPS-2 PA
RF2136 GSM PA in bat wing package
RF2140 PCS PA (5 cell)
RF2141 DCS1800/1900 PA in PSOP2-15
RF2142 DCS1800/1900 PA in PSOP2-8
RF9101 DECT PA (3.3V)
RF9102 AMPS PA (3.3V)
RF9103 DAMPS/JDC950 PA (3.3V)
RF9104 JDC1500 PA (3.3V)
RF9105 GSM PA (3.3V) ver 1
RF9107 GSM PA (3.3V) ver 2
RF9108 GSM PA (3.3V) ver 3
RF9109 Gain-controlled PDC950 PA (3.3V)
RF9110 Gain-controlled PDC1500 PA (3.3V)
RF9111 TDMA1900 PA (3.3V)
RF9112 DCS1900 PA (3.3V)
RF9905 Cellular DCMA LNA/Mixer
RF9907 Cellular DCMA Rx AGC
RF9908 Cellular CDMA Upconverter
RF9909 Cellular DCMA Tx AGC
RF9916 LNA/Mixer (Pakistan Project)
RF9917 Upconverter
RF9918 Downconverter
RF9919 Power Oscillater, Ver. 1
RF9920 Power Oscillater, Ver. 2 (Song's version)
RF9921 AMPS PA (PA4 and PA5)
RF9922 DAMPS PA
RF9923 GSM PA in twin bat lead package or PSOP2
RF9924 PCS PA (5 cell)
RF9936 PCS LNA/Mixer (Dual LNAs, RF Gain Control)
RF9938 PCS Upconverter
RF9946 Dual-band LNA/Mixer
RF9948 Dual-band Upconverter
RF9956 Cellular CDMA LNA/Mixer
RF9957 Cellular CDMA RX AGC/Domed (IF Amp)
RF9958 Cellular CDMA Mod/Upconverter (Transmitter)
RF9966 Cellular Dual Mode LNA/Mixer w/o GCA
RF9976 PCS LNA/Mixer (Dual LNAs, No Gain Control)
RF9986 PCS LNA/Mixer (Single LNA, No Gain Control)
RF2103 Medium Power Linear PA 800-1000 MHz
RF2105 High Power Linear PA 800-930 MHz
19
<PAGE> 21
RF2108 CDMA PA standard product
RF2113 Medium Power Broadband PA in PSOP2-8 50-1000 MHz
RF2114 Medium Power Broadband PA in fused leadframe 50-1000 MHZ
RF2115 High Power PA 800-930 MHZ
RF2123 GSM PA in standard BatWing package
RF2124 DCS1800 PA
RF2125 High Power PA 1800-2200 MHZ (PSOP2-8)
RF2126 High Power PA 2400-2500 MHZ (PSOP2-8)
RF2127 Medium Power PA 1800-2000 MHz (SOIC-8 fused lead-frame)
RF2128P Medium Power PA 2.4-2.5 GHz (PSOP2-8)
RF2129 3V, 2.4-2.5 GHz , 200 mW PA
RF2131 High Efficiency AMPS PA
RF2132 5V DAMPS or 4.5V CDMA PA
RF2143 DCS1800/1900 PA in PSOP2-8
RF2144 4.5V, GSM PA in Quad Bat-Wing (old 9107)
RF2145 4.5V, DCS 1800/1900 in QBW (old 9101)
RF2146 4.5V, PCS TDMA/CDMA PA
RF2155 3V, switched gain PA, 900 MHz, 27dBm
RF2306 HBT Gain Block, Darlington Amplifier
RF2307 HBT Gain Block, Darlington Amplifier
RF2308 HBT Gain Block, Darlington Amplifier
RF2310 HBT Gain Block, RFMD design
RF2311 HBT Gain Block, RFMD design
RF2312 HBT Gain Block, RFMD design - CATV broadband amp
RF2313 HBT Gain Block
RF2314 HBT Gain Block
RF2315 HBT Gain Block
RF2316 HBT TV Distr Amp (Balanced)
RF2317 HBT TV Distr Amp (unBalanced) (G=15dB)
RF2411 High Dynamic Range LNA/Mixer
RF2422 Direct Quadrature Modulator 900-2500 MHz
20
<PAGE> 22
REDACTED
SCHEDULE 1.7
EXISTING TRW GAAS HBT PATENT RIGHTS
<TABLE>
<CAPTION>
DOCKET NUMBER SERIAL NUMBER FILING DATE
COUNTRY PATENT NUMBER ISSUE DATE
TITLE
<S> <C> <C>
12-0527 07/783303 10/28/91
US 5352911 10/4/94
Dual Base HBT
12-0569 07/987329 8/27/92
US 5328856 7/12/94
Method for Producing Bipolar Transistors Having
Polysilicon Contacted Terminals
12-0644 08/611117 3/5/96
US
Selective Subcollector Heterojunction Bipolar
Transistors
12-0715 *****
*****
12-0716 *****
*****
12-0717 *****
*****
12-0718 *****
*****
12-0719 *****
*****
</TABLE>
21
<PAGE> 23
SCHEDULE 1.8
EXISTING TRW MBE PATENT RIGHTS
<TABLE>
<CAPTION>
DOCKET NUMBER SERIAL NUMBER FILING DATE
COUNTRY PATENT NUMBER ISSUE DATE
TITLE
<S> <C> <C>
774499 9/10/85
12-0351
US
Heterojunction Transistors with Wide Band-GAP Stop
Etch Layer
12-0543 752401 8/30/91
US 5162243 11/10/92
Method of Producing High Reliability Heterojunction
Bipolar Transistors
92305531.3 6/17/92
12-0543
EPO
Method of Producing High Reliability Heterojunction
Bipolar Transistors
4-190822 7/17/92
12-0543
JAPAN
Method of Producing High Reliability Heterojunction
Bipolar Transistors
07/876199 4/30/92
12-0553 5448087 9/5/95
US
Heterojunction Bipolar Transistor with Graded Base
Doping (as amended)
</TABLE>
22
<PAGE> 24
REDACTED
SCHEDULE 1.13
HBT TECHNICAL INFORMATION
<TABLE>
<CAPTION>
DOCUMENT NO. REVISION TITLE
<S> <C> <C>
C271736 D *****
C600008 A *****
C600009 B *****
C600012 A *****
C600015 A *****
C600017 C *****
C600060 A *****
C600061 A *****
C600062 A *****
C600068 A *****
C600504 B *****
C601655 C *****
C601657 B *****
C602190 B *****
C602191 C *****
C602192 A *****
C602195 B *****
C602445 B *****
C602447 B *****
C602454 A *****
C602455 A *****
</TABLE>
23
<PAGE> 25
REDACTED
<TABLE>
<S> <C> <C>
C602456 New *****
C602457 B *****
C602458 C *****
C602461 B *****
C602476 B *****
C602477 E *****
C714462 A *****
C714463 New *****
C714464 New *****
C714465 B *****
C714468 New *****
C714467 B *****
C714468 New *****
C714469 B *****
C714471 New *****
C788576 A *****
C788578 A *****
C788577 B *****
C788578 A *****
C788582 A *****
C788584 A *****
C788585 B *****
C788592 B *****
C788593 A *****
C788594 New *****
C788595 B *****
</TABLE>
24
<PAGE> 26
REDACTED
<TABLE>
<S> <C> <C>
C788596 A *****
C788597 B *****
C788598 A *****
C788599 A *****
C788609 A *****
C788614 A *****
C788617 New *****
C788620 A *****
C788624 A *****
C788626 A *****
C788629 A *****
C788630 B *****
C788646 A *****
C795936 A *****
C795938 A *****
C795942 B *****
C795948 New *****
C795950 New *****
C795953 New *****
C795954 New *****
C795957 New *****
C795960 New *****
C795961 New *****
C795962 B *****
C795969 D *****
C795970 A *****
</TABLE>
25
<PAGE> 27
REDACTED
<TABLE>
<S> <C> <C>
C797406 New *****
C797408 C *****
C797409 B *****
C797410 B *****
C797416 New *****
C797417 New *****
C797418 New (A2) *****
C797429 A *****
C797430 A *****
C798640 New *****
C801500 New *****
C801501 A *****
C801502 New *****
C801503 New *****
C801504 New *****
C801506 New *****
C801507 New *****
C805451 B *****
C807500 B *****
C810052 A *****
C810264 New *****
C810267 New *****
C810268 New *****
C810270 B *****
C810271 New *****
C818613 A *****
C818614 A *****
</TABLE>
26
<PAGE> 28
REDACTED
<TABLE>
<S> <C>
C818615 New *****
C818616 New *****
C818617 New *****
C818618 A *****
C818619 New *****
C818620 New *****
C818621 A *****
C818988 A *****
C818995 A *****
C824002 New *****
C827215 New *****
C827216 New *****
C827217 New *****
C827219 New *****
C827220 New *****
C827224 New *****
C834430 New *****
C834433 New *****
C834435 New *****
C834436 New *****
C834439 New *****
C836380 New *****
C843684 New *****
C843685 New *****
C843686 New *****
D00042 New *****
</TABLE>
27
<PAGE> 29
REDACTED
<TABLE>
<S> <C> <C>
D00044 A *****
D00046 New *****
D01786 New *****
D06822 E *****
D06827 C *****
D09427 A *****
D09503 A *****
D05904 B *****
D12146 E *****
D12147 New *****
D15088 B *****
D15092 A *****
D19714 New *****
D19715 A (B1) *****
D19716 A (B1) *****
D19718 A *****
D19985 B *****
D20898 New *****
D20903 New *****
D22365 *****
MF1-195 New *****
MF1-281 New *****
MF1-3714 A *****
MF1-3966 A *****
MF1-4042 New *****
MF1-4060 New *****
</TABLE>
28
<PAGE> 30
REDACTED
<TABLE>
<S> <C> <C>
MF1-4061 New *****
MF1-4063 A *****
MF1-4235 D *****
MF1-4236 K (L4) *****
MF1-4238 B (C1) *****
MF1-4239 C (D5) *****
MF1-4240 C (D5) *****
MF1-4241 E/F1 *****
MF1-4242 C *****
MF1-4243 A/B1 *****
MF1-4246 D *****
MF1-4248 New *****
MF1-4249 E *****
MF1-4250 B *****
MF1-4254 C *****
MF1-4255 C *****
MF1-4256 D/E1 *****
MF1-4257 D *****
MF1-4260 A *****
MF1-4261 C *****
MF1-4262 A *****
MF1-4264 New *****
MF1-4265 C *****
MF1-4266 C *****
MF1-4267 E *****
MF1-4269 New *****
MF1-4270 B *****
</TABLE>
29
<PAGE> 31
REDACTED
<TABLE>
<S> <C> <C>
MF1-4271 A *****
MF1-4272 A (B2) *****
MF1-4273 A *****
MF1-4274 B *****
MF1-4276 A (B2) *****
MF1-4277 A *****
MF1-4278 D *****
MF1-4280 *****
MF1-4281 A *****
MF1-4283 New *****
MF1-4284 New *****
MF1-4289 New *****
MF1-4290 New *****
MF1-4291 A *****
MF1-4292 C *****
MF1-4295 *****
MF1-4317 New *****
MF1-4318 *****
MF1-4319 New *****
MF1-4365 A *****
MF1-4366 *****
MF1-4811 New *****
</TABLE>
30
<PAGE> 32
REDACTED
SCHEDULE 1.18
MBE TECHNICAL INFORMATION
<TABLE>
<CAPTION>
DOCUMENT NO. REVISION TITLE
<S> <C> <C>
817336 D *****
817337 F *****
817338 C *****
C602193 New *****
C602194 A *****
C602201 B *****
C602202 New *****
C602448 New *****
C709148 A *****
C788595 B *****
C788597 B *****
C817336 A *****
C817337 New *****
C817346 C *****
C836381 *****
C836382 New *****
C836383 New *****
C836384 New *****
D12143 B *****
D12146 E *****
D20901 New *****
MF1-3714 A *****
MF1-3864 D (E4) *****
</TABLE>
31
<PAGE> 33
REDACTED
<TABLE>
<S> <C> <C>
MF1-3968 New *****
MF1-3979 A *****
MF1-3980 C *****
MF1-4040 New *****
MF1-4041 A *****
MF1-4045 B *****
MF1-4046 New *****
MF1-4047 A (B1) *****
MF1-4052 New *****
MF1-4053 New *****
MF1-4054 C (D2) *****
MF1-4056 New *****
MF1-4282 New *****
Training Document *****
</TABLE>
32
<PAGE> 34
REDACTED
SCHEDULE 2.8.2
LICENSOR CONTRACTUAL OBLIGATIONS
<TABLE>
<CAPTION>
COMPANY SALES NO. PRODUCT QTY OPTION QTY
<S> <C> <C> <C> <C> <C>
1. Matrix Corp. SN 66002 Darlington ***** *****
Amps
2. Matrix Corp. SN 65487 Darlington ***** *****
Amps
3. FEI Communications SN 65790 TRW Std *****
Products
</TABLE>
4. RFMD Supply Agreement dated May _____, 1996
33
<PAGE> 35
REDACTED
SCHEDULE 3.1
TECHNICAL ASSISTANCE
I. FUNDING AND ASSISTANCE:
Licensor shall provide Technical Assistance to Licensee in the form of employee
hours, travel expense, and other related expenses up to a total expense limit
of *****. Employee hours charged against this expense limit shall be charged
at the following rates:
<TABLE>
<CAPTION>
Employee Classification Charging Rate per Hour
<S> <C>
100B $*****
100C $*****
100D $*****
106 $*****
</TABLE>
Employees at other classifications TRW's then existing charging rate.
Travel and other related expenses will be charged at the actual expense
incurred.
II. ADDITIONAL TECHNICAL ASSISTANCE: If Licensor has provided
Technical Assistance to Licensee up to the limit specified in Item I of this
Schedule 3.1 and Licensee does not have an Operational Foundry, or if following
the date that the parties mutually agree that Licensee has an Operational
Foundry, solely as related to MBE, Licensor will provide additional Technical
Assistance for an additional expense of up to *****, at the charging rates
specified in Item 1 of this Schedule 3.1.
III. ADDITIONAL TECHNICAL ASSISTANCE: If Licensor has provided
Technical Assistance to Licensee up to the limit specified in Items I and II of
this Schedule 3.1 and Licensee does not have an Operational Foundry, or if
following the date that the parties mutually agree that Licensee has an
Operational Foundry, solely as related to MBE, Licensor will provide additional
Technical Assistance at the request of, and at the expense of, Licensee.
Licensee's obligations under this Item III shall be limited to the next *****
of expense, and will be charged at the charging rates specified in Item 1 of
this Schedule 3.1.
IV. ADDITIONAL TECHNICAL ASSISTANCE: If Licensor has provided
Technical Assistance to Licensee up to the limit specified in Items I, II and
III of this Schedule 3.1 and Licensee does not have an Operational Foundry, or
if following the date that the parties mutually agree that Licensee has an
Operational Foundry, solely as related to MBE, Licensor will provide additional
Technical Assistance for an additional expense of up to *****, at the charging
rates specified in Item 1 of this Schedule 3.1.
V. ADDITIONAL TECHNICAL ASSISTANCE: If Licensor has provided
Technical Assistance to Licensee up to the limit specified in Items I, II, III
and IV of this Schedule 3.1 and Licensee does not have an Operational Foundry,
or if following the date that the parties mutually agree that Licensee has an
Operational Foundry, solely as related to MBE, Licensor will provide additional
Technical Assistance at the request of, and at the expense of, Licensee.
Licensee's obligations under this Item III shall be limited to the next *****
of expense, and will be charged at the charging rates specified in Item 1 of
this Schedule 3.1.
VI. ADDITIONAL TECHNICAL ASSISTANCE: If Licensor has provided
Technical Assistance to Licensee up to the limit specified in Items I, II, III,
IV and V of this Schedule 3.1 and Licensee does not have an Operational
Foundry, or if following the date that the parties mutually agree that Licensee
has an Operational Foundry, solely as related to MBE, Licensor will provide
additional Technical Assistance at the request of, and at the expense of,
Licensee in accordance with Section 3.1.5 of this Agreement.
