<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 28, 1999
REGISTRATION NO. 333-81245
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TRIQUINT SEMICONDUCTOR, INC.
(Exact name of Registrant as specified in our charter)
------------------------------
<TABLE>
<S> <C> <C>
DELAWARE 2300 N.E. 95-3654013
BROOKWOOD
PARKWAY
(State or other jurisdiction HILLSBORO, (I.R.S. Employer
of OREGON 97124 Identification
incorporation or organization) (503) 615-9000 Number)
</TABLE>
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
STEVEN J. SHARP
PRESIDENT, CHIEF EXECUTIVE OFFICER & CHAIRMAN
TRIQUINT SEMICONDUCTOR, INC.
2300 N.E. BROOKWOOD PARKWAY
HILLSBORO, OREGON 97124
(503) 615-9000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
ROBERT P. LATTA JORGE DEL CALVO
CHRIS F. FENNELL STANTON D. WONG
JULIA REIGEL DAVINA K. KAILE
TED S. HOLLIFIELD LINDA P. SHIH
WILSON SONSINI GOODRICH & ROSATI PILLSBURY MADISON & SUTRO LLP
PROFESSIONAL CORPORATION 2550 HANOVER STREET
650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94304
PALO ALTO, CALIFORNIA 94304-1050 (650) 233-4500
(650) 493-9300
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
------------------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities being offered pursuant to dividend or interest
reinvestment plans, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1)(2) PRICE PER SHARE(2) OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common stock, $0.001 par value(3)........... 4,442,811 $35.25(4) $156,609,091 $43,538(5)
Common stock, $0.001 par value(3)........... 1,939 $36.25(6) $ 70,289 $ 20
</TABLE>
(1) Includes 579,750 shares that the underwriters have the option to purchase to
cover over-allotments, if any.
(2) Adjusted to reflect a three-for-two stock split in the form of a stock
dividend to be effected on July 2, 1999.
(3) Includes preferred share purchase rights which, prior to the occurrence of
certain events, will not be exercisable or evidenced separately from the
common stock.
(4) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) promulgated under the Securities Act of 1933, as
amended, on the basis of the average of the high and low prices on June 15,
1999 reported on the Nasdaq National Market.
(5) Fee of $43,538 was previously paid.
(6) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) promulgated under the Securities Act of 1933, as
amended, on the basis of the average of the high and low prices on June 25,
1999 reported on the Nasdaq National Market.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY OUR EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 28, 1999
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell and we are not soliciting offers to buy these securities in any
jurisdiction where the offer or sale is not permitted.
<PAGE>
PROSPECTUS
3,865,000 Shares
[LOGO]
Common Stock
Of the 3,865,000 shares of our common stock being sold in this offering,
TriQuint Semiconductor, Inc. is selling 3,006,746 shares and the selling
stockholder is selling 858,254 shares. These share numbers reflect a
three-for-two stock split in the form of a stock dividend to be effected on July
2, 1999. We will not receive any of the proceeds for the sale of shares by the
selling stockholder.
Our common stock is quoted on the Nasdaq National Market under the symbol
TQNT. On June 25, 1999, the last reported sale price of our common stock was
$54.00 per share, ($36.00 per share after taking into account the three-for-two
stock split effected in the form of a stock dividend).
Our business involves significant risks. These risks are described under the
caption "Risk Factors" beginning on page 5.
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
---------------------
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price......................................... $ $
Underwriting discounts and commissions........................ $ $
Proceeds, before expenses, to TriQuint........................ $ $
Proceeds, before expenses, to the selling stockholder......... $ $
</TABLE>
The underwriters may also purchase up to an additional 579,750 shares of
common stock at the public offering price, less the underwriting discounts and
commissions, to cover over-allotments.
The underwriters expect to deliver the shares in New York, New York on
, 1999.