34
<PAGE> 1
EXHIBIT 10.10
THE REGISTRANT HAS REQUESTED THAT CERTAIN PORTIONS OF THIS EXHIBIT BE GIVEN
CONFIDENTIAL TREATMENT
SUPPLY AGREEMENT
SUPPLY AGREEMENT dated as of June 6, 1996, between RF Micro Devices,
Inc. ("RFMD"), a corporation organized in the State of North Carolina, U.S.A,
with offices at 7341-D West Friendly Ave, Greensboro, NC 27410 (hereinafter
"Buyer") and TRW Inc., a corporation organized in the State of Ohio, U.S.A.,
acting through its Space and Electronics Group, with offices at One Space Park,
Redondo Beach, California 90278, U.S.A. (hereinafter "TRW").
WHEREAS, Buyer desires to purchase, and TRW desires to provide, the
Products (as defined below) specified in Exhibit 1A to this Agreement, and the
parties desire to define the terms and conditions under which the same will be
furnished;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS AND PRIORITY
1.1 DEFINITIONS: The following words and phrases shall have the meanings
set forth below:
AGREEMENT: This Supply Agreement between TRW and Buyer including the
following Exhibits, attached hereto and made a part hereof:
<TABLE>
<S> <C>
EXHIBIT 1A: List of Products
EXHIBIT 1B: Price, Minimum Annual Quantities and Site
EXHIBIT 4: Order Form
</TABLE>
CONTRACT PRICE: Defined in Section 4.1.
DELIVERY DATE(S): Defined in Section 6.1.
PRODUCTS: The products described in Exhibit 1A to be supplied by TRW.
SITE: Buyer's facility or other location identified in Exhibit 1B as
the destination to which transportation is to be arranged for deliverable
items.
TRW PLANT: Each of the factories or establishments of TRW and its
suppliers located in the United States.
1.2 PRIORITY: In case of any inconsistencies between this
Agreement and any of the Exhibits, the text of this Agreement shall prevail.
<PAGE> 2
ARTICLE 2
SUBJECT MATTER OF SUPPLY; REQUIREMENTS
2.1 SUPPLY: TRW hereby agrees to sell to Buyer and Buyer hereby
agrees to buy from TRW, on and subject to the terms and conditions contained in
this Agreement, the Products listed in Exhibit 1A.
2.2 REQUIREMENTS: Buyer shall buy from TRW no less than the
annual minimum quantities of Products set forth in Exhibit 1B, and TRW agrees
to sell Buyer the annual quantities of Products set forth in such Exhibit.
ARTICLE 3
EFFECTIVE DATE AND TERM
This Agreement shall be effective and binding on the parties as of the
first date noted above when signed by Buyer and TRW (the "Effective Date") and
shall remain in force and effect until December 31, 2000.
ARTICLE 4
CONTRACT PRICE, TAXES
TRANSPORTATION, EXPENSES AND CHARGES, ORDERS
4.1 PRICE: Buyer shall pay TRW, for the performance of TRW's
obligations hereunder, the prices for Products stated in Exhibit 1B in
accordance with the provisions of Article 5. The aforementioned price is
hereinafter referred to as the "Contract Price.''
4.2 TAXES: All taxes (excluding income, personal property,
inventory and similar taxes, but including stamp, withholding, value added and
turnover taxes), duties, fees, charges, or assessments of any nature levied by
any governmental authority in connection with this transaction, whether levied
against Buyer or TRW, or employees of TRW as a result of Products provided by
TRW under this Agreement, shall be for Buyer's account and shall be paid
directly by Buyer to the governmental authority concerned. If TRW is required
by law or otherwise to pay any such levy and/or fines, penalties, or
assessments in the first instance, or as a result of Buyer's failure to comply
with any applicable laws or regulations governing the payment of such levies by
Buyer, the amount of any payments so made by TRW shall be reimbursed by Buyer
to TRW upon submission of TRW's invoices and written documentation justifying
TRW's invoices.
4.3 TRANSPORTATION EXPENSES: TRW shall pay for all expenses of
handling, freight, in-transit insurance, and other transportation expenses
including, without limiting the foregoing, all packing and special handling
charges for air shipment incurred in connection with the delivery of Products
from the TRW Plant to the Site.
4.4 ORDERS: For its convenience, Buyer shall use preprinted forms
to order Products or to specify subsequent changes to Products in the form
attached hereto as Exhibit 4, which forms reference this Agreement and specify
the desired delivery date or dates for Products ("Orders").
4.5 ACCEPTANCE OF ORDERS: TRW shall use its best efforts to
accept and supply all Orders for Products which Buyer submits hereunder, and
unless otherwise agreed, TRW shall deliver Products so ordered on or before the
delivery dates or during the performance periods specified in each Order. All
preprinted terms and conditions contained in any Order are superseded by the
terms and conditions of this Agreement. Notwithstanding the foregoing, TRW
shall have no obligation to accept and shall not be deemed to have accepted,
unless signed by TRW,
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REDACTED
any Order (i) for any Products not listed in Exhibit 1A hereto or revisions
thereof; or (ii) which specifies a delivery date which is less than ***** from
the date of such Order; provided, however, subsequent to qualification of TRW's
MBE process, the parties will meet and mutually determine in good faith whether
shorter Order lead times are appropriate for Orders for MBE.
4.6 ORDER PROCEDURE: TRW shall give Buyer notice of its
acceptance or rejection of any Order which specifies a delivery date or dates
less than ten (10) weeks from the date of submission of the Order within five
(5) working days after receipt of such Order. If TRW rejects any such Order,
it shall specify in such notice the reasons for rejection.
4.7 ADDITIONAL PRODUCTS: The parties may, from time to time,
amend Exhibit 1A to add thereto any additional Products which TRW, during the
term of this Agreement, generally offers for sale and Buyer may purchase same
under this Agreement.
4.8 DELETION OF PRODUCTS: Subject to TRW's obligations under
Article 2 hereof, should TRW discontinue offering for sale any Products listed
in Exhibit 1A, TRW may delete such Products from Exhibit 1A, effective one
hundred eighty (180) calendar days after giving Buyer notice of such deletion.
Other provisions hereof notwithstanding, the deletion of any Products pursuant
to this Section 4.8 shall not relieve TRW from its obligation to deliver
Products for which an Order has been accepted by TRW pursuant to Section 4.5.
4.9 PRICE AND PRODUCT CATEGORY CHANGES: If, during the term
hereof, and at the request of Buyer, TRW develops a modified smaller chip
design for any Products listed in Exhibit 1A, which allows a larger number of
chips per wafer, then, effective upon TRW's notification to Buyer of the price
change, Exhibit 1A shall be deemed amended to incorporate the price change
based upon the following formula:
New price = *****
where N(0) is the initial number of chip sites per wafer using the unmodified
chip, and N1 is the number of chip sites per wafer achievable with the modified
chip design.
4.10 SALES FORECASTS: Buyer shall submit to TRW on the Effective
Date and thereafter at thirty (30) days before the start of each calendar
quarter during the term hereof a written forecast of its best estimate of its
requirements for Products during the next four (4) calendar quarters. Such
forecast shall list separately for each quarter during the period covered by
the forecast the amount of Products which Buyer expects to require during such
quarter.
ARTICLE 5
PAYMENT
Unless otherwise agreed by the parties, payment for Products shall be
net thirty (30) days after receipt of TRW's invoice; provided, however, Buyer
may pay TRW's invoices up to forty-five (45) days after receipt without being
in default under this Agreement if, and only if, such payment includes a late
payment charge equal to one percent (1%) of the amount of the invoice. Payment
of other charges, if any, provided for in this Agreement shall be due and
payable within thirty (30) days after receipt of TRW's invoice therefor. TRW's
electronic funds transfer account is as follows:
Bank of America
1850 Gateway Boulevard
Concord, California 92520
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Telex - MCI #67652
ABA ________
TRW Account ________
ARTICLE 6
SHIPMENT, TITLE, AND RISK OF LOSS
6.1 DELIVERY OF PRODUCTS: TRW shall place Products in the
possession of the carrier on or before the date or dates specified in each
Order therefor for delivery to Buyer, F.O.B. the Site specified in Exhibit 1B.
TRW shall arrange for shipment of Products by common carrier to the Site.
6.2 PROTECTION AND PACKING OF THE PRODUCTS: TRW shall arrange to
have all Products suitably packaged in accordance with good commercial
practices. Unless otherwise provided, all packing containers used by TRW shall
be non-returnable.
6.3 RISK OF LOSS AND TITLE: Title and risk of loss for Products
shall pass to Buyer on delivery to Buyer at the Site, notwithstanding the form
of shipping documents, or the breach or default by TRW at the time of loss.
Title and risk of loss of Products sent to TRW for adjustment shall remain with
Buyer until such are received by TRW.
6.4 SHIPPING DOCUMENTS: After Products have been shipped, TRW
shall deliver to Buyer one (1) copy of the signed Bill of Lading.
6.5 ACCESS BY BUYER: Subject to United States law and security
regulations, Buyer's representatives shall have the right, during reasonable
business hours, to enter the TRW Plant in order to inspect visually the
manufacturing progress.
ARTICLE 7
FACTORY TESTING
Prior to delivery, TRW or its suppliers shall perform standard quality
control inspections and tests applicable to their respective deliverable items.
Records of such tests shall be retained by TRW and remain available for review
by Buyer for at least one (1) year after the date(s) of delivery; a copy of
such inspection and test records shall be delivered by TRW to Buyer with
deliveries of the Products to which such records correspond. TRW shall make
available to Buyer from time to time upon Buyer's request, process control
monitor ("PCM") and specification limit testing protocols implemented by TRW
with respect to Products.
ARTICLE 8
WARRANTY
8.1 WARRANTY: TRW warrants that immediately upon delivery but not
thereafter, each Product shall comply in all material respects with the PCM
test protocol, as it relates thereto. Promptly after receipt of written notice
from Buyer that any Products are non-conforming, TRW shall replace such
non-conforming Products. Any non-conforming Products must be returned for
inspection to the TRW Plant. Buyer shall prepay all freight charges to return
any such Products to TRW. TRW shall deliver replaced Products freight prepaid
to the Site.
8.2 EXCLUSION: THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES,
WHETHER STATUTORY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, INCLUDING BUT NOT
LIMITED TO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE,
ALL OF WHICH
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ARE EXPRESSLY EXCLUDED. TRW'S WARRANTY OBLIGATIONS AND BUYER'S REMEDIES ARE
SOLELY AND EXCLUSIVELY AS STATED IN THIS ARTICLE 8.
ARTICLE 9
DELAYS
9.1 FORCE MAJEURE: No failure or omission on the part of either
party to carry out or observe any of the terms or provisions of this Agreement
or any Order hereunder (except the payment of money) shall be deemed a breach
of this Agreement or such Order if same shall arise or result from force
majeure or from any cause reasonably beyond the control of Buyer or TRW, as the
case may be, including but without limitation, acts of God, acts (including
delay or failure to act) of any governmental authority (de jure or de facto),
war (declared or undeclared) riot, revolution, fires, labor disputes, sabotage
or epidemics. Should such delay occur, the date or dates of performance by the
affected party shall be extended for a period equal to the number of days
during which performance is so delayed. The affected party shall give the
other party written notice of such delay within five (5) working days after
identification of the delay. If a delay in the performance of any Order in the
aggregate shall continue for more than one hundred eighty (180) days and the
parties have not agreed upon a revised basis for performing the Order at the
end of such delays, then either party, upon thirty (30) days written notice,
may terminate such Order without liability.
9.2 TRW DELAYS: If at any time TRW discovers that it is unable
(whether for reasons set out in Section 9.1 or otherwise) to deliver any
Products to Buyer on the scheduled delivery date, TRW shall give Buyer written
notice within two (2) days of such discovery, which notice shall specify the
delivery date on which TRW shall be able to deliver such Products to Buyer. If
the delivery date proposed by TRW is more than forty-five (45) days after the
scheduled delivery date, Buyer shall have the right, without liability, to
cancel (in whole or in part) its Order for such Products, by giving TRW notice
of cancellation within ten (10) days of receipt of TRW's notification of delay.
9.3 TERMINATION: If the delays resulting from any of the causes
stated in Section 9.2 extend in the aggregate for more than one hundred eighty
(180) days on any Order and the parties have not agreed upon a revised basis
for continuing work on such Order at the end of such delays, including
adjustment of the price, then either party, upon thirty (30) days written
notice, may terminate this Agreement with respect to the unexecuted portion of
the work, whereupon Buyer shall pay TRW its termination charges as provided in
Section 9.4 below.
9.4 TERMINATION CHARGES: In the event of termination of an Order
under this Agreement for any reason, TRW shall promptly submit to Buyer a
detailed written statement and supporting documentation (such as TRW incurred
cost report and vendor invoices) of TRW's total costs incurred in the
performance of work under such Order and total cost resulting from such
termination as determined in accordance with TRW's standard accounting
practices and, if requested by Buyer, verified to Buyer by TRW's independent
auditors at Buyer's expense (hereinafter referred to as the "Total Verified
Termination Cost").
The Total Verified Termination Cost shall include the following:
(1) One hundred percent (100%) of the total termination
costs incurred by TRW, including but not limited to
any committed and/or termination costs incurred by
TRW's suppliers and vendors, less the amounts
previously paid by Buyer pursuant to such Order;
(2) The price of any completed Products pursuant to
Exhibit 1B; and
(3) TRW's costs incurred in performing uncompleted work,
plus profit in the amount of fifteen percent (15%) of
such costs.
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The Total Verified Termination Cost shall be paid by Buyer within thirty (30)
days after receipt of TRW's invoice therefor.
ARTICLE 10
TRANSFERS AND ASSIGNMENTS
Buyer may assign all or part of its rights and delegate all or part of
its duties described in this Agreement by giving written notice thereof to TRW.
Since this Agreement requires the performance of personal services by TRW, TRW
may not assign any right or delegate any duty described in this Agreement
without Buyer's prior written approval, which approval shall not be
unreasonably withheld, provided that this shall not affect TRW's right to
assign without Buyer's consent, either absolutely or by way of charge, any
moneys due or to become due to it or which may become payable to it under this
Agreement.
ARTICLE 11
DEFAULT
11.1 EVENT OF DEFAULT: An Event of Default on the part of either
party shall exist under this Agreement if:
(a) Such party fails to pay the other party any amount
required to be paid hereunder when due and payable hereunder; or
(b) Such party fails to perform its minimum purchase or
supply obligations (as the case may be hereunder) specified in Section
2.2 hereof during any calendar year during the term hereof, or
otherwise fails to perform any other material obligation required to
be performed by it under any provision of this Agreement (except the
payment of money) within thirty (30) days after the time specified or
within thirty (30) days after notice from the other party that such
performance has become due; provided, however, a party shall have no
right to terminate this Agreement for the other party's default so
long as corrective action is being diligently pursued by the
defaulting party in a manner that demonstrates that such party's
obligations hereunder shall be completed in sufficient time to allow
the non-defaulting party not to be prejudiced thereby.
11.2 REMEDIES AVAILABLE FOR DEFAULT: Subject to other provisions
hereof which expressly limit the remedies available hereunder, if an Event of
Default as defined in Section 11.1 exists on the part of either party, then the
other party may terminate this Agreement upon giving written notice of
termination and pursue any other remedies available at law or in equity.
ARTICLE 12
LIMITATION OF LIABILITY
12.1 INFRINGEMENT: Nothing contained in this Agreement shall be
construed as a warranty or representation by TRW that the manufacture, sale,
lease, use or other disposition of Products shall be free from infringement of
patents, utility models, design patents, maskwork rights, copyrights, trade
secrets and/or other legal rights of third parties.
12.2 LIMITATION OF LIABILITY: With the exception of Buyer's
obligation to pay invoices for deliveries of Products hereunder, the total
aggregate liability of a party under this Agreement and all Orders placed
hereunder on any claim, whether in contract, tort (including sole or concurrent
negligence), or otherwise, arising out of, connected with, or resulting from
the manufacture, supply, delivery, resale, repair, replacement, or use of
Products
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shall not exceed one hundred thousand dollars ($100,000).