---------------------
SG COWEN
DONALDSON, LUFKIN & JENRETTE
BANC OF AMERICA SECURITIES LLC
CIBC WORLD MARKETS
DAIN RAUSCHER WESSELS a division of Dain
Rauscher Incorporated
U.S. BANCORP PIPER JAFFRAY
, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary................ 3
Risk Factors...................... 5
Forward Looking Statements........ 14
Use of Proceeds................... 15
Price Range of Common Stock....... 15
Dividend Policy................... 15
Capitalization.................... 16
Selected Consolidated Financial
Data............................ 17
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 18
<CAPTION>
Page
<S> <C>
Business.......................... 29
Principal and Selling
Stockholders.................... 33
Underwriting...................... 35
Legal Matters..................... 37
Experts........................... 37
Information Incorporated by
Reference....................... 37
Where You Can Find More
Information..................... 37
Index to Consolidated Financial
Statements...................... F-1
</TABLE>
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. WE
ARE OFFERING TO SELL AND SEEKING OFFERS TO BUY SHARES OF OUR COMMON STOCK ONLY
IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS,
REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR ANY SALE OF OUR COMMON
STOCK.
------------------------
REFERENCES IN THIS PROSPECTUS TO "TRIQUINT," "WE," "OUR" AND "US" REFER TO
TRIQUINT SEMICONDUCTOR, INC., A DELAWARE CORPORATION.
EACH TRADEMARK, TRADE NAME OR SERVICE MARK OF ANY OTHER COMPANY APPEARING IN
THIS PROSPECTUS BELONGS TO ITS HOLDER.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY IS NOT COMPLETE AND DOES NOT CONTAIN ALL OF THE
INFORMATION THAT YOU SHOULD CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. YOU
SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING OUR FINANCIAL STATEMENTS
AND THE RISKS OF INVESTING IN OUR COMMON STOCK DISCUSSED UNDER "RISK FACTORS,"
BEFORE MAKING AN INVESTMENT DECISION. EXCEPT AS OTHERWISE STATED, ALL
INFORMATION ON THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION AND REFLECTS THE THREE-FOR-TWO STOCK SPLIT TO BE EFFECTED
IN THE FORM OF A STOCK DIVIDEND ON JULY 2, 1999 TO STOCKHOLDERS OF RECORD ON
JUNE 22, 1999.
TRIQUINT SEMICONDUCTOR, INC.
We are a leading supplier of high performance gallium arsenide integrated
circuits for the wireless communications, telecommunications, data
communications and aerospace markets. Our integrated circuits are incorporated
into a variety of communications products, including cellular phones and pagers,
fiber optic telecommunications equipment, satellite communications systems, high
performance data networking products and aerospace applications. We use our
proprietary gallium arsenide technology to enable our products to overcome the
performance barriers of silicon devices in a variety of applications. Gallium
arsenide has inherent physical properties that allow its electrons to move up to
five times faster than those of silicon. This higher electron mobility permits
the manufacture of gallium arsenide integrated circuits that operate at much
higher speeds than silicon devices, or operate at the same speeds with reduced
power consumption. We sell our products worldwide to end user customers,
including Alcatel, CellNet Data Systems, Ericsson, Hughes, Lucent, Motorola,
Nokia, Nortel, QUALCOMM and Raytheon.
We own and operate advanced wafer fabrication facilities and utilize
proprietary processes designed to enable us to cost effectively produce analog
and mixed signal integrated circuits in high volumes. We believe that control of
wafer fabrication assures a reliable source of supply and provides greater
opportunities to enhance quality and reliability and achieve manufacturing
efficiency. In addition, this control can facilitate new process and product
development and enables us to be more responsive to customer requirements. Our
wafer fabrication capabilities have allowed us to establish a strategic foundry
business serving leading communications companies. Our foundry business
leverages our extensive library of proprietary analog and mixed signal cells and
our advanced integrated circuit manufacturing processes.
Our strategy is to focus on the communications market by offering a broad
range of standard and custom designed integrated circuits and manufacturing
services which address numerous applications in our target markets. Key elements
of this strategy include:
- focusing on analog and mixed signal design excellence;
- continuing to serve customers across a broad array of applications in
communications markets;
- targeting high growth markets with high performance solutions;
- offering foundry services; and
- capitalizing on partnerships with industry leaders in our target markets.
We are incorporated under the laws of the state of Delaware. Our principal
executive offices are located at 2300 N.E. Brookwood Parkway, Hillsboro, Oregon
97124, and our telephone number is (503) 615-9000.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock TriQuint is offering.................. 3,006,746 shares
Common stock the selling stockholder is offering... 858,254 shares
Common stock to be outstanding after this
offering......................................... 17,736,668 shares
Use of proceeds.................................... For capital expenditures, working
capital and other general corporate
purposes.
Nasdaq National Market symbol...................... TQNT
</TABLE>
The number of shares of our common stock to be outstanding after this
offering is based on 14,563,256 shares outstanding as of June 18, 1999 and gives
effect to the exercise, after June 18, 1999, on a net exercise basis of warrants
to purchase shares of common stock resulting in the issuance of 166,666 shares
of common stock assuming a market price of $36.00 for the common stock. The
number of shares of our common stock to be outstanding after this offering
excludes, as of June 18, 1999, 3,176,618 shares of common stock issuable upon
exercise of stock options with weighted average exercise prices of $11.21 per
share. This number also excludes 1,012,122 additional shares reserved for future
issuance under our stock option plans and 514,914 additional shares reserved for
sale under our employee stock purchase plan.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The information under "As Adjusted" in the consolidated balance sheet data
below reflects the receipt of the estimated net proceeds from the sale by us of
the 3,006,746 shares of common stock in this offering at an assumed public
offering price of $36.00.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues.................................... $ 30,261 $ 45,943 $ 59,526 $ 71,367 $ 111,605 $ 23,681 $ 33,695
Special charges................................... -- -- -- -- 10,220 10,220 --
Income (loss) from operations..................... (9,930) 2,215 3,435 5,633 (6,345) (12,764) 2,967
Net income (loss)................................. (9,732) 3,062 6,287 6,860 (3,955) (12,290) 3,213
Net income (loss) per share:
Basic........................................... $ (1.21) $ 0.32 $ 0.52 $ 0.55 $ (0.28) $ (0.89) $ 0.22
Diluted......................................... $ (1.21) $ 0.28 $ 0.48 $ 0.50 $ (0.28) $ (0.89) $ 0.21
Weighted average shares:
Basic........................................... 8,019 9,537 12,067 12,560 14,099 13,867 14,339
Diluted......................................... 8,019 10,856 13,144 13,662 14,099 13,867 15,149
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1999
----------------------
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents .............................................................. $ 12,949 $ 115,280
Working capital......................................................................... 46,634 148,965
Total assets............................................................................ 146,751 249,082
Capital lease and installment note obligations, less current installments............... 8,012 8,012
Total stockholders' equity.............................................................. 110,878 213,209
</TABLE>
4
<PAGE>
RISK FACTORS
ANY INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD CONSIDER THE RISKS DESCRIBED BELOW CAREFULLY AND ALL OF THE INFORMATION
CONTAINED IN THIS PROSPECTUS BEFORE DECIDING WHETHER TO PURCHASE OUR COMMON
STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY RISKS AND
UNCERTAINTIES WE FACE. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO
US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS OPERATIONS.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION
AND RESULTS OF OPERATIONS WOULD SUFFER. IN THAT EVENT, THE TRADING PRICE OF OUR
COMMON STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT IN
OUR COMMON STOCK. THE RISKS DISCUSSED BELOW ALSO INCLUDE FORWARD-LOOKING
STATEMENTS AND OUR ACTUAL RESULTS MAY DIFFER SUBSTANTIALLY FROM THOSE DISCUSSED
IN THESE FORWARD-LOOKING STATEMENTS.
OUR OPERATING RESULTS MAY FLUCTUATE SUBSTANTIALLY.