12.3 DAMAGES: In no event shall either party be liable for any
special, indirect, incidental or consequential damages, however caused, whether
by such party's sole or concurrent negligence or otherwise, including but not
limited to costs and expenses incurred in connection with labor, overhead,
transportation, installation, or removal of Products or substitute facilities
or supply sources.
ARTICLE 13
NOTICES
All notices, requests, consents, and other communications required or
permitted to be given under this Agreement must be in writing and mailed by
registered or certified mail to the other party at its respective business
address as follows:
<TABLE>
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If to TRW: TRW Inc., Space and Electronics Group
Electronic Systems & Technology Division
One Space Park
Redondo Beach, California 90278
Attention: Mr. Chris Johnson
Mail Station D1/1302
Phone: (310) 814-2001
FAX: (310) 812-7011
If to Buyer: RF Micro Devices, Inc.
7341-D West Friendly Ave.
Greensboro, NC 27410
Attention: Mr. Powell Seymour
Phone: (910) 855-8085
Fax: (910) 299-9808
</TABLE>
ARTICLE 14
CONTRACT CHANGE PROCEDURE
14.1 CHANGES: Any changes to this Agreement after the Effective
Date which relate to: (i) the deletion of Products; (ii) adding additional
Products; (iii) changing or modifying Products; or (iv) making other changes
which do not materially alter the scope of this Agreement shall be made in
accordance with the procedures set forth in this Article 14.
14.2 CONTRACT CHANGES REQUESTS: Either party hereto may, from time
to time, and at any time during the term hereof, request a change, as defined
in Section 14.1, in this Agreement. (The party requesting the change is
hereinafter referred to as the "Requesting Party.") Requests for changes shall
be in writing and shall be addressed and delivered to the other party (the
"Notified Party"). Such writing shall be identified as a "Contract Change
Request" (or "CCR"), shall carry a sequential number for ease of tracking,
shall set forth in detail the nature of the change requested, and shall
identify the Products to be changed.
14.3 PROCEDURE: As soon as practical after receipt by the Notified
Party of copies of the CCR, the parties shall as necessary meet to discuss the
change and to ascertain its cost and schedule impacts, if any.
14.4 CONTRACT CHANGE NOTICE: If the parties decide to implement a
change request, a standard form Contract Change Notice ("CCN") shall be
prepared, which CCN shall describe the change, delineate the cost,
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schedule, and other impacts of the change and the payment terms for any price
increase or decrease. Execution of a CCN by both parties shall constitute a
modification hereof and shall be binding on both parties hereto.
14.5 EXCEPTION: Substitutions relative to Products which are
purchased items not manufactured by TRW may be made by TRW with the consent of
Buyer, which consent may not be unreasonably withheld.
ARTICLE 15
INTELLECTUAL PROPERTY
15.1 PROPRIETARY INFORMATION. For the purpose of this Agreement:
(a) "Proprietary Information" shall mean all drawings,
documents, ideas, know-how and other information supplied by one party
to another (whether disclosed orally, or in documentary form, by
demonstration or otherwise) for the purpose of achieving the
objectives of this Agreement.
(b) "Proper Use" shall mean use of the Proprietary
Information solely by the recipient for the objectives of this
Agreement.
15.2 NONDISCLOSURE. All Proprietary Information furnished shall
remain the property of the disclosing party and shall be treated by the
recipient in strict confidence, shall not be used except for Proper Use, shall
be disclosed by the recipient only to persons within the recipient's company
(including companies directly or indirectly more than fifty percent (50%) owned
or controlled by the recipient) who are directly concerned in the Proper Use,
and shall not be disclosed to consultants or by the recipient to any other
party without the disclosing party's prior written consent, except for
Proprietary Information which the recipient can show was:
(a) In the public domain at the time it was disclosed; or
(b) Known to the recipient without restriction at the
time of receipt; or
(c) Published or becomes available to others without
restriction through no act or failure to act on the part of the
recipient; or
(d) Disclosed inadvertently despite the exercise of the
same degree of care as the recipient takes to preserve and safeguard
its own proprietary information; or
(e) Known to the recipient from a source other than the
disclosing party without breach of this Agreement by the recipient; or
(f) Subsequently designated by the disclosing party in
writing as no longer proprietary; or
(g) Independently developed by the recipient; or
(h) Disclosed after five (5) years from the date of
delivery by the disclosing party to the recipient, which five (5) year
period shall survive the termination of this Agreement.
If any portion of Proprietary Information falls within any one of these
exceptions, the remainder shall continue to be subject to the foregoing
prohibitions and restrictions. The recipient of Proprietary Information shall
inform its employees of the confidential nature of the Proprietary Information
and shall prohibit them from making copies of any of it except where such
copies are necessary for the purposes of Proper Use, unless agreed upon by the
disclosing party.
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15.3 MARKING. Proprietary Information made available in written
form by one party to the other party shall be marked with the legend:
"RFMD PROPRIETARY INFORMATION"
or - "TRW PROPRIETARY INFORMATION"
as the case may be, or an equivalent conspicuous legend. No sheet or page of
any written material shall be so labeled which is not, in good faith, believed
by the disclosing party to contain Proprietary Information. A recipient of
Proprietary Information hereunder shall have no obligation with respect to any
portion of any written material which is not so labeled or any information
received orally unless it is identified as proprietary and a written summary of
such oral communication, specifically identifying the items of Proprietary
Information, is furnished to the recipient within thirty (30) days of such
disclosure.
The individuals identified below are the only persons
authorized to receive Proprietary Information on behalf of the parties:
For Buyer: Mr. Powell Seymour
For TRW: Mr. Bob Van Buskirk
By written notice to the other parties, these representatives may be replaced
by another person from the same party.
15.4 COMPENSATION. The parties shall not be obligated to
compensate each other for the transfer of any Proprietary Information under
this Agreement and agree that no warranties of any kind are given with respect
to such Proprietary Information or any use thereof. No license is hereby
granted under any patent, trademark or copyrights with respect to any
Proprietary Information.
15.5 SURVIVAL. The obligations of the parties concerning
confidentiality set forth in this Article 15 shall survive termination or
completion of this Agreement.
15.6 INVENTIONS AND PATENTS. Inventions conceived solely by
employees of a party under this Agreement shall belong exclusively to such
party. Inventions conceived jointly by the parties in the course of work
called for in this Agreement shall be subject to the further agreement of the
parties. Except as expressly set forth in this Agreement, nothing contained in
this Agreement shall be deemed, by implication, estoppel or otherwise, to grant
any party any right or license in respect of any patents, inventions,
Proprietary Information or other technical data at any time owned by the party
hereto. Irrespective of in whose name(s) patent applications are filed, any
party which is a co-inventor of an invention shall be entitled to a
non-exclusive, royalty-free, transferable license in any patent(s) issued with
respect thereto. The understandings set forth in this Section 15.6 are subject
to modification as may be required by applicable government regulations.
Notwithstanding the above, each party shall have a non-exclusive, royalty-free,
non- transferable, worldwide right and license under any inventions, patents,
Proprietary Information and technical data owned by the other party and used in
Products made under this Agreement, but only to the extent such licenses are
required for the limited purpose of enabling a party to perform its obligations
under this Agreement or to enable Buyer to sell products incorporating Products
made by TRW under this Agreement.
15.7 OWNERSHIP OF MASKSETS. Buyer shall retain sole ownership of
all glass plates ("Masksets") utilized for photolithographic semiconductor
processing of MMIC (as defined in Section 15.8 below) designs, and TRW shall
retain sole possession of any and all Masksets developed or procured by TRW
under this Agreement. TRW shall store Buyer's Masksets at TRW for a maximum
period of two (2) years after delivery of all Products manufactured from such
Masksets to Buyer and after expiration of such two (2) year storage period may
destroy or dispose of such Masksets upon giving Buyer ten (10) days prior
written notice thereof.
15.8 OWNERSHIP OF MMIC DESIGNS. Buyer shall retain sole ownership
rights to its designs for
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monolithic microwave integrated circuit ("MIMIC") designs. TRW shall retain
sole ownership rights to TRW MMIC designs , all individual circuit elements,
design libraries, design rule manuals, circuit elements and MMIC fabrication
processes for all MMIC designs.
ARTICLE 16
MISCELLANEOUS
16.1 HEADINGS: The headings and titles to the articles, sections,
and paragraphs of this Agreement are inserted for convenience only and shall
not be deemed a part hereof or affect the construction or interpretation of any
provision hereof.
16.2 REMEDIES: Unless otherwise expressly provided herein, the
rights and remedies hereunder are in addition to, and not in limitation of,
other rights and remedies under the Agreement, at law or in equity, and
exercise of one right or remedy shall not be deemed a waiver of any other right
or remedy.
16.3 MODIFICATION AND WAIVER: No cancellation, modification,
amendment, deletion, addition, or other change in the Agreement or any
provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless specifically set forth in a writing signed by
the party to be bound thereby. No waiver of any right or remedy in respect of
any occurrence or event on one occasion shall be deemed a waiver of such right
or remedy in respect of such occurrence or event on any other occasion.
16.4 ENTIRE AGREEMENT: This Agreement contains the entire
agreement of the parties and supersedes all other agreements, oral or written,
heretofore made with respect to the subject hereof, specifically including the
following agreements between the parties:
SN 63004, dated 3 January 1994; modified 24 March 1995
SN 64439, dated 3 January 1995
SN 64713, dated 13 January 1995
SN 63778, dated 14 September 1994; modified 17 October 1995 and 10
January 1996
SN 64770, dated 3 January 1995.
and the transactions contemplated thereby.
16.5 SEVERABILITY: Any provision hereof prohibited by or unlawful
or unenforceable under any applicable law of any jurisdiction shall as to such
jurisdiction be ineffective without affecting any other provision of the
Agreement. To the full extent, however, that the provisions of such applicable
law may be waived, they are hereby waived, to the end that the Agreement be
deemed to be a valid and binding agreement enforceable in accordance with its
terms.
16.6 CONTROLLING LAW: All questions concerning the validity and
operation of this Agreement and the performance of the obligations imposed upon
the parties hereunder shall be governed by the laws of the State of California
applicable to contracts entered into and wholly to be performed in such
jurisdiction.
16.7 SUCCESSORS AND ASSIGNS: The provisions of this Agreement
shall be binding upon and for the benefit of TRW and Buyer and their respective
successors and assigns. This provision shall not be deemed to expand or
otherwise affect the limitation on assignment and transfers set forth in
Article 10 and no party is intended to or shall have any right or interest
under this Agreement, except, as provided in Article 10.
16.8 COUNTERPARTS: This Agreement has been executed in several
counterparts, each of which shall be deemed to be an original, and all such
counterparts together shall constitute but one and the same instrument.
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16.9 LANGUAGE: If a translation of this Agreement is required or
otherwise made, the English version shall be the official version and shall
control in the event of differences. All communications relating to this
Agreement shall be in English.
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IN WITNESS WHEREOF, the parties have executed this Agreement in
English as of the date and year first set forth above.
RF Micro Devices, Inc.
By:
--------------------------------------
President and Chief Executive Officer
TRW INC.
Space and Electronics Group
Electronic Systems & Technology Division
By:
--------------------------------------
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EXHIBIT 1A
LIST OF PRODUCTS
1. 3" GaAs HBT processed wafers (RFMD designs using
Masksets which have been developed prior to the receipt of Order)
2. 3" GaAs HBT processed wafers (TRW designs using
Masksets which have been developed prior to the receipt of Order)
3. 4" GaAs epitaxial wafers (MBE)
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REDACTED
EXHIBIT 1B
PRICE, MINIMUM ANNUAL QUANTITIES AND SITE
A. PRICE
All prices are for annual cumulative wafers ordered and are subject to
adjustment as provided in Section 4.9.
<TABLE>
<CAPTION>
STANDARD PROCESS REDUCED PROCESS MBE EPITAXIAL
PRODUCT PROCESS
<S> <C> <C> <C> <C>
1. 3" GaAs HBT processed $***** $***** N/A
wafers (RFMD designs)
2. 3" GaAs HBT processed
wafers (TRW designs)
0-19 wafers $***** N/A N/A
20-39 wafers *****
40-79 wafers *****
80+ wafers *****
3. 4" GaAs epitaxial wafers N/A N/A *****
(MBE)
</TABLE>
B. MINIMUM ANNUAL QUANTITIES
<TABLE>
<CAPTION>
Number of Wafers per Year
PRODUCT 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C> <C> <C>
1. 3" GaAs HBT processed ***** ***** ***** ***** ***** Forecast
wafers (RFMD and TRW ***** ***** ***** ***** ***** Minimum
designs)
2. 4" GaAs epitaxial ***** ***** ***** ***** ***** Forecast
wafers (MBE)* ***** ***** ***** ***** ***** Minimum
</TABLE>
C. SITE: RF Micro Devices, Inc., 7341-D West Friendly Ave., Greensboro,
NC 27410
- ------------
*Buyer's obligation to purchase, and TRW's obligation to supply, 4" GaAs
epitaxial wafers (MBE) is conditional upon Buyer's having obtained by March 1,
1997 (or such other date as the parties agree pursuant to the License and
Technical Assistance Agreement ("License Agreement") between the parties of
even date herewith) the Financing, or entered into a definitive sublicense
agreement with a third party for the manufacture of Licensed Products, as such
terms are defined in Article 8.2 of the License Agreement.
14
<PAGE> 1
EXHIBIT 10.15
MASTER EQUIPMENT LEASE AGREEMENT
Dated as of
DECEMBER 2,1996
between
FINOVA TECHNOLOGY FINANCE, INC.
(LESSOR)
AND
R F MICRO DEVICES, INC.
(LESSEE)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
1. Agreement for Lease of Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Delivery and Acceptance of Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Disclaimer of Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. Primary Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
5. Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
6. Lessee's Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
7. Identification Marks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
8. Fees and Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
9. General Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
10. Use of Equipment; Location; Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
11. Maintenance and Repairs; Additions to Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
12. Loss, Damage or Destruction of Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
13. Reports; Inspections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
14. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
15. Return of Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
16. Lessor's Ownership; Equipment To Be and Remain Personal Property. . . . . . . . . . . . . . . . . . 11
17. Other Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
18. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
19. Assignment and Transfer by Lessor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
20. Recording and Filing; Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
21. Automatic Lease Term Renewal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
22. Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
23. Failure or Indulgence not Waiver; Additional Rights of Lessor. . . . . . . . . . . . . . . . . . . . 16
24. Sublease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
25. Purchase Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
26. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
27. Entire Agreement; Severability, Amendment or Cancellation of Lease. . . . . . . . . . . . . . . . . 18
28. Waiver of Jury. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
29. Restriction of Limitation Periods and Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
30. Governing Law, Consent to Jurisdiction and Service. . . . . . . . . . . . . . . . . . . . . . . . . 18
31. Lessor's Right to Perform for Lessee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
32. Agreement for Lease Only. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
33. Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
34. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
35. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
<PAGE> 4
MASTER EQUIPMENT LEASE AGREEMENT
MASTER EQUIPMENT LEASE AGREEMENT dated as of December 2,1996, between
R F MICRO DEVICES, INC. (hereinafter called "Lessee"), a North Carolina
corporation that has its executive office and principal place of business at
7625 Thorndike Road Greensboro, NC 27409 and FINOVA TECHNOLOGY FINANCE, INC.
(hereinafter called "Lessor"), a Delaware corporation with its principal place
of business at 10 Waterside Drive, Farmington, Connecticut 06032-3065.
In consideration of the mutual covenants hereinafter contained, Lessee
and Lessor agree as follows:
1. Agreement for Lease of Equipment. Lessor shall lease to
Lessee and Lessee shall lease from Lessor, upon the terms and conditions
specified in this Master Lease and the applicable Rental Schedule, the
Equipment as described in the applicable Rental Schedule including Schedule A
of such Rental Schedule and this Master Lease. Each Rental Schedule shall
incorporate the terms of this Master Lease and shall constitute a separate
lease (the term "this Lease" shall refer collectively to the applicable Rental
Schedule and this Master Lease). Only the signed copy of each Rental Schedule
and not this Master Lease shall constitute chattel paper the possession of
which can perfect a security interest. In the event of a conflict between the
provisions of this Master Lease and the provisions of any Rental Schedule, the
provisions of the Rental Schedule shall prevail.