Our quarterly and annual results of operations have varied in the past and
may vary significantly in the future due to a number of factors including, but
not limited to, the following:
- cancellation or delay of customer orders or shipments;
- our success in achieving design wins in which our products are designed
into those of our customers;
- market acceptance of our products and those of our customers;
- variability of the life cycles of our customers' products;
- variations in manufacturing yields;
- timing of announcement and introduction of new products by us and our
competitors;
- changes in the mix of products we sell;
- declining average sales prices for our products;
- changes in manufacturing capacity and variations in the utilization of
that capacity;
- variations in operating expenses;
- the long sales cycles associated with our customer specific products;
- the timing and level of product and process development costs;
- the cyclicality of the semiconductor industry;
- the timing and level of nonrecurring engineering revenues and expenses
relating to customer specific products; and
- significant changes in our and our customers' inventory levels.
We expect that our operating results will continue to fluctuate in the
future as a result of these and other factors. Any unfavorable changes in these
or other factors could cause our results of operations to suffer as they have in
the past, based upon some of these factors. For example, in June 1994, Nortel,
formerly Northern Telecom, requested that we delay shipment of some of our
products. Nortel was then our largest customer and the delay, together with
lower than expected orders, materially reduced our revenues and results of
operations in the second quarter and for the remainder of 1994. Due to potential
fluctuations, we believe that period to period comparisons of our results of
operations are not necessarily meaningful and should not be relied upon as
indicators of our future performance.
5
<PAGE>
WE RELY ON A LIMITED NUMBER OF CUSTOMERS FOR A SUBSTANTIAL PART OF OUR REVENUES.
A limited number of customers have accounted for a significant portion of
our revenues in each fiscal period. In recent periods, sales to some of our
major customers as a percentage of total revenues have fluctuated. In 1997,
Nortel accounted for approximately 12.0% of total revenues. In 1998, Nokia
accounted for approximately 12.0% and Raytheon accounted for approximately 11.7%
of total revenues. We expect that sales to a limited number of customers will
continue to account for a substantial portion of our total revenues in future
periods. We do not have long-term agreements with any of our customers.
Customers generally purchase our products pursuant to cancelable short-term
purchase orders. Our results of operations have been negatively affected in the
past by the failure of anticipated orders to materialize and by delays in or
cancellations of orders. If we were to lose a major customer or if orders by or
shipments to a major customer were to otherwise decrease or be delayed, our
results of operations would be harmed.
WE FACE RISKS FROM FAILURES IN OUR MANUFACTURING PROCESSES.
The fabrication of integrated circuits, particularly those made of gallium
arsenide, is a highly complex and precise process. Our integrated circuits are
manufactured from four inch round wafers made of gallium arsenide. During
manufacturing, each wafer is processed to contain numerous die, the individual
integrated circuits. We may reject or be unable to sell a substantial percentage
of wafers or the die on a given wafer because of:
- minute impurities;
- difficulties in the fabrication process;
- defects in the masks used to print circuits on a wafer;
- electrical performance;
- wafer breakage; or
- other factors.
We refer to the proportion of final good integrated circuits that have been
processed, assembled and tested relative to the gross number of integrated
circuits that could be constructed from the raw materials as our manufacturing
yield. Compared to the manufacture of silicon integrated circuits, gallium
arsenide technology is less mature and more difficult to design and manufacture
within specifications in large volume. In addition, the more brittle nature of
gallium arsenide wafers can result in lower manufacturing yields than with
silicon wafers. We have in the past experienced lower than expected
manufacturing yields, which have delayed product shipments and negatively
impacted our results of operations. We may experience difficulty maintaining
acceptable manufacturing yields in the future.
In addition, the maintenance of our two fabrication facilities is subject to
risks, including:
- the demands of managing and coordinating workflow between two
geographically separate production facilities;
- disruption of production in one of our facilities as a result of a
slowdown or shutdown in our other facility; and
- higher operating costs from managing two geographically separate
manufacturing facilities.
IF WE FAIL TO SELL A HIGH VOLUME OF PRODUCTS, OUR OPERATING RESULTS WILL BE
HARMED.
Because the majority of our manufacturing costs are relatively fixed, our
manufacturing volumes are critical to our operating results. If we fail to
achieve acceptable manufacturing volumes or
6
<PAGE>
experience product shipment delays, our results of operations could be harmed.
During periods of decreased demand, our high fixed manufacturing costs could
have a negative effect on our results of operations. We base our expense levels
in part on our expectations of future orders and these expense levels are
predominantly fixed in the short-term. If we receive fewer customer orders than
expected, we may not be able to reduce our manufacturing costs in the short-term
and our operating results would be harmed.
IF WE DO NOT SELL OUR CUSTOMER-SPECIFIC PRODUCTS IN LARGE VOLUMES, OUR OPERATING
RESULTS MAY BE HARMED.
We manufacture a substantial portion of our products to address the needs of
individual customers. Frequent product introductions by systems manufacturers
make our future success dependent on our ability to select development projects
which will result in sufficient volumes to enable us to achieve manufacturing
efficiencies. Because customer specific products are developed for unique
applications, we expect that some of our current and future customer specific
products may never be produced in volume and may impair our ability to cover our
fixed manufacturing costs. In addition, if we experience delays in completing
designs or if we fail to obtain development contracts from customers whose
products are successful, our revenues could be harmed.
OUR OPERATING RESULTS COULD BE HARMED IF WE LOSE ACCESS TO SOLE OR LIMITED
SOURCES OF MATERIALS OR SERVICES.
We currently obtain some components and services for our products from
limited or single sources, such as ceramic packages from Kyocera. We purchase
these components and services on a purchase order basis, do not carry
significant inventories of these components and do not have any long-term supply
contracts with these vendors. Our requirements are relatively small compared to
silicon semiconductor manufacturers. Because we often do not account for a
significant part of our vendors' business, we may not have access to sufficient
capacity from these vendors in periods of high demand. If we were to change any
of our sole or limited source vendors, we would be required to requalify each
new vendor. Requalification could prevent or delay product shipments that could
negatively affect our results of operations. In addition, our reliance on these
vendors may negatively affect our production if the components vary in
reliability or quality. If we are unable to obtain timely deliveries of
sufficient components of acceptable quality or if the prices of components for
which we do not have alternative sources increase, our results of operations
could be harmed.
IF OUR PRODUCTS FAIL TO PERFORM OR MEET CUSTOMER REQUIREMENTS, WE COULD INCUR
SIGNIFICANT ADDITIONAL COSTS.
The fabrication of gallium arsenide integrated circuits is a highly complex
and precise process. Our customers specify quality, performance and reliability
standards that we must meet. If our products do not meet these standards, we may
be required to rework or replace the products. Gallium arsenide integrated
circuits may contain undetected defects or failures that only become evident
after we commence volume shipments. We have experienced product quality,
performance or reliability problems from time to time. Defects or failures may
occur in the future. If failures or defects occur, we could:
- lose revenue;
- incur increased costs such as warranty expense and costs associated with
customer support;
- experience delays, cancellations or rescheduling of orders for our
products; or
- experience increased product returns or discounts.
7
<PAGE>
OUR OPERATING RESULTS MAY SUFFER IF WE DO NOT EXPAND OUR MANUFACTURING CAPACITY
IN A TIMELY MANNER.
We may attempt to increase our capacity by converting our existing facility
to accommodate equipment that uses six-inch wafers. We do not have any
experience processing six-inch wafers in our fabrication facilities. We may be
required to redesign our processes and procedures substantially to accommodate
the larger wafers. As a result, implementing additional capacity for six-inch
wafers may take longer than planned, which could harm our results of operations.
Our facilities have a level of capacity beyond which we cannot cost
effectively produce our products. Although we are not currently approaching
those constraints, we may be unable to further expand our business if we fail to
plan and build sufficient capacity. The process of building, testing and
qualifying a gallium arsenide integrated circuit fabrication facility is time
consuming. We must begin to design and implement additional manufacturing
facilities well in advance of our needs.