2. Delivery and Acceptance of Equipment. (a) Lessor and Lessee
agree that the vendor of the Equipment to Lessor or, as to any Equipment to be
sold by Lessee to Lessor and leased back, the vendor of the Equipment to Lessee
(in either case, the "Vendor") will be responsible to deliver the Equipment to
Lessee at the location specified in the applicable Rental Schedule. Such
delivery shall be delivery of the Equipment by Lessor to Lessee under this
Lease unless such Equipment is to be sold by Lessee to Lessor and leased back.
Provided that no Event of Default has occurred, no event which with the passage
of time or giving of notice would be an Event of Default has occurred, and is
continuing, and the conditions set forth in the next following paragraph have
been met and the Equipment is not to be sold by Lessee to Lessor and leased
back, Lessor hereby authorizes Lessee, acting as Lessors agent, to accept for
Lessor, and in Lessor's name, the Equipment from the Vendor upon delivery
pursuant to the purchase contract for the Equipment. Such acceptance shall be
acceptance of the Equipment by Lessee under this Lease. Nevertheless, if
within five business days after Lessee has received delivery of an item of the
Equipment, Lessee has not given Lessor written notice of a defect therein and
Lessor has not notified Lessee not to accept the Equipment, Lessee shall be
deemed to have (a) acknowledged receipt of such item of the Equipment in good
condition and repair and (b) accepted such item of the Equipment under this
Lease. Lessee agrees to confirm any acceptance of the Equipment by Lessee by
executing a Certificate of Inspection and Acceptance and providing the same to
Lessor in accordance with the notice provision hereof on or about the Lease
Commencement Date, but no later than the date for payment to the Vendor.
(b) Conditions precedent to every progress payment and Lease Term
Commencement shall include that (i) no payment shall be past due to Lessor or
any assign of Lessor from Lessee or any Guarantor (as hereinafter defined),
whether as a lessee, a guarantor or in some other capacity; (ii) Lessee shall
be in compliance with the provisions of this Lease; (iii) all documentation
then required by Lessor's counsel shall have been received by Lessor, (iv)
Lessee shall not be in default under any material contract to which Lessee is a
party or by which Lessee or the property of Lessee is bound; and (v) there
shall not have been any material adverse change or threatened material adverse
change in the financial or other condition, business, operations, properties,
or assets of Lessee or any Guarantor since September 3, 1996, or from the
written information that has been supplied to Lessor prior to September 3, 1996
by Lessee or any Guarantor. Conditions precedent to the Lease Term
Commencement under each Rental Schedule shall include that there shall not have
been any material adverse change or threatened material adverse change in the
financial or other condition, business, operations, properties or assets of any
Manufacturer (as hereinafter defined) of the Equipment to be leased under such
Rental Schedule since September 3, 1996, or from the written information that
has been supplied to Lessor prior to September 3, 1996 by such Manufacturer.
<PAGE> 5
3. Disclaimer of Warranties. LESSEE ACKNOWLEDGES THAT IT HAS
SELECTED BOTH THE EQUIPMENT AND EVERY MANUFACTURER AND OTHER VENDOR OF THE
EQUIPMENT, THAT LESSEE HAS NOT RELIED UPON LESSOR FOR SUCH SELECTION AND THAT
LESSEE HAS A COPY OF THE PURCHASE CONTRACT(S) FOR LESSOR'S PURCHASE OF THE
EQUIPMENT. LESSOR HAS NOT MADE AND SHALL NOT BE DEEMED TO HAVE MADE ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY,
FITNESS FOR USE, FITNESS FOR A PARTICULAR PURPOSE OR TITLE OF THE EQUIPMENT (OR
ANY PART THEREOF) OR AS TO COMPLIANCE WITH SPECIFICATIONS, COMPLIANCE WITH
GOVERNMENTAL REGULATIONS, QUALITY SELECTION, INSTALLATION, SUITABILITY
PERFORMANCE, CONDITION, DESIGN, ABSENCE OF DEFECTS, OPERATION, OR
NON-INFRINGEMENT OF PATENT, COPYRIGHT TRADEMARK OR OTHER INTELLECTUAL PROPERTY
RIGHTS OF THE EQUIPMENT (OR ANY PART THEREOF). LESSEE SHALL LEASE THE
EQUIPMENT "AS IS, WHERE IS." LESSOR HEREBY DISCLAIMS ANY AND ALL SUCH
WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED. LESSEE AND LESSOR AGREE
THAT ALL RISKS INCIDENT TO THE MATTERS REFERRED TO IN THIS SECTION ARE TO BE
BORNE BY LESSEE. Lessor has and shall have no responsibility for the
installation, adjustment or servicing of the Equipment. The provisions of this
Section have been negotiated and are intended to be a complete exclusion and
negation of any representations or warranties by Lessor, express or implied,
with respect to the Equipment that may arise pursuant to any law now or
hereafter in effect, or otherwise. In no event shall defect in, or unfitness
of, any or all of the Equipment, or any breach of warranty or representation by
any or every Manufacturer or other Vendor relieve Lessee of the obligation to
pay rent or to make any other payments required hereunder or to perform any
other obligation hereunder. Without limiting the generality of the foregoing,
Lessor shall not be responsible or liable for any (i) defect, either latent or
patent, in any of the Equipment or for any direct or consequential damages
therefrom, (ii) loss of use of any of the Equipment or for any loss of profits
or any interruption in Lessee's business occasioned by Lessee's inability to
use any or all of the Equipment for any reason whatsoever, or (iii) in the
event that any Vendor delays or fails to make delivery of any or all of the
Equipment or fails to fulfill or comply with any purchase contract or order.
For as long as no Event of Default shall have occurred and is continuing
hereunder, Lessor hereby transfers and assigns to Lessee during the Lease Term
(as hereinafter defined) all right and interest of Lessor in any Manufacturer's
and other Vendor's warranties with respect to any and all of the Equipment, and
agrees to execute all documents reasonably necessary to effect such transfer
and assignment, except that to the extent any rights of Lessor with respect to
the Equipment may not be assigned or otherwise be available to Lessee, Lessor
shall instead use reasonable efforts to enforce such rights against such
Manufacturers or other Vendors but only upon the request and at the expense of
Lessee.
4. Primary Term. The Primary Term for each item of the Equipment
shall commence on the Lease Commencement Date provided for by the Rental
Schedule for such Equipment, and unless sooner terminated pursuant to the
provisions of this Lease, shall be for the number of calendar months set forth
in such Rental Schedule, plus the number of days remaining in any partial
calendar month if the Lease Commencement Date occurs on other than the first
day of a month. Notwithstanding the foregoing, the provisions of this Master
Lease on indemnification of Lessor by Lessee shall apply between Lessor and
Lessee with respect to any Equipment from the time that any order for the
Equipment is placed by Lessor.
5. Rent. (a) Lessee shall pay to Lessor in cash or by check as
rent for the Equipment during the Lease Term, the amounts provided for in the
Rental Schedule ("Basic Rent") for such Equipment on the dates designated
therein ("Payment Dates"), at the location of Lessor set forth therein, or at
such other address or to such other person or entity as Lessor, from time to
time, may designate in writing.
(b) Lessee shall also pay to Lessor, within 10 business days
(unless specifically otherwise provided by this Lease) from notice by Lessor to
Lessee that payment is due, any sums other than for Basic Rent that Lessee at
any time shall be required to pay Lessor pursuant to the provisions of this
Lease, including but not limited to sums payable by reason of payments by
Lessor to any Vendors in advance of the delivery of such Equipment or the
commencement of the Lease Term for such Equipment, together with every
additional charge, interest and cost which by the terms of the applicable
Rental Schedule or this Master Lease may be added for non-payment or late
payment
2
<PAGE> 6
of any such sums or of Basic Rent. All such sums shall be additional rent
("Additional Rent") and not less than 10 business days prior to the due date
thereof which due date if not otherwise specified in the notice by Lessor to
Lessee or by a specific provision of this Lease as to when payment is due shall
be the tenth day following the day such notice is given. Lessor shall provide
Lessee with written notification as to the amount of any Additional Rent. If
Lessee shall fail to pay any Additional Rent, Lessor shall have all rights,
powers and remedies with respect thereto as are provided herein or by law in
the case of non-payment of Basic Rent.
(c) With respect to any amount of Basic Rent or Additional Rent
not received by Lessor within three business days from when due hereunder,
Lessee shall pay to Lessor interest on such amount from the due date thereof
until payment is received by Lessor at two percent per month or the highest
rate of interest on amounts past due that is not unlawful, whichever is lower
(the "Default Interest Rate"). Additionally, with respect to each such
instance of late payment, Lessee shall pay to Lessor, within three business
days of written notification that such payment is due, a collection fee of
$500, which fee approximates Lessor's administrative costs, at minimum, to
collect such unpaid Basic Rent or Additional Rent.
(d) LESSEE AGREES THAT TIME IS OF THE ESSENCE TO LESSOR IN
LESSEE'S MAKING PAYMENTS OF BASIC RENT AND ADDITIONAL RENT WHEN SUCH PAYMENTS
BECOME DUE.
(e) This Lease is a net-net-net lease and, notwithstanding any
other provisions of this Lease, it is intended that Basic Rent and Additional
Rent shall be paid without notice, demand, counterclaim, setoff, deduction or
defense and without abatement, suspension, deferment, diminution or reduction.
Lessee shall perform all its obligations under this Lease at its sole cost and
expense. Except to the extent otherwise expressly specified herein or for any
breach by Lessor of Section 22 of this Master Lease, the obligations and
liabilities of Lessee hereunder shall in no way be released, discharged or
otherwise affected for any reason, including, without limitation: (i) any
defect in the condition, quality or fitness for use of the Equipment or any
part thereof; (ii) any damage to, removal, abandonment, salvage, loss,
scrapping or destruction of or any requisition or taking of the Equipment or
any part thereof; (iii) any restriction, prevention or curtailment of or
interference with any use of the Equipment or any part thereof; (iv) any defect
in title or rights to the Equipment or any lien on such title or rights or on
the Equipment; (v) any change, waiver, extension, indulgence or other action or
omission in respect of any obligation or liability of Lessor, (vi) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceedings relating to Lessee or any action taken
with respect to this Lease by any trustee or receiver of Lessee or by any
court, in any such proceeding; (vii) any claim that Lessee has or might have
against any Person (as hereinafter defined), including without limitation
Lessor; (viii) any failure on the part of Lessor to perform or comply with any
of the terms hereof or of any other agreements; (ix) any invalidity,
unenforceability or disaffirmance of this Lease or any provision hereof against
or by Lessee; or (x) any other occurrence whatsoever, whether similar or
dissimilar to the foregoing, whether or not Lessee or Lessor shall have notice
or knowledge of any of the foregoing. To the extent permitted by law, Lessee
waives all rights now or hereafter conferred by statute or otherwise to quit,
terminate, cancel rescind or surrender this Lease, or to any diminution or
reduction of Basic Rent or Additional Rent payable by Lessee hereunder.
Nothing is this paragraph shall prevent Lessee from suing and collecting
damages and refunds from Lessor.
6. Lessee's Representations and Warranties. Lessee represents
and warrants (and if requested by Lessor, promptly will provide supporting
documents to the effect and an opinion of counsel substantially in the form
requested by Lessor) that as of the date that Lessee signs this Master Lease,
as of any date that Lessor makes a payment to a Vendor prior to the date all
Equipment has been accepted for lease hereunder, as of each date that any
Equipment is accepted for lease hereunder and as of each Lease Commencement
Date pursuant to a Rental Schedule hereunder: (i) all items of the Equipment
are new and unused as of the Lease Commencement Date, unless otherwise
specified in the applicable Rental Schedule in which event the specified items
of the Equipment shall have been delivered new to Lessee by their suppliers not
more than 90 days prior to their Lease Term Commencement; (ii) Lessee is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, and is qualified and in good standing to do
business wherein the failure to be so qualified could reasonably be expected to
have a material adverse effect on its operations or business including the
jurisdictions where the
3
<PAGE> 7
Equipment is or will be located; (iii) Lessee has the corporate power to enter
into this Lease and the other instruments and documents executed by Lessee in
connection herewith (together with this Lease, the "Transactional Documents")
and to pay and perform its obligations under this Lease and the other
Transactional Documents; (iv) this Lease and the other Transactional Documents
have been duly authorized, executed and delivered by Lessee, and constitute the
valid, legal and binding obligations of Lessee enforceable in accordance with
their terms subject to such limitations on enforceability as may be imposed by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws relating to or affecting the rights of creditors generally
and to the application of general principles of equity (regardless of whether
considered in a proceeding in equity or at law); (v) no vote or consent of, or
notice to, the holders of any class of stock of Lessee is required, or if
required, such vote or consent has been obtained or given, to authorize the
execution, delivery and performance of this Lease and the other Transactional
Documents by Lessee; (vi) neither the execution and delivery by Lessee of this
Least or the other Transactional Documents, nor the consummation by Lessee of
the transactions contemplated hereby or thereby, nor compliance by Lessee with
the provisions hereof or thereof, conflicts with or results in a breach of any
of the provisions of any Certificate of Incorporation or Bylaws or partnership
or trust agreement or certificate of Lessee, or of any applicable law,
judgment, order, writ, injunction, decree, award, rule or regulation of any
court, administrative agency or other governmental authority, or of any
indenture, mortgage, deed of trust, other agreement or instrument of any nature
to which Lessee is a party or by which it or its property is bound or affected
or pursuant to which it is constituted, or constitutes a default under any
thereof or will result in the creation of any lien, charge, security interest
or other encumbrance upon any of the Equipment, other than the interests
therein of Lessor or any Assignee (as hereinafter defined), or upon any other
right or property of Lessee or will in any manner adversely affect Lessor's or
any Assignee's right, title and interest in any of the Equipment; (vii) no
consent, approval, withholding of objection or other authorization of or by any
court, administrative agency, other governmental authority or any other Person
is required, except such consents, approvals or other authorizations which have
been duly obtained and are in full force and effect and copies of which have
been furnished Lessor, in connection with the execution, delivery or
performance by, or the consummation by Lessee, of the transactions contemplated
by this Lease and the other Transactional Documents; (viii) there are no
actions, suits or proceedings pending, or, to the knowledge of threatened, in
any court or before any administrative agency or other governmental authority
against or affecting Lessee, which, if adversely decided would be reasonably
likely or could reasonably be expected to materially and adversely affect the
financial or other condition, business, operations, properties, or assets of
Lessee or the ability of Lessee to perform any of its obligations under this
Lease or under the other Transactional Documents, except for any such actions,
suits or proceedings that Lessee has described in writing to Lessor, (ix) there
has been no material adverse change or threatened material adverse change in
Lessees, any Guarantor's or (with respect to the Equipment described in the
applicable Rental Schedule) any Manufacturer's financial or other condition,
business, operations, properties or assets since the date of Lessee's, such
Guarantor's or such Manufacturer's most recent financial statements reported on
by an independent public accounting firm prior to the date of this Master
Lease, since the dates of each such Person's interim and annual financial
statements, if any, subsequent to such prior statements, or from the written
information that has been supplied to Lessor by Lessee, any Guarantor or such
Manufacturer; (x) Lessee possesses any and all authorizations, certifications
and licenses which are or may be required to use and operate the Equipment;
(xi) the actual Acquisition Cost pursuant to the applicable Rental Schedule of
each item of the Equipment does not exceed the fair and usual price for like
quantity purchases of such item and reflects all discounts, rebates and
allowances for the Equipment given to Lessee, any Guarantor or any affiliate of
Lessee or any Guarantor by any Vendor or other Person including, without
limitation, discounts for advertising, prompt payment, testing or other
services; (xiii) all information supplied to Lessor by Lessee or any Guarantor
is correct in all material respects and does not omit any statement necessary
to make the information supplied not misleading; and (xiv) the financial
statements of and any Guarantor have been prepared in accordance with generally
accepted accounting principles consistently applied ("GAAP") and fairly present
in accordance with GAAP the financial condition and the results of operations
of Lessee and such Guarantors at the dates of and for the periods covered by
statements.
7. Identification Marks. To the extent requested by Lessor or if
required by applicable law, Lessee shall affix to the Equipment at Lessee's
expense signs, labels, or other forms of notice to disclose Lessor's ownership
of, and the interest of any Assignee in, the Equipment. Lessee shall keep and
maintain such signs, labels or other forms of notice affixed to the Equipment
throughout the Lease Term. Lessor may furnish such signs, labels or other
4
<PAGE> 8
forms of notice to Lessee. Except as otherwise directed by Lessor, Lessee
shall not allow the name of any person other than Lessor to be placed on any
part of the Equipment as a designation that might reasonably be interpreted as
a claim of ownership.
8. Fees and Taxes. Lessee agrees to pay promptly when due, and
to indemnify and hold Lessor harmless from, all license, title, registration
and recording fees whatsoever, all taxes including, without limitation, sales,
use, franchise, personal property, excise, import, export and stamp taxes and
customs duties, and all charges together with any penalties, fines or interest
thereon which are assessed, levied or imposed by any governmental or taxing
authority against Lessor with respect to any or all of the Equipment or the
purchase, acquisition, ownership, construction, installation, shipment,
delivery, lease, possession, use, maintenance, condition, operation, control,
return or other disposition thereof or the rents, receipts or earnings arising
therefrom which accrue or are payable with respect to the Equipment or this
Lease or which are assessed, are based on a valuation date, or are due during
or with respect to the Lease Term or any subsequent period until the Equipment
has been returned to Lessor pursuant to the provisions of this Lease or until
the Equipment has been purchased by Lessee pursuant to any purchase option
provisions of this Lease, excluding, however, any taxes solely measured by
Lessor's net income from the general operation of Lessor's business including
applicable state franchise taxes payable by Lessor that are solely so measured.
In the event any fees, taxes or charges payable by Lessee pursuant to the next
preceding sentence are paid by Lessor, or if Lessor is required to collect or
pay any thereof, Lessee shall reimburse Lessor therefor (plus any penalties,
fines or interest thereon) promptly upon demand. Unless and until Lessor
notifies Lessee in writing to the contrary, Lessee shall file and pay any
personal property taxes levied or assessed on the Equipment directly to the
levying authority. Upon Lessor's written request, Lessee shall submit to
Lessor satisfactory evidence of payment by Lessee of any or all amounts for
which Lessee is required to make payment or to indemnify Lessor hereunder that
are paid by Lessee, and of the filing of any and all reports, returns and other
documentation required in connection with any such payment. However, Lessor
may, if it elects, estimate such personal property taxes and bill Lessee
therefor periodically in advance. In the event Lessor elects to pay the
personal property taxes directly to a levying authority, Lessor shall submit to
Lessee a copy of its personal property tax return and its receipt for the full
amount of such personal property taxes so paid by Lessor. All of the
obligations of Lessee under this Section shall continue in full force and
effect notwithstanding any expiration, termination, rescission or cancellation
of this Lease. Lessee acknowledges that Lessor may not be exempt from the
payment of any of the amounts referred to herein, even though Lessee might have
been exempt therefrom if it were the owner or purchaser of the Equipment, and
Lessee agrees that this Section shall apply, and the amounts due from it
hereunder shall be due, whether or not Lessee might itself have otherwise been
exempt from any such payments. Subject to the foregoing, Lessee shall have the
right to contest in good faith any such taxes levied or imposed by any
governmental or taxing authority, provided that Lessee shall have given Lessor
not less than ten business days prior notice of its intention to contest and
full particulars of the proposed contest, in the reasonable opinion of Lessor
the proposed contest will not adversely affect the interests of Lessor or any
Assignee, and Lessee either shall have paid the taxes or provided for a bond or
other security so that none of the Equipment will be subject to seizure,
confiscation or forfeiture. For purposes of this Section, the term "Lessor"
shall include each member of Lessor's affiliated group, if any.
9. General Indemnity. (a) Lessee shall indemnify Lessor and any
Assignee (as hereinafter defined), and their respective agents and servants,
against, and agrees to defend, protect, save and keep them harmless from, any
and all liabilities, obligations, losses, damages, penalties, claims, actions,
suits, costs, expenses and disbursements, including attorneys' fees and
expenses and costs for customs, completion, performance and appeal bonds, of
whatsoever kind and nature (including, without limitation, for negligence, tort
liability, damages by reason of strict or absolute liability, punitive damages,
and indirect and consequential damages, but excluding any such amount imposed
or incurred as a result of Lessor's gross negligence or willful misconduct),
imposed on or incurred by or assessed against Lessor and/or any Assignee, in
any way relating to or arising out of (i) the failure of Lessee to provide or
obtain any certificates, documents, consents, authorizations, clearances,
licenses, permits or instruments required hereunder or under any of the other
Transactional Documents, or (ii) the ordering, construction, installation,
delivery, testing, ownership, lease, possession, use, maintenance, operation,
control, movement, import, export, shipment, condition, or return of the
Equipment (including but not limited to latent and other defects, whether or
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not discoverable by Lessor or Lessee, and any claim for patent, trademark,
copyright, software or other intellectual property infringement) until such
time as the Equipment shall have been returned to Lessor pursuant to the
provisions of this Lease or until the Equipment shall have been purchased by
Lessee pursuant to any purchase option provisions of this Lease; provided that
Lessee shall have no obligation to indemnify any Person otherwise so entitled
to indemnity hereunder in respect of the foregoing to the extent the same shall
arise from the gross negligence or wilful misconduct of such person.
(b) The obligations of Lessee under this Section shall survive the
payment of all known obligations under and any expiration, termination,
rescission or cancellation of this Lease, and are expressly made for the
benefit of and shall be enforceable by Lessor, its successors and any Assignee.
10. Use of Equipment; Location; Liens. (a) During the Lease Term,
Lessee warrants and agrees that the Equipment shall be used and operated and
otherwise be in compliance with any established operating procedures therefor
of any Manufacturer and all statutes, regulations and orders of any
governmental body having power to regulate the Equipment or its use. Lessee
shall bear and pay all costs of such compliance. Lessee shall not permit the
Equipment to be used or maintained in any manner or condition that would
violate, or could result in the termination of, the insurance policies carried
by Lessee pursuant to the provisions of this Lease on insurance, or in any
manner or condition or for any purpose for which, in the opinion of any
Manufacturer, the Equipment is not designed or suited.
(b) Lessee agrees that without Lessor's prior written consent, it
will not remove any of the Equipment from the location specified in the Rental
Schedule for such Equipment or permit any of the Equipment to be used by anyone
other than Lessee, Lessee's employees or a responsible independent contractor
engaged by Lessee.
(c) During the Lease Term and until the Equipment has been
returned to Lessor pursuant to the provisions of this Lease or until the
Equipment is purchased by Lessee pursuant to any purchase option provisions of
this Lease, Lessee will not directly or indirectly create, incur, assume or
suffer to exist any mortgage, security interest, lien or encumbrance on the
Equipment or Lessor's or any Assignee's title thereto or interest therein,
except in the name of Lessor and its successor(s) and any Assignee. Lessee, at
its own expense, will promptly take such action as may be necessary to keep the
Equipment free and clear of, and to duly discharge, any such mortgage, security
interest, lien or encumbrance not excepted above.
(d) Lessee agrees to procure and maintain in effect all licenses,
certificates, permits and other approvals and consents required by federal,
state and local laws and regulations in connection with Lessee's possession,
use, operation and maintenance of the Equipment. During the Lease Term, Lessee
agrees that 100 percent of the use of the Equipment shall be "qualified
business use" as that term is and shall be from time to time defined by the
Internal Revenue Code of 1986, as amended.
(e) Lessee shall cooperate fully with Lessor or any Assignee to
perfect and record their respective interests in connection with the
Transactional Documents including, without limitation, the filing of financing
statements and will pay such Persons their reasonable costs related thereto.
Lessee authorizes Lessor to file financing statements that are signed only by
Lessor or that are signed for Lessee by Lessor in any jurisdiction when
permitted by law or local authority. Lessee hereby grants to Lessor
power-of-attorney to act as Lessee's attorney-in-fact to sign Lessee's name on
financing statements as "Debtor".
11. Maintenance and Repairs; Additions to Equipment. (a) Lessee
shall, for the entire Lease Term, at its sole expense, maintain all of the
Equipment in good, safe and efficient operating repair, appearance and
condition, will keep all components of the Equipment properly calibrated and
aligned, will make all required adjustments, replacements and repairs and, if
reasonably determined by Lessee to be necessary for the efficient use of the
Equipment in the conduct of Lessee's business, will obtain and install any
upgrades for the Equipment that are announced and available for sale by a
Manufacturer (collectively, "maintenance and repairs"). Such maintenance and
repairs shall include, but not be limited to, all recommended or advised by a
Manufacturer, all required or
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advised by cognizant governmental agencies or regulatory bodies and all
commonly performed by prudent business and/or professional practice. All
maintenance and repairs to any item of the Equipment shall be made by the
Manufacturer or, upon prior written approval by Lessor, those of substantially
equal skill or knowledge in maintaining and repairing the Equipment.
(b) Lessee shall not modify the Equipment without the prior
written consent of Lessor. Any replacements, substitutions, additions,
attachments, accessions, parts, fittings, accessories, modifications,
enhancements, maintenance and repairs and other upgrades to the Equipment
whenever made shall be considered accessions to the Equipment and shall
automatically become the property of Lessor.
(c) All instruction manuals, published statements of capabilities
and technical specifications, service, maintenance and repair records,
installation, qualification, certification and calibration reports, usage logs,
and printed material relating to the Equipment shall be deemed part of the
Equipment. Computer programs, programming codes, operating systems, data
processing instructions, series of instructions or statements which are machine
readable, and any like symbols or signals usable by an electronic data
processing system (collectively "Software") that has been or shall be installed
or entered in the Equipment shall become a part of the Equipment except for any
Software that is proprietary Software of Lessee and is not a modification,
change, enhancement or improvement to any Software which is identified or
listed in the description of specific items of the Equipment in or attached to
a Rental Schedule. Whenever Lessee acquires Software licenses from other
parties, with respect to the Software such licenses shall, to the extent
assignable, automatically and without further action by Lessee be assigned to
Lessor and become through assignment a part of the Equipment transferable to
any future user of the Equipment for use with the Equipment.
12. Loss, Damage or Destruction of Equipment. (a) Lessee shall
bear all risks of damage to, taking of, or theft, loss or destruction of, any
or all of the Equipment commencing as of the date of this Master Lease and
continuing throughout the Lease Term and until such Equipment has been returned
to Lessor or purchased by Lessee pursuant to any purchase option provisions of
this Lease. Except as otherwise herein expressly provided, no damage to,
taking of or theft, loss or destruction of any Equipment shall impair any
obligation of Lessee to Lessor under this Lease, including, without limitation,
the obligation to pay Basic Rent.
(b) In the event that any item of Equipment shall become damaged
from any cause whatsoever, Lessee agrees to promptly notify Lessor in writing
of such fact, fully informing Lessor of the details thereof. If any item of
Equipment is damaged (unless the same, in the opinion of Lessor is irreparably
damaged, in which case the provisions of this Lease with respect to a Casualty
Occurrence shall apply), Lessee shall, at its sole cost and expense, place the
same in good repair, condition and working order or replace the same with "like
property" having the same value and operating capabilities and useful life at
least equal to the damaged Equipment prior to the date of such damage, which
property shall thereupon become subject to this Lease with title thereto in
Lessor. In the event that an item of Equipment has been damaged, but not
irreparably, if no Event of Default has occurred and is continuing hereunder,
upon receipt by Lessor of evidence, reasonably satisfactory to Lessor, that
such repair, restoration or replacement has been completed, and an invoice
therefor, Lessor shall release to Lessee or its supplier the proceeds of any
insurance received by Lessor as a result of such damage for the purpose of
reimbursing Lessee for the costs of repairing, restoring or replacing such
item.
(c) In the event that any item of Equipment shall become lost,
stolen, destroyed or irreparably damaged from any cause whatsoever, or if any
item of Equipment or Lessor's title thereto shall be requisitioned or seized by
any governmental authority (each such occurrence being herein called a
"Casualty Occurrence") during the Lease Term and until it has been returned to
Lessor pursuant to the provisions of this Lease or until the Equipment is
purchased by Lessee pursuant to any purchase option provisions of this Lease,
Lessee shall promptly notify Lessor in writing of such fact, fully informing
Lessor of all details of the Casualty Occurrence in question, and shall pay
Lessor in cash the greater of (i) the "Stipulated Loss Value" as set forth in
the Table of Stipulated Loss Values attached to the Rental Schedule pursuant to
which such item of Equipment is leased hereunder, calculated as of the date of
the Casualty Occurrence, or (ii) the Fair Market Value (as hereinafter defined)
of the item of Equipment in question as of the date of the Casualty Occurrence.
This payment shall be made within 30 days following the
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Casualty Occurrence, together with the Basic Rent accrued and unpaid with
respect to such Equipment as of the date of the Casualty Occurrence, plus all
Additional Rent or amounts owing with respect to such Equipment on such date of
payment.
(d) Upon the payment of the greater of the Stipulated Loss Value
or Fair Market Value of the Equipment in question in accordance with the terms
of this Section, and the payment of all Basic Rent, Additional Rent and any
other sums then due hereunder, this Lease shall terminate with respect to the
Equipment or part thereof suffering the Casualty Occurrence and all Lessor's
rights and title to such Equipment shall pass to Lessee, "as is" and "where
is", without any representation or warranty by, or recourse to, Lessor, as
provided by the provisions of this Master Lease on disclaimer of warranties and
as evidenced by a duly executed bill of sale naming Lessor as the seller and
Lessee as the buyer.
(e) Provided that no Event of Default has occurred and is
continuing and no event that with the passage of time or giving of notice, or
both, would be an Event of Default has occurred and is continuing, any
insurance proceeds received as the result of a Casualty Occurrence with respect
to any or all items of the Equipment shall be applied first in reduction of any
other then unpaid obligation of Lessee to Lessor hereunder and second in
reduction of Lessee's obligation to pay the greater of the Fair Market Value or
the Stipulated Loss Value for such item if not already paid by Lessee to
Lessor, or, if already paid by Lessee, to the reimbursement of Lessee therefor,
and the balance of the insurance proceeds, if any, shall be paid to Lessee.
13. Reports; Inspections. Lessee will cause to be furnished to
Lessor, if requested in writing, from time-to-time a statement showing the
condition and such other information regarding the Equipment as Lessor may
reasonably request. Lessor and any Assignee shall have the right, upon
reasonable written notice to Lessee, to inspect during Lessee's normal business
hours the Equipment including Lessee's records with respect to the Equipment,
to copy such records, and to inspect and copy Lessee's records with respect to
the financial statements Lessee is required to furnish Lessor or has warranted
to Lessor pursuant to this Lease. Any inspection by Lessor or any Assignee
shall not be deemed to be approval or acknowledgment by Lessor or such Assignee
of the safety, freedom from defects, performance or compliance with
specifications or governmental requirements of the Equipment or of the
conformity of the Equipment or such financial statements to the requirements or
warranties of this Lease, and the disclaimers set forth in the provisions of
this Master Lease on disclaimer of warranties shall apply to any such
inspection. Lessee shall pay or reimburse Lessor for Lessor's reasonable costs
and travel expenses for one such inspection per year, and for Lessor's
reasonable costs, travel expenses and salaries and the charges and such
expenses of Lessor's advisers for the inspection following an inspection which
encountered a breach of the requirements of this Lease or the warranties of
Lessee pursuant to this Lease.