WE MAY FACE FINES OR OUR FACILITIES COULD BE CLOSED IF WE FAIL TO COMPLY WITH
ENVIRONMENTAL REGULATIONS.
Federal, state and local regulations impose various environmental controls
on the storage, handling, discharge and disposal of chemicals and gases used in
our manufacturing process. For our manufacturing facility located in Hillsboro,
Oregon, we provide our own manufacturing waste treatment and disposal. We are
required by the State of Oregon Department of Environmental Quality to report
usage of environmentally hazardous materials.
At our Texas facility, we utilize Texas Instruments' waste treatment and
waste storage facilities and services for the treatment, storage, disposal and
discharge of wastes we generate. Our waste streams are commingled with those of
Texas Instruments and are covered by Texas Instruments' waste water permit.
The failure to comply with present or future regulations could result in
fines being imposed on us and we could be required to suspend production or
cease our operations. These regulations could require us to acquire significant
equipment or to incur substantial other expenses to comply with environmental
regulations. We rely to a great extent on Texas Instruments' hazardous waste
disposal system at our Texas facility. Any failure by us, or by Texas
Instruments with respect to our Texas facility, to control the use of, or to
adequately restrict the discharge of, hazardous substances could subject us to
future liabilities and harm our results of operations.
WE DEPEND ON THE CONTINUED GROWTH OF COMMUNICATIONS MARKETS.
We derive a substantial portion of our product revenues from sales of
products for communication applications. These markets are characterized by the
following:
- intense competition;
- rapid technological change; and
- short product life cycles, especially in the cellular telephone market.
In addition, although the communications markets have grown rapidly in the
last few years, these markets may not continue to grow or a significant slowdown
in these markets may occur.
Products for communications applications are often based on industry
standards, which are continually evolving. Our future success will depend, in
part, upon our ability to successfully develop and introduce new products based
on emerging industry standards, which could render our existing products
unmarketable or obsolete. If communications markets evolve to new standards, we
may be unable to successfully design and manufacture new products that address
the needs of our customers or that will meet with substantial market acceptance.
8
<PAGE>
OUR BUSINESS WILL BE IMPACTED IF SYSTEMS MANUFACTURERS DO NOT USE GALLIUM
ARSENIDE COMPONENTS.
Silicon semiconductor technologies are the dominant process technologies for
integrated circuits and the performance of silicon integrated circuits continues
to improve. Our prospective customers may be systems designers and manufacturers
who are utilizing such silicon technologies in their existing systems and who
are evaluating gallium arsenide integrated circuits for use in their next
generation high performance systems. Customers may be reluctant to adopt our
products because of:
- their unfamiliarity with designing systems with gallium arsenide products;
- their concerns related to manufacturing costs and yields;
- their unfamiliarity with design and manufacturing processes; and
- uncertainties about the relative cost effectiveness of our products
compared to high performance silicon components.
Systems manufacturers may not use gallium arsenide components because the
production of gallium arsenide integrated circuits has been and continues to be
more costly than the production of silicon devices. As a result, we must offer
devices that provide superior performance to that of silicon-based devices.
In addition, customers may be reluctant to rely on a smaller company like us
for critical components. We cannot be certain that additional systems
manufacturers will design our products into their systems, that the companies
that have utilized our products will continue to do so in the future or that
gallium arsenide technology will continue to achieve widespread market
acceptance. If our gallium arsenide products fail to achieve market acceptance,
our results of operations would suffer.
CUSTOMERS MAY DELAY OR CANCEL ORDERS DUE TO REGULATORY DELAYS.
The increasing demand for communications products has exerted pressure on
regulatory bodies worldwide to adopt new standards for these products, generally
following extensive investigation of and deliberation over competing
technologies. The delays inherent in the regulatory approval process may in the
future cause the cancellation, postponement or rescheduling of the installation
of communications systems by our customers. These delays have in the past had
and may in the future have a negative effect on our sales and our results of
operations.