14. Insurance. During the Lease Term and until all Equipment has
been returned to Lessor pursuant to the provisions of this Lease or until the
Equipment is purchased by Lessee pursuant to any purchase option provisions of
this Lease, Lessee shall procure and maintain at its expense with reputable
insurers reasonably acceptable to Lessor (i) insurance on all of the Equipment
in an amount not less than the greater of the Equipment's Stipulated Loss Value
or Fair Market Value replacement cost insuring against all risks of loss or
damage to the Equipment and against such other risks as Lessee would, in the
prudent management of its properties, maintain with respect to similar
equipment owned by it, and (ii) comprehensive public liability and property
damage insurance, in such amounts as shall be satisfactory to Lessor but for
not less than the greater of $1,000,000 or the amounts customarily maintained
by parties similar to Lessee for similar leased equipment with similar
contemplated use, insuring Lessor and any Assignees, as their interests may
appear, against liability for death, bodily injury, professional malpractice,
and property damage arising out of or resulting from the design, construction,
manufacture, ownership, use, operation, lease or maintenance of, or otherwise
in connection with, the Equipment. On the policies referred to in clause (i),
such insurance shall name Lessor (and any Assignees) as the sole loss payee so
that (and Lessor and Lessee hereby agree that) the insurance proceeds payable
under such policies will be payable and paid solely to Lessor (and to any
Assignees). On the policies referred to in clause (ii), such insurance will
name Lessor (and any Assignees) as an additional insured as its interests may
appear. All such policies shall provide that they may not be invalidated
against Lessor (or any Assignees) because of any violation of a condition or a
breach of
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warranty of the policies or application therefor by Lessee, that they may not
be altered or canceled except after 30 days' prior written notice to Lessor,
and that Lessor and any Assignee have the right but not the obligation to pay
the premiums with respect to coverage required by this Lease in order to
continue such insurance in effect or to obtain like coverage. Under the
policies of insurance required to be maintained by Lessee pursuant to this
Master Lease, Lessee agrees to waive any right of subrogation and to cause the
insurance carrier to waive any right of subrogation in each instance as such
right may exist against Lessor or any Assignee and for any and all loss or
damage to the Equipment. Lessee shall maintain and deliver evidence to Lessor
of such insurance written by insurers and in amounts satisfactory to Lessor.
Should Lessee fail to provide such insurance coverage, Lessor may obtain
coverage protecting interests of Lessor and Lessee, or the interest of Lessor
only, for part or all of the Lease Term or such period beyond the Lease Term as
is required by this Lease or by the insurance company issuing such coverage.
The proceeds of such insurance shall be applied, at the option of Lessee if no
Event of Default shall exist, and otherwise at Lessor's option, toward (i)
replacement, restoration or repair of the Equipment or (ii) payment of the
obligations of Lessee under this Lease. Lessee hereby appoints Lessor as
Lessee's attorney-in-fact to make claims for, receive payment of, and execute
and endorse all documents, checks or drafts for loss or damage under any such
policies.
15. Return of Equipment. (a) At the end of the Lease Term for any
Equipment, Lessee at its sole expense shall forthwith return possession of such
Equipment without omissions to Lessor by:
(i) properly preparing, crating and/or assembling such Equipment
(in accordance with the Manufacturer's instructions if such instructions exist)
for shipment by common carrier with all containers and pieces labeled with
model, part and unit numbers and descriptions; and
(ii) shipping such Equipment by common carrier, with insurance and
freight prepaid, to a place designated by Lessor within a 1,000 mile radius of
the specified location under this Lease for such Equipment. Lessor shall pay
additional shipping charges incurred because of distances in excess of such
1,000 miles.
The insurance required by clause (ii) above shall provide that in the
event of loss such insurance shall pay Lessor in cash directly the greater of
(A) the full replacement value of such Equipment and (B) the "Stipulated Loss
Value" as set forth in the Exhibit to the Rental Schedule calculated as of the
Payment Date next preceding the date of loss. Lessee acknowledges that "full
replacement value" may exceed Fair Market Value.
(b) When the Equipment is returned to Lessor it shall be complete.
The condition of the Equipment including Software upon receipt by Lessor shall
be not less than (i) meeting all specifications for such fully upgraded
equipment as published most currently by the respective Equipment vendor(s),
Manufacturer(s) or supplier(s) (collectively referred to, together with their
successors and assigns, if any, as "Vendors"), exclusive of upgrades not
purchased by Lessee in its reasonable discretion or with Lessor's consent (ii)
in fully operational condition, (iii) capable of being installed and operated
in the normal course by another user, (iv) for each item of the Equipment for
which the Vendor has a program of maintenance and service including
certification for reinstallation and for qualification under the maintenance
and service program certified in writing by the Vendor that the items of the
Equipment are in compliance with the conditions specified in this paragraph,
are accepted by the Vendor for reinstallation and are qualified for the usual
and customary service and maintenance program of the Vendor, (v) legally
qualified for future use or operation of the Equipment by another lessee or
purchaser of the Equipment, (vi) free of defects, visible or concealed,
including, but not limited to, damage or malfunction of any kind, dents,
fractures, defacements, discolorations, rust, corrosion, electrical shorts,
fluid restrictions or blockages, disconnections, breakage or the like,
reasonable well and tear excepted, (vii) safe for routine and usual operation,
(viii) in compliance with any and all pertinent governmental or regulatory
rules, laws or guidelines for its operation or use, (ix) free of Lessee's
markings or labelings, and (x) free of any advertising or insignia not
requested by Lessor that was placed on the Equipment by Lessee.
(c) Lessor reserves the right to inspect the Equipment within 30
days of its return to verify compliance with the provisions of this Master
Lease on Equipment maintenance and repairs and additions and on return of
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Equipment. Should there be less than full compliance, Lessor at its option may
(i) perform or cause to be performed through service organizations of its own
choosing such maintenance and repairs, including upgrades, replacements, the
obtaining of paid-up Software licenses and other services, as it deems
necessary to effect such compliance, (ii) require Lessee to perform or cause to
be performed such maintenance and repairs, including upgrades, replacements,
the obtaining of paid-up Software licenses and other services, as Lessor deems
necessary to effect such compliance and/or (iii) reasonably estimate the costs
to effect such compliance. Lessee shall pay to Lessor the costs for
performance of (i) above, or the estimated costs under (iii) above, in any such
case including the costs of the inspection(s). If maintenance and repairs,
including upgrades, replacements, and the obtaining of paid-up Software
licenses and other services, are necessary to place any of the Equipment under
any Rental Schedule in the condition required by this Lease, Lessee shall
continue to pay to Lessor monthly Additional Rent at the last prevailing rate
during the Lease Term for Basic Rent on the Equipment under such Rental
Schedule for the period of delay until all such required maintenance and
repairs can be performed, or for the period of time reasonably necessary to
accomplish such maintenance and repairs. For any such period that applies,
Lessee shall continue to provide the insurance required during the Lease Term.
However, Lessor's acceptance of such rent and provision of insurance during
such period shall not constitute a renewal of the Lease Term, a waiver of
Lessor's right to prompt return of such Equipment in the condition required by
this Section, or a waiver of Lessor's right to possession of such Equipment.
(d) Should the inspection reveal any item(s) of the Equipment to
be missing, Lessee shall be responsible for paying to Lessor promptly the
greater of the Stipulated Loss Value or the Fair Market Value of such item(s)
of the Equipment computed as of the last Payment Date prior to the end of the
Lease Term, plus the amount of any impairment of the Fair Market Value of the
remaining item(s) of the Equipment due to the absence of such missing item(s)
of the Equipment.
(e) In the event that Lessee fails to return any of the Equipment
when required, at the election of Lessor effected by notice to Lessee, the
Lease Term for such Equipment shall be extended on a month-to-month basis on
the same terms as previously in effect, and Lessee shall pay to Lessor monthly
in advance Basic Rent for such Equipment at the last prevailing rate during the
unextended Lease Term, until such Equipment has been returned to Lessor
pursuant to the provisions of this Lease. Notwithstanding any month-to-month
continuance of this Lease, Lessor may resort to any remedies available to it
under this Lease, at law or in equity, to recover such Equipment at any time
following the end of such extended Lease Term.
(f) Lessor may give written notice to Lessee not more than 120
days and not less than 30 days prior to the end of the Lease Term that Lessee
shall delay returning the Equipment to Lessor and shall keep, at Lessor's
expense, the Equipment on the premises of Lessee in working condition after the
end of the Lease Term and until requested by Lessor to return the Equipment or
until six months after the end of the Lease Term, whichever first occurs, at
which time Lessee shall forthwith return possession of the Equipment without
omissions to Lessor as provided by the provisions of this Section other than
this paragraph. After the end of the Lease Term, Lessee shall not use the
Equipment except in the performance of demonstrations requested by Lessor,
which demonstrations shall be at Lessor's expense. During the period from
notice to delay returning the Equipment until requested to return the Equipment
or six months after the end of the Lease Term, Lessee shall maintain the
Equipment in the same condition as required to be maintained during the Lease
Term, shall cooperate with Lessor, shall grant access to Lessee's premises for
inspection of the Equipment by potential purchasers and future lessees of the
Equipment and representatives of Lessor, and shall facilitate demonstrations of
the Equipment by Lessor, all at Lessor's expense. During such period and
thereafter until the Equipment is delivered to a common carrier with the
insurance upon such delivery required by this section, Lessee shall continue to
maintain the insurance required by this Lease during the Lease Term, all at
Lessor's expense. Lessee shall continue to have the risk of loss of the
Equipment and the obligation to indemnify Lessor as provided by this Lease
until the return of the Equipment to Lessor following such period and delivery.
(g) Not less than 180 days prior to expiration of the Lease Term,
if Lessee has not given notice of the exercise of any purchase option and
Lessor has not given notice of the exercise of any option to require Lessee to
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purchase such Equipment, Lessee shall give Lessor notice that Lessee shall be
returning the Equipment forthwith upon the expiration of the Lease Term unless
otherwise notified by Lessor and either (i) that the Equipment is in the
condition required by this Lease upon the return of the Equipment or (ii)
specifying the respects in which the condition of the Equipment is not in
compliance with such requirements and the measures that Lessee shall take to
bring the Equipment into compliance.
16. Lessor's Ownership; Equipment To Be and Remain Personal
Property. (a) Lessee acknowledges and agrees that it does not have, and by
execution of this Lease and/or payments and performance hereunder it shall not
have or obtain, any title to the Equipment, nor any property right or interest,
legal or equitable, therein, except its rights as Lessee hereunder and subject
to the terms hereof. Lessee shall not have or claim a security interest and
shall not seek or obtain replevin, detinue, specific performance,
sequestration, claim and delivery, or like remedies in or for this Lease, any
rents under this Lease, any or all of the Equipment, any items of personal
property identified to become items of the Equipment, or any proceeds of any or
all of the foregoing.
(b) All of the Equipment shall be and remain personal property
notwithstanding the manner in which the Equipment may be attached or affixed to
realty. Upon the expiration, cancellation or termination of the Lease Term of
any or all of the Equipment, Lessee shall have the obligation, and Lessor shall
have the right, to remove, or cause the removal of, such Equipment from the
premises where the same is then located, for return to Lessor pursuant to the
provisions of this Master Lease on return of Equipment and, if applicable, on
Events of Default, whether or not any of the Equipment is affixed or attached
to realty or to any building. In the exercise of its rights, Lessor shall not
be liable for any damage to the realty or any such building or other real or
personal property occasioned by any removal of the Equipment by Lessee or
Lessor or the agents of Lessee or Lessor. Lessee further covenants and agrees
that Lessee will at the request of Lessor, obtain and deliver to Lessor
concurrently with the execution and delivery of each Rental Schedule, a waiver,
in recordable form, from the owner and any landlord, tenant or holder of any
lien or encumbrance on the realty or building(s) on or in which any of the
Equipment described in such Rental Schedule shall be located, under which such
owner, landlord, tenant and holder (i) agree and consent that such Equipment is
and shall be personal property, owned by and removable by Lessor upon the
expiration, cancellation or termination of the Lease Term thereof, and (ii)
waive any rights of distraint or similar rights with respect to such Equipment.
(c) If Lessee is unable to return, or is prevented from returning,
any of the Equipment to Lessor for a period of 6 months following the
expiration, cancellation or termination of the Lease Term as required under the
provisions of this Master Lease on return of Equipment, for any reason
whatsoever, including, but not limited to, the assertion by any third party of
any claim against such Equipment, or of any right with respect thereto, whether
or not resulting from the manner in which such Equipment is affixed or attached
to, or installed in, the realty or any building(s) thereon or any other
personal or real property, or from the failure of any owner, landlord or tenant
of said realty (or the building(s) thereon) or the holder of any lien or
encumbrance to execute the waiver in writing of such fact, for all purposes of
this Lease such Equipment shall be deemed to have been the subject of a
Casualty Occurrence. Thereupon, Lessee shall pay to Lessor the amounts
provided for by the provisions of this Master Lease on loss, damage or
destruction of Equipment, with respect to such Equipment, at the time, in the
manner, and with the consequences provided by such provisions. During any
period of non-return of the Equipment, Lessor in addition to its rights under
this paragraph (c) also may exercise its rights under Section 15 of this Master
Lease.
(d) Notwithstanding the foregoing provisions of this Section,
without Lessor's prior written consent, Lessee shall not permit any of the
Equipment to be attached or affixed to, imbedded in or incorporated into any
building, structure, real estate or other personal or real property.
17. Other Covenants. (a) Lessee agrees to furnish, upon Lessor's
request, such financial, business and operational information concerning Lessee
and any or all Guarantors, including copies of its and their tax returns, as
Lessor or its assigns may reasonably request during the Lease Term.
Additionally, Lessee shall furnish to Lessor and its assigns without notice or
demand therefor two complete copies of its and of every Guarantor's (i)
quarterly interim financial statements within 45 days of the close of each of
the first three fiscal quarters of every year,
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certified by the chief financial officer of, respectively, Lessee or such
Guarantor and (ii) annual financial statements within 120 days of the close of
each fiscal year reported on by independent accountants without material
adverse qualification or comment. All such financial statements shall be
prepared in accordance with generally accepted accounting principles
consistently applied, and shall fairly present in accordance with GAAP Lessee's
and every Guarantor's financial condition and results of operations at the
dates of and for the periods covered by such statements.
(b) Lessee shall promptly furnish to Lessor copies of (i) filings
that Lessee or any Guarantor makes with the SEC or other government agencies
under the securities laws including but not limited to definitive proxy
statements, registration statements, prospectuses and tender offer filings, and
reports on holdings or acquisitions of securities, relating to proxy
solicitations, and on Form 10-K, 10-Q, 8-K or similar forms, and any amendments
to such filings, (ii) press releases of Lessee or any Guarantor, and (iii) new
product (or service) announcements of Lessee or any Guarantor.
(c) Lessee shall give Lessor notice of all meetings of its
stockholders and copies of all materials that are furnished to the stockholders
for the meetings at the same time that the notice or materials are sent to the
stockholders. Lessor shall have the right to have its representative attend
any and all such meetings.
(d) There shall be no actual or threatened material conflict with,
or material violation of, any statute, regulation, standard or rule relating to
Lessee, its present or future operations, or the Equipment.
(e) All information supplied to Lessor or its assigns by Lessee or
any Guarantor shall be correct in all material respects and shall not omit any
statement necessary to make the information supplied not be misleading. There
shall be no material breach of the representations and warranties made by
Lessee in connection with this Lease or by any Guarantor in connection with a
Guaranty (as hereinafter defined).
(f) Lessee shall give Lessor notice of any change in the address
of the executive office or principal place of business of Lessee not less than
15 days prior to the change.
(g) No change shall occur in the control, and no material change
shall occur in the ownership, of Lessee or any Guarantor, and no Guarantor
shall assert in writing that the obligations of the Guarantor as a Guarantor or
in its Guaranty are not in full force and effect; provided, however, that no
material change in control or ownership of Lessee shall be deemed to have
occurred as a consequence of the initial public issuance of its stock.
(h) Lessee shall not make any payment or distribution of money,
checks, securities or property to any Person in contravention of the provisions
of any Guaranty or subordination that such Person has made in favor of Lessor
or its assigns of which Lessee shall have notice or knowledge.
18. Events of Default. If one or more of the following events
(hereinafter called "Events of Default" or an "Event of Default") shall occur:
(i) default shall be made in the payment of any Basic Rent or
Additional Rent due under this Master Lease or under any Rental Schedule
hereto, and any such default shall continue for more than 10 days after the due
date thereof;
(ii) any representation or warranty by Lessee or any Guarantor made
in this Master Lease or in any Guaranty or other Transactional Document or
certificate furnished to Lessor in connection with this Lease or pursuant
hereto shall at any time prove to be incorrect in any material respect when
made;
(iii) Lessee shall make or permit any unauthorized assignment or
transfer of this Master Lease or any Rental Schedule to this Master Lease or of
any of Lessee's rights and obligations hereunder or thereunder, or Lessee shall
make or permit any unauthorized sublease or transfer of any Equipment or the
possession of any Equipment;
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<PAGE> 16
(iv) Lessee shall default in the observance and/or performance of
any other covenant, condition or agreement on the part of Lessee to be observed
and/or performed under this Master Lease, under any Rental Schedule hereto, or
under any other Transactional Document, which default is not governed by
paragraphs (i), (ii) or (iii) above, and such default shall continue for 30
days after written notice from Lessor to Lessee specifying the default and
demanding the same to be remedied;
(v) Lessee or any Guarantor shall make an assignment for the
benefit of creditors, or generally fail to pay its debts as they become due,
or become insolvent or commence a voluntary case under the federal Bankruptcy
Code as now or hereafter constituted or any other applicable federal or state
bankruptcy, insolvency or similar law, or admit in writing its inability to pay
its debts as they mature, or consent to the appointment of a trustee or
receiver, or a trustee or a receiver shall be appointed for Lessee or any
Guarantor or for a substantial part of Lessee's or any Guarantor's property
without such party's consent and such appointment shall be not dismissed for a
period of 60 days; there shall have been entered a decree or order for relief
by a court having jurisdiction in respect of Lessee or any Guarantor, or
approving as properly filed a petition seeking a reorganization, arrangement,
adjustment or composition of or in respect of Lessee or any Guarantor in an
involuntary proceeding or case under any applicable federal or state
bankruptcy, insolvency or other similar law, or appointing a receiver,
liquidator, assignee, custodian, trustee or similar official of Lessee or any
Guarantor or of any substantial part of its property, or ordering the
winding-up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 60 days, or there shall
have been filed a petition by or against Lessee or any Guarantor under any
bankruptcy law or other insolvency law and, if petition is filed against Lessee
or such Guarantor, the petition is not withdrawn or dismissed within 60 days
after the date of filing; or Lessee or any Guarantor shall cease doing business
as a going concern or shall liquidate or be dissolved;
(vi) Lessee or any Guarantor shall, without the prior written
consent of Lessor, enter into a merger, consolidation or division, effect a
share exchange of its outstanding stock for the stock of another corporation,
make a tender offer for equity securities of a publicly held entity, or sell or
otherwise dispose of all or a major part of its assets or of assets that
produce all or a major part of its revenues or profits; provided, however, that
Lessee or any Guarantor, without violating the provisions of this clause, may
consolidate with or merge with a corporation or other entity organized under
the laws of one of the states of the United States (the surviving entity, a
"successor"), effect a share exchange of its outstanding stock for the stock of
another corporation, make a tender offer for equity securities of a public
entity, or sell (except by means of a sale and leaseback arrangement) all or
substantially all of its business and assets to such a successor, on the
condition that any successor expressly assume in writing all of the obligations
of Lessee pursuant to this Lease or of such Guarantor pursuant to its Guaranty,
and that the net tangible assets and the net worth (determined in accordance
with generally accepted accounting principles) of the successor after the
consolidation, merger or sale shall be at least equal to the net tangible
assets and the net worth of Lessee or such Guarantor, as the case may be,
immediately prior to the consolidation, merger or sale;
(vii) there shall occur under any other lease, contract or agreement
between Lessee and Lessor, an Event of Default, as defined in such lease,
contract or agreement;
(viii) any of the Equipment shall be attached, levied upon,
encumbered, pledged, seized or taken under any judicial process (except for any
attachment, levy, encumbrance or pledge caused to be placed on the Equipment by
Lessor) and such proceedings shall not be vacated, or fully stayed, within 30
days thereof;
(ix) at any time there shall occur under (A) any lease between
Lessee and a party other than Lessor as lessor or (B) under any lease wholly or
partially guaranteed by Lessee, the exercise by the lessor of its possessory
remedies or commencement of legal proceedings by the lessor for default under
the lease; provided that the aggregate future payments remaining to be made or
guaranteed by Lessee exceed $250,000, and that under a lease described in (B)
above within ten days of notice to Lessee of such exercise of remedies and
demand for payment by Lessee any such amount guaranteed by Lessee remains
unpaid; or
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<PAGE> 17
(x) any obligation exceeding $250,000 of Lessee or any Guarantor
for the payment of borrowed money or the acquisition of assets by purchase,
conditional sale or other arrangement is not paid or refinanced at maturity,
whether by acceleration or otherwise, or is declared due and payable prior to
the stated maturity thereof by reason of default or other violation of the
terms of any promissory note or agreement evidencing or governing such
obligation, and Lessor has given Lessee an opportunity to either cure the
purported Event of Default or supply information satisfactory to Lessor that it
does not, in fact, exist;
this Lease shall be declared in default, immediately and without notice upon
the occurrence of an Event of Default specified in clause (v) above, and in the
case of any other Event of Default, upon Lessor at any time at its option
subsequent to such Event of Default giving written notice to Lessee that this
Lease is declared in default provided, however, that such notice only shall be
effective if the Event of Default has not been waived or cured as provided in
this Master Lease or if the Event of Default has continued for more than 30
days after Lessee has notice of the existence of the Event of Default. At any
time after this Lease has been declared in default, Lessor may exercise one or
more of the following remedies, to the extent not then prohibited by law, as
Lessor in its sole discretion may elect:
(I) to proceed by appropriate court action or actions at law or in
equity or in bankruptcy to enforce performance by Lessee of the covenants and
terms of this Lease and/or to recover damages for the breach thereof;
(II) to terminate or cancel this Lease upon written notice to
Lessee whereupon all rights of Lessee to use the Equipment shall immediately
terminate, but Lessee shall not be relieved of any obligations under this
Lease;
(III) whether or not this Lease be so terminated or canceled, and
without notice to Lessee, to repossess and/or to render inoperable the
Equipment wherever found, with or without legal process, and for this purpose
Lessor and/or its agents may enter upon any premises of or under the control or
jurisdiction of Lessee or any agent of Lessee without liability for suit,
action or other proceeding by Lessee and remove the Equipment therefrom; Lessee
hereby expressly waives any claims for damages occasioned by such repossession;
LESSEE HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS INCLUDING RIGHTS TO NOTICE OR
A JUDICIAL HEARING, WITH RESPECT TO REPOSSESSION OF THE EQUIPMENT AFTER AN
EVENT OF DEFAULT;
(IV) to hold or to use any Equipment returned to Lessor or
repossessed by Lessor for any purpose whatsoever, to sell any Equipment at a
private or public, cash or credit sale, to re-lease any Equipment, in all the
foregoing events free and clear of any rights of Lessee and without any duty to
account to Lessee with respect to such action or inaction;
(V) whether or not Lessor shall have exercised, or shall hereafter
at any time exercise, any of its other rights with respect to an item of the
Equipment, upon written notice to Lessee, to demand that Lessee pay to Lessor,
and Lessee shall pay to Lessor on the date specified in such notice, as
liquidated damages for loss of a bargain and not as a penalty (in lieu of the
Basic Rent for such Equipment that prior to the Event of Default was to have
been paid on Payment Dates subsequent to the date specified in such notice),
the sum equal to the excess, if any, of 125% of the Stipulated Loss Value for
such item of Equipment computed as of the latest Payment Date when all Basic
Rent and Additional Rent then due and payable has been fully paid over
whichever of the following three amounts Lessor, in its sole discretion, shall
designate in such notice:
(A) the present value of the fair market rental value (determined
as hereafter provided in this Section) of such item of the
Equipment for the remainder of the Lease Term as of the date
specified in such notice, the present value to be computed on
the basis of a seven percent per annum rate of discount from
the respective dates upon which such rent would be paid,
(B) the fair market sales value (determined as hereafter provided
in this Section) of such item of Equipment as of the date
specified in such notice, or
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<PAGE> 18
(C) if Lessor shall have sold or re-leased any item of Equipment
pursuant to clause (IV) above, the net proceeds of such sale
or re-lease,
plus interest at the Default Interest Rate (a) on such sum from the such
Payment Date until paid and (b) on whichever of such three amounts is so
designated by Lessor from such Payment Date until whichever one of the
following shall be applicable to the designated amount: the time when the fair
market rental or sales value shall have been so determined or the time when the
Equipment shall have been sold or re-leased; and
(VI) to forthwith recover from Lessee, and Lessee shall be fully
liable for, all Basic Rent that shall accrue until the date that the Equipment
is returned to or repossessed by Lessor and any Additional Rent including
collection fees, whenever accrued, and interest at the Default Interest Rate.
In addition to the foregoing, Lessor may also recover from Lessee all
reasonable costs and expenses arising out of Lessee's default, including,
without limitation, expenses of repossession of the Equipment and the storage,
inspection, repair, reconditioning, sale and re-leasing thereof, and reasonable
attorneys fees incurred by Lessor in exercising any of its rights or remedies
hereunder. For the purposes of this Section only, "fair market rental value"
and "fair market sales value" shall be determined by an appraisal of an
independent appraiser chosen by Lessor, and the cost of any such appraisal
shall be borne by Lessee. No remedy referred to in this Section is intended to
be exclusive, but each shall be cumulative and in addition to any other remedy
referred to above or otherwise available to Lessor at law or in equity or in
bankruptcy. Lesser shall have no duty to pay Lessee any surplus from sale or
lease of the Equipment, or in the fair market rental or sales value of the
Equipment, above all amounts payable by Lessee to Lessor. The exercise by
Lessor of any one or more remedies shall not be deemed to preclude the
simultaneous or later exercise by Lessor of any or all such previously
exercised remedies and any and all other remedies.
19. Assignment and Transfer by Lessor. (a) Lessor may at any time
and from time to time assign to one or more security assignees (all herein
called the "Secured Party" and also called an "Assignee") for the purpose of
securing a loan to Lessor or for any other purpose, and at its sole discretion,
may also sell or transfer to one or more Persons (herein called the
"Transferee" and also called an "Assignee"), in any case subject to the rights
of Lessee under this Lease but without notice to or consent of Lessee, this
Lease, any other Transactional Documents, any or all of the Equipment, and all
sums at any time due and to become due or at any time owing or payable by
Lessee to Lessor under this Lease or pursuant to any or all of the
Transactional Documents. The Secured Party shall not be obligated to perform
any duty, covenant or condition required to be performed by Lessor under this
Lease or any other Transactional Documents.
(b) Lessee agrees that notwithstanding any assignment to a Secured
Party, each and every covenant, agreement, representation and warranty of
Lessor under this Lease shall be and remain the sole liability of Lessor and of
every successor in interest of Lessor (excluding any Secured Party) or, in the
case of assignment to a Transferee, shall become and remain the sole liability
of the Transferee if so agreed to by the Transferee and if not so agreed to
shall be and remain the sole liability of Lessor. Lessee further agrees and
acknowledges that any assignment, sale or transfer by Lessor could not and
shall not materially change any duty or obligation of Lessee or materially
increase any burden or risk of Lessee.
(c) Lessee further acknowledges and agrees that from and after the
receipt by of written notice of an assignment from Lessor, Lessee shall comply
with the directions or demands given in writing by the Secured Party or (to the
extent not inconsistent with the directions or demands of the Secured Party) by
the Transferee, and the Secured Party or Transferee shall have the right to
exercise (either in its own name or in the name of Lessor) all rights,
privileges, and remedies of Lessor provided for herein. Lessee agrees that any
obligation to a Secured Party as a result of the assignment of this Lease to a
Secured Party as aforesaid shall not be reduced or minimized by reason of any
claim, defense, counterclaim (except for the assertion in litigation of a
mandatory counterclaim), set-off, abatement, reduction or recoupment or other
right that Lessee might otherwise have been able to assert against Lessor, any
prior Assignee or any Transferee. After any assignment to a Secured Party and
unless and until Lessee
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<PAGE> 19
is otherwise notified by the Secured Party, this Lease may not be amended or
modified, and no consent or waiver hereunder shall be effective, without the
prior written consent of the Secured Party. Lessee agrees, at Lessor's
expense, to execute and Lessor or any Transferee or Secured Party may record
any instruments and documents relating to such assignment, mortgage or security
interest reasonably desired by Lessor or any Transferee or Secured Party.
Lessee shall promptly provide any such instruments and documents that are
reasonably requested by Lessor or any Assignee including certificates
indicating any claim, defense, counterclaim, set-off, abatement, reduction,
recoupment or other right that Lessee may have against Lessor or any Assignee,
the date to which Basic Rent has been paid under each Rental Schedule hereunder
and that this Lease is in effect without default or amendment or the extent of
such default or amendment, as the case may be.
20. Recording and Filing; Expenses. Lessee will, upon demand of
Lessor, at Lessee's cost and expense, do and perform any other act and will
execute, acknowledge, deliver, file, register, record and deposit (and will
re-file, re-register, re-record or re-deposit whenever required) any and all
instruments required by law or requested by Lessor (or any Assignee) including,
without limitation, financing statements under the Uniform Commercial Code
(which, notwithstanding the intent of Lessor and Lessee that this is a true
lease, Lessor shall have the right to file wherever and whenever Lessor
requires), for the purpose of providing proper protection to the reasonable
satisfaction of Lessor (and/or any Assignee) of Lessor's title to any Equipment
(and/or of any Assignee's security interest in the Equipment) or for the
purpose of carrying out the intention of this Lease, provided, however, that
Lessee shall not bear such cost and expense in the case of any transfer or
assignment by Lessor other than for Lessee's signature, acknowledgment and
delivery to Lessor or any Assignee of instruments. Lessee will also pay, or
will upon demand reimburse Lessor for, all reasonable costs and expenses
incurred by Lessor in connection with this Lease, any other Transactional
Documents, and any related transactions, closings, enforcement of Lessor's
rights under this Lease and the other Transactional Documents, proceedings
involving Lessee or any Guarantor as a debtor under any chapter of the
Bankruptcy Code, filings, the documentation of this and any related
transactions, and fees and costs of attorneys for Lessor in connection
therewith; provided, however, that Lessee shall not so pay Lessor or reimburse
Lessor for assignments or sales by Lessor or transfers to any Secured Party or
Transferee.
21. Automatic Lease Term Renewal. In the event that at the
expiration of the Primary Term Lessee does not exercise the purchase option set
forth in this Master Lease with respect to the Equipment subject to a Rental
Schedule, the Lease Term shall automatically be renewed for all of the
Equipment subject to such Rental Schedule for an additional term of twelve
months (the "Renewal Term") at a monthly Basic Rent equal to one and one half
percent (1.5%) of the Acquisition Cost of such Equipment, plus any applicable
sales and other taxes, that shall be paid monthly in advance.
22. Quiet Enjoyment. So long as no Event of Default has occurred
and is continuing hereunder, Lessee shall have peaceful and quiet use and
enjoyment of the Equipment during the Lease Term as against acts of Lessor or
anyone claiming by, through or under Lessor including any Secured Party or
Transferee.
23. Failure or Indulgence not Waiver; Additional Rights of Lessor.
(a) No failure to exercise, and no delay in exercising, any right power or
remedy hereunder on the part of Lessor shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. Any waiver, to be effective, must be in writing. A waiver of any
covenant, term or condition contained herein shall not be construed as a waiver
of any subsequent breach of the same covenant, term or condition. Receipt by
Lessor of any Basic Rent or Additional Rent with knowledge of the breach of any
provision hereof shall not constitute a waiver of such breach.
(b) Lessor shall be entitled to injunctive relief in case of the
violation or attempted or threatened violation of any of the provisions hereof,
to a decree compelling performance of any of the provisions hereof, and to any
other remedy allowed in law or in equity.
24. Sublease. Lessee shall not sublease the Equipment, relinquish
possession of the Equipment, or assign, pledge or hypothecate this Lease or
any of Lessee's rights or obligations hereunder, in whole or in part,
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<PAGE> 20
without the prior written consent of Lessor. Nevertheless, any such sublease
and the rents, profits and proceeds therefrom shall be the property of Lessor
and, unless Lessor has consented to such sublease, Lessor within 30 days after
receiving notice thereof in accordance with the provisions of this Master Lease
on notices shall have the right to declare the sublease void from its purported
commencement, to terminate the sublease or to accept the sublease. Any such
attempted relinquishment of possession, assignment pledge or hypothecation by
Lessee without such consent shall be null and void.