OUR REVENUES ARE AT RISK IF WE DO NOT INTRODUCE NEW PRODUCTS AND/OR DECREASE
COSTS.
Historically, the average selling prices of our products have decreased over
the products' lives, and we expect them to continue to do so. To offset these
decreases, we rely primarily on achieving yield improvements and other cost
reductions for existing products and on introducing new products that can often
be sold at higher average selling prices. We believe our future success depends,
in part, on our timely development and introduction of new products that compete
effectively on the basis of price and performance and adequately address
customer requirements. The success of new product and process introductions
depends on several factors, including:
- proper selection of products and processes;
- successful and timely completion of product and process development and
commercialization;
- market acceptance of our or our customers' new products;
- achievement of acceptable manufacturing yields; and
- our ability to offer new products at competitive prices.
9
<PAGE>
Our product and process development efforts may not be successful and our
new products or processes may not achieve market acceptance. To the extent that
our cost reductions and new product introductions do not occur in a timely
manner, our results of operations could suffer.
WE MUST IMPROVE OUR PRODUCTS AND PROCESSES TO REMAIN COMPETITIVE.
If technologies or standards supported by our or our customers' products
become obsolete or fail to gain widespread commercial acceptance, our results of
operations may be materially impacted. Because of continual improvements in
semiconductor technology, including those in high performance silicon where
substantially more resources are invested than in gallium arsenide, we believe
that our future success will depend, in part, on our ability to continue to
improve our product and process technologies. We must also develop new
technologies in a timely manner. In addition, we must adapt our products and
processes to technological changes and to support emerging and established
industry standards. We may not be able to improve our existing products and
process technologies, develop new technologies in a timely manner or effectively
support industry standards. If we fail to do so, our customers may select
another gallium arsenide product or move to an alternative technology.
OUR RESULTS OF OPERATIONS MAY SUFFER IF WE DO NOT COMPETE SUCCESSFULLY.
The semiconductor industry is intensely competitive and is characterized by
rapid technological change, rapid product obsolescence and price erosion.
Currently, we compete primarily with manufacturers of high performance silicon
integrated circuits such as Applied Micro Circuits, Motorola and Philips and
with manufacturers of gallium arsenide integrated circuits such as Anadigics,
Raytheon, RF Micro Devices and Vitesse. We also face competition from the
internal semiconductor operations of some of our current and potential
customers. We expect increased competition from existing competitors and from a
number of companies that may enter the gallium arsenide integrated circuits
market, as well as future competition from companies that may offer new or
emerging technologies such as silicon germanium. Most of our current and
potential competitors have significantly greater financial, technical,
manufacturing and marketing resources than we do. Manufacturers of high
performance silicon integrated circuits have achieved greater market acceptance
of their existing products and technologies in some applications.
We compete with both gallium arsenide and silicon suppliers in the wireless,
data communications and telecommunications markets. In the microwave and
millimeter wave markets, our competition is primarily from a limited number of
gallium arsenide suppliers, which are in the process of expanding their product
offerings to address commercial applications other than aerospace.
Our prospective customers are typically systems designers and manufacturers
that are considering the use of gallium arsenide integrated circuits for their
high performance systems. Competition is primarily based on performance elements
such as speed, complexity and power dissipation, as well as price, product
quality and ability to deliver products in a timely fashion. Due to the
proprietary nature of our products, competition occurs almost exclusively at the
system design stage. As a result, a design win by TriQuint or our competitors
typically limits further competition with respect to manufacturing a given
design.
OUR OPERATING RESULTS MAY SUFFER DUE TO DECLINING DEMAND FOR SEMICONDUCTORS.
From time to time, the semiconductor industry has experienced significant
downturns and wide fluctuations in product supply and demand. This cyclicality
has led to significant imbalances in demand and production capacity. It has also
accelerated the decrease of average selling prices per unit. We may experience
periodic fluctuations in our future financial results because of these or other
industry-wide conditions.
10
<PAGE>
IF WE FAIL TO INTEGRATE ANY FUTURE ACQUISITIONS, OUR BUSINESS WILL BE HARMED.