25. Purchase Option. (a) If (i) no Event of Default, and no event
which with the giving of notice or lapse of time, or both, would constitute an
Event of Default, has occurred and then remains unremedied to Lessor's
satisfaction, and (ii) this Lease shall not have been earlier terminated,
Lessee shall be entitled, at its option, upon written notice to Lessor, as
hereinafter provided, to purchase all, but not less than all, items of the
Equipment then subject to a Rental Schedule, at the expiration of the Primary
Term for such items of the Equipment or, as the case may be, at the expiration
of any Renewal Term for such items of the Equipment, for an amount, with
respect to each such item of the Equipment, payable in immediately available
funds, equal to the Fair Market Value thereof as of the expiration of the
Primary Term or Renewal Term, as the case may be, as such value is determined
by an Appraisal, plus any applicable sales, excise or other taxes imposed as a
result of such sale (other than net income taxes attributable to such sale).
Lessor's sale of any item of the Equipment shall be on an "as-is", "where-is"
basis, without any representation or warranty by or recourse to Lessor, as
provided by the provisions of this Master Lease on disclaimer of warranties,
and shall be subject to such additional terms and conditions as may be
specified in the Rental Schedule. If Lessee intends to exercise said purchase
option, Lessee shall give written notice to Lessor to such effect at least 180
days prior to the earliest expiration of the Primary Term of the item(s) of the
Equipment subject to the particular Rental Schedule with respect to which
Lessee intends to exercise its purchase option, or, if a Renewal Term is then
in effect, at least 180 days prior to the earliest expiration of the then
current Renewal Term of the item(s) of the Equipment subject to the particular
Rental Schedule with respect to which Lessee intends to exercise its purchase
option. If Lessee fails to give such written notice to Lessor as aforesaid, it
shall be conclusively presumed that Lessee has elected not to exercise such
purchase option. If Lessee gives such written notice, Lessee shall be
obligated to buy, and Lessor shall be obligated to sell, such Equipment on the
terms herein provided.
(b) If Lessee has elected to exercise its purchase option, as
provided in this Section, as soon as practicable following Lessor's receipt of
the written notice from Lessee of Lessee's intent to exercise such option,
Lessor and Lessee shall consult for the purpose of determining the Fair Market
Value of each such item of the Equipment as of the end of the Primary Term
thereof, or, if this Lease has been renewed pursuant to any provisions of this
Lease on option to renew, as of the end of the then current Renewal Term
thereof, and any values agreed upon in writing shall constitute the Fair Market
Value of each such item of the Equipment for the purposes of this Section. In
so consulting, Lessor and Lessee may refer to books containing indexes of
standard values for used equipment of relevant type and age and to the records
of Lessee and similar users which tabulate the history of revenues and various
other economic benefits derived from the use of the Equipment. If Lessor and
Lessee have failed to agree upon such value prior to the 150th day before the
expiration of the Primary Term, or, if this Lease has been renewed, prior to
the 150th day before the expiration of the then current Renewal Term, on and
after such 150th day either party may request that such value be determined by
Appraisal.
(c) Notwithstanding any election by Lessee to purchase, the
provisions of this Lease shall continue in full force and effect until the
transfer of ownership of such Equipment upon the date of purchase by the
delivery of a Bill of Sale by Lessor.
26. Notices. Any notice or other communication required or
permitted to be given by either party hereto to the other party shall be deemed
to have been given upon its receipt, in writing, by the receiving party at its
address set forth below, or at such other address as the receiving party shall
have furnished to the other party by notice pursuant to this Section.
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<TABLE>
<S> <C>
If to Lessee: R F Micro Devices, Inc.
7625 Thorndike Road
Greensboro, NC 27409
If to Lessor: FINOVA Technology Finance, Inc.
10 Waterside Drive
Farmington, CT 06032-3065
</TABLE>
27. Entire Agreement; Severability, Amendment or Cancellation of
Lease. This Lease constitutes the complete and exclusive statement of the
terms of the agreement between the parties with respect to the leasing of the
Equipment and any sale of the Equipment by Lessor to Lessee. Any provision of
this Lease which is prohibited or unenforceable in any jurisdiction shall be,
as to such jurisdiction, ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. LESSEE
ACKNOWLEDGES RECEIPT OF A COPY OF THIS MASTER LEASE. Lessor and Lessee agree
that neither this Lease nor Lessee's acceptance or deemed acceptance of any or
all of the Equipment may be canceled, waived, altered, amended, repudiated,
terminated, rescinded, revoked or modified, except by a writing signed by
Lessee and a duly authorized representative of Lessor.
---------------------------------------
Signature of Lessee
28. Waiver of Jury. Lessor and Lessee waive any right and all
right to trial by jury in any action or proceeding relating in any way to this
Lease.
29. Restriction of Limitation Periods and Damages. Any action for
breach of warranty or in respect of or relating to the Equipment or this Lease
that may be brought by Lessee against Lessor or any Assignee must be commenced
within one year after the cause of action accrues. Lessee shall not make any
claim in respect of or relating to the Equipment or this Lease against Lessor
or any Assignee for special consequential or punitive damages.
30. Governing Law, Consent to Jurisdiction and Service. This
Lease shall be governed by and construed in accordance with the laws of the
State of Connecticut (other than the conflicts of laws provisions). Lessee
agrees that any legal action or proceeding against Lessee in respect of or
relating to this Lease or the Equipment may be brought in any state or federal
court sitting in the city of Hartford in the State of Connecticut. Lessee
hereby irrevocably consents and submits to the nonexclusive personal
jurisdiction of said courts and irrevocably agrees that all claims in any such
action or proceeding may be heard and determined in and enforced by any such
court. Lessee irrevocably consents to the service of summons, notice, or other
process relating to any such action or proceeding by delivery thereof to it by
hand or by mail in the manner set forth in the provisions of this Master Lease
on notices.
31. Lessor's Right to Perform for Lessee. If Lessee fails to duly
and promptly perform any of its obligations under this Lease or fails to comply
with any of the covenants or agreements contained herein, Lessor may itself
perform such obligations or comply with such covenants or agreements, for the
account of Lessee, without thereby waiving any default, and any amount paid or
expense (including, without limitation, attorney's fees) reasonably incurred by
Lessor in connection with such performance or compliance shall, together with
interest thereon at the Default Interest Rate, be payable by Lessee to Lessor
on demand.
32. Agreement for Lease Only. Lessor and Lessee agree that this
Lease is and is intended to be a true lease (and not a lease in the nature of a
security interest) and further agree to treat this Lease as a true lease for
all purposes, including, without limitation, tax purposes.
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<PAGE> 22
33. Binding Effect. This Lease shall inure to the benefit of and
be binding upon the parties hereto and their respective permitted successors
and assigns.
34. General. The captions in this Master Lease and each Rental
Schedule are for convenience of reference only. There shall be only one
original executed copy of this Master Lease and of each Rental Schedule. This
Master Lease is and each Rental Schedule shall be executed in the State of
Connecticut by Lessor's having countersigned the same in the State of
Connecticut, and are to be and shall be performed in the State of Connecticut
by reason of the requirements therein for payment by Lessee to Lessor to be
made in the State of Connecticut.
35. Definitions. The following terms, not elsewhere defined,
shall have the following meanings for all purposes hereof:
"Acquisition Cost" of any item of the Equipment shall mean an amount
equal to the sum of (i) the purchase price of such item of the Equipment paid
by Lessor pursuant to the purchase order for such item of the Equipment
assigned to or given by Lessor, plus (ii) any excise, sales or use tax,
freight, installation, set-up and other costs that are paid by Lessor on or
with respect to such item of the Equipment on or about the time of Lessor's
purchase of the Equipment or the Lease Commencement Date and that Lessor does
not request Lessee to directly reimburse to Lessor.
"Appraisal" shall mean the following procedure whereby recognized
independent qualified equipment appraisers shall mutually agree upon the amount
in question. The party seeking Appraisal shall deliver a written notice to that
effect to the other party appointing its appraiser, and within 15 days after
receipt of such notice, the other party shall, by written notice, appoint its
appraiser. If within 15 days after appointment of the two appraisers as
described above, the two appraisers are unable to agree upon the amount in
question, a third appraiser shall be chosen within five days thereafter by
mutual agreement of the first two appraisers, or if the first two appraisers
fail to agree upon the appointment of a third appraiser, such appointment shall
be made by an authorized representative of the American Arbitration
Association. The appraisal of the third appraiser shall be given within a
period of ten days after the selection of the third appraiser. The average of
the three appraisals arrived at by the time appraisers shall be binding and
conclusive on Lessor and Lessee. Lessor and Lessee each shall pay the fees of
the appraiser appointed by it and shall share equally the fees and expenses of
the third appraiser, if any, and those of the American Arbitration Association,
if applicable.
"Certificate of Inspection and Acceptance" shall mean a certificate in
the form designated by Lessor whereby Lessee evidences its acceptance of one or
more items of the Equipment for lease hereunder.
"Equipment" shall mean the property that this Master Lease and any
Rental Schedule shall provide shall be leased to Lessee pursuant to the
provisions of this Lease.
"Fair Market Value" shall mean, with respect to the Equipment in
question, the amount which would be paid for that Equipment in an arm's-length
sale transaction between an informed and willing buyer (not a used equipment or
scrap dealer) who wants the Equipment to be as described in the next following
sentence and is under no compulsion to buy, and an informed and willing seller
under no compulsion to sell. In determining the Fair Market Value, it shall be
assumed (whether or not the same be true) that the Equipment is fully
operational, installed and in economically productive service and that all
maintenance and repairs including any upgrades, replacements and other services
required by this Lease have been performed and that the Equipment is in such
condition to comply fully with the requirements of this Lease, including
provisions of this Master Lease governing the return of Equipment. The costs
of removal from the location of current use and installation at another
location for use shall not be a deduction in determining the Fair Market Value.
However, upon any exercise by Lessee of the purchase option provided for by
this Master Lease at the expiration of the Primary Term for the Equipment
subject to a Rental Schedule. Lessor and Lessee agree that the Fair Market
Value shall not be less than fifteen percent (15%) of the Acquisition Cost of
such Equipment.
19
<PAGE> 23
"Guarantor" shall mean a guarantor of any or all of the obligations of
Lessee pursuant to this Lease.
"Guaranty" shall mean a writing containing a guaranty of any or all of
the obligations of Lessee pursuant to this Lease.
"Lease Commencement Date" with respect to an item of Equipment shall
mean the date of commencement of the Lease Term of the item as provided by the
applicable Rental Schedule.
"Lease Term" with respect to an item of the Equipment shall mean the
Primary Term plus any and all Renewal Terms plus any period during which Lessee
retains the Equipment on a month-to-month basis pursuant to provisions of this
Master Lease governing the return of the Equipment. The Lease Term shall
include the Lease Commencement Date and the date on which the Lease Term ends.
"Manufacturer" shall mean the Person that manufactures the item of the
Equipment in question.
"Master Lease" shall mean this Master Equipment Lease Agreement.
"Person" shall mean an individual, a corporation, a partnership, an
association, a joint-stock company, a limited liability company, a trust, an
estate, any incorporated organization or similar association, a government or
political subdivision, or any other entity.
"Rental Schedule" shall mean each schedule, executed by Lessor and
Lessee pursuant to this Master Lease, providing for a description of some or
all of the Equipment to be leased hereunder, the place or places where such
Equipment shall be located, its Acquisition Cost, the Basic Rent payable by
Lessee with respect thereto, the Primary Term thereof, the Lease Commencement
Date with respect thereto, and such other matters as Lessor and Lessee may
agree upon.
"Stipulated Loss Value" shall mean the amounts specified in the Table
of Stipulated Loss Values applicable to the items of the Equipment subject to a
Rental Schedule, as provided by the Schedule B attached to the Rental Schedule.
Except as otherwise provided in a writing signed by Lessor and Lessee, the
Stipulated Loss Value immediately prior to the end of the Primary Term for any
items of the Equipment shall be the Stipulated Loss Value throughout any
Renewal Term(s) for such items, and thereafter until such items are returned to
Lessor pursuant to the provisions of this Lease or purchased by Lessee pursuant
to any then applicable purchase option provisions of this Lease.
IN WITNESS WHEREOF, the duly authorized representatives of Lessor and
Lessee have executed this Master Lease as of the date first above written.
<TABLE>
<S> <C>
LESSOR: LESSEE:
FINOVA TECHNOLOGY FINANCE, INC. R F MICRO DEVICES, INC.
By: By:
--------------------------------------- --------------------------------------------------------
Title: Title:
------------------------------------- -------------------------------------------------------
ATTEST:
By:
---------------------------------------------------------
Title:
------------------------------------------------------
</TABLE>
20
<PAGE> 1
EXHIBIT 11
COMPUTATION OF PRO FORMA NET (LOSS) INCOME PER SHARE
RF MICRO DEVICES, INC.
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Nine Month Period Ended December 31,
------------------------------------ Year Ended March 31,
1995 1996* 1996
------------ ------------ ------------
<S> <C> <C> <C>
Weighted average number of
common shares issued and
outstanding 585,000 2,602,918 585,000
Dilutive common stock
equivalents:
Stock options and warrants -- 680,452 --
Preferred stock -- 7,749,239 --
Less shares assumed
repurchased with proceeds -- (86,773) --
------------ ------------ ------------
585,000 10,945,836 585,000
Restricted common stock,
preferred stock, stock options
and warrants assumed to be
outstanding for the period in
accordance with SAB 83 5,013,198 2,276,819 5,013,198
Less shares assumed
repurchased with proceeds (1,023,157) (954,448) (1,023,157)
------------ ------------ ------------
Weighted average number of
shares used to compute
historical (loss) income per
share in accordance with APB
No. 15 and SAB 83 4,575,041 12,268,207 4,575,041
Additional adjustments to the
weighted average number of
shares used to compute
proforma per share calculations:
Long-term note payable, which
will be converted to common
stock upon the closing of the
initial public offering, is assumed
to convert at the beginning of
the period 1,111,111 1,111,111 1,111,111
All series of preferred stock,
which will be converted to
common stock upon the closing
of the initial public offering, is
assumed to be converted at the
beginning of the period 5,578,540 -- 6,480,088
------------ ------------ ------------
Weighted average shares used
in proforma per share
calculation 11,264,692 13,379,318 12,166,240
============ ============ ============
Net (loss) income used in per
share calculations $ (3,031) $ 940** $ (5,188)
Proforma (loss) income per
share $ (0.27) $ 0.07 $ (0.43)
Net (loss) income per share $ (0.66) $ 0.06 $ (1.13)
</TABLE>
* Because the nine month period ended December 31, 1996, was a period of net
income rather than net loss, the calculation of weighted average shares
outstanding for this period takes into consideration common stock
equivalents in accordance with ABP 15.
** Adjusted to exclude $152,000 of interest expense (net of taxes) included in
the net income reported on the Company's statement of operations related to
the long-term note payable assumed converted to common stock at closing of
the initial public offering.
Page 1
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 24, 1997, in Amendment No. 1 to the Registration
Statement (Form S-1 No. 333-22625) and the related Prospectus of RF Micro
Devices, Inc. for the registration of 2,537,000 shares of its common stock.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Raleigh, North Carolina
April 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,321
<SECURITIES> 0
<RECEIVABLES> 4,534
<ALLOWANCES> 510
<INVENTORY> 6,194
<CURRENT-ASSETS> 13,578
<PP&E> 3,832
<DEPRECIATION> 857
<TOTAL-ASSETS> 35,195
<CURRENT-LIABILITIES> 6,486
<BONDS> 10,809
28,257
0
<COMMON> 2,960
<OTHER-SE> (13,317)
<TOTAL-LIABILITY-AND-EQUITY> 35,195
<SALES> 19,654
<TOTAL-REVENUES> 19,654
<CGS> 10,973
<TOTAL-COSTS> 18,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 234
<INCOME-PRETAX> 863
<INCOME-TAX> 75
<INCOME-CONTINUING> 788
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 788
<EPS-PRIMARY> .06
<EPS-DILUTED> .07
</TABLE>