We face risks from any future acquisitions, including the following:
- we may fail to combine and coordinate the operations and personnel of
newly acquired companies with our existing business;
- our ongoing business may be disrupted or receive insufficient management
attention;
- we may not cost effectively and rapidly incorporate the technology we
acquire;
- we may not be able to recognize the cost savings or other financial
benefits we anticipated;
- we may not be able to retain the existing customers of newly acquired
operations;
- our corporate culture may clash with that of the acquired businesses; and
- we may incur unknown liabilities associated with acquired businesses.
We may not successfully address these risks or any other problems that arise
in connection with future acquisitions.
We will continue to evaluate strategic opportunities available to us and we
may pursue product, technology or business acquisitions. On January 13, 1998, we
acquired our Millimeter Wave Communications operation, which included
substantially all of the assets of the monolithic microwave integrated circuit
operation of Texas Instruments' former Defense Systems & Electronics Group. In
addition, in connection with any future acquisitions, we may issue equity
securities that could dilute the percentage ownership of our existing
stockholders, we may incur additional debt and we may be required to amortize
expenses related to goodwill and other intangible assets that may negatively
affect our results of operations.
WE MUST MANAGE OUR GROWTH.
Our total number of employees grew from 371 in 1997 to 679 in 1998. The
resulting growth has placed, and is expected to continue to place, significant
demands on our personnel, management and other resources. We must continue to
improve our operational, financial and management information systems to keep
pace with the growth of our business.
IF WE DO NOT HIRE AND RETAIN KEY EMPLOYEES, OUR BUSINESS WILL SUFFER.
Our future success depends in large part on the continued service of our key
technical, marketing and management personnel. We also depend on our ability to
continue to identify, attract and retain qualified technical employees,
particularly highly skilled design, process and test engineers involved in the
manufacture and development of our products and processes. We must also recruit
and train employees to manufacture our products without a substantial reduction
in manufacturing yields. There are many other semiconductor companies located in
the communities near our facilities and it may become increasingly difficult for
us to attract and retain those employees. The competition for these employees is
intense, and the loss of key employees could negatively affect us.
OUR BUSINESS MAY BE HARMED IF WE FAIL TO PROTECT OUR PROPRIETARY TECHNOLOGY.
We rely on a combination of patents, trademarks, copyrights, trade secret
laws, confidentiality procedures and licensing arrangements to protect our
intellectual property rights. We currently have patents granted and pending in
the United States and in foreign countries and intend to seek further
international and United States patents on our technology. We cannot be certain
that patents will be issued from any of our pending applications or that patents
will be issued in all countries where our products can be sold or that any
claims allowed from pending applications or will be of sufficient scope
11
<PAGE>
or strength to provide meaningful protection or any commercial advantage. Our
competitors may also be able to design around our patents. The laws of some
countries in which our products are or may be developed, manufactured or sold,
including various countries in Asia, may not protect our products or
intellectual property rights to the same extent as do the laws of the United
States, increasing the possibility of piracy of our technology and products.
Although we intend to vigorously defend our intellectual property rights, we may
not be able to prevent misappropriation of our technology. Our competitors may
also independently develop technologies that are substantially equivalent or
superior to our technology.
OUR ABILITY TO PRODUCE OUR SEMICONDUCTORS MAY SUFFER IF SOMEONE CLAIMS WE
INFRINGE ON THEIR INTELLECTUAL PROPERTY.
The semiconductor industry is characterized by vigorous protection and
pursuit of intellectual property rights or positions, which have resulted in
significant and often protracted and expensive litigation. If it is necessary or
desirable, we may seek licenses under such patents or other intellectual
property rights. However, we cannot be certain that licenses will be offered or
that we would find the terms of licenses that are offered acceptable or
commercially reasonable. Our failure to obtain a license from a third party for
technology used by us could cause us to incur substantial liabilities and to
suspend the manufacture of products. Furthermore, we may initiate claims or
litigation against third parties for infringement of our proprietary rights or
to establish the validity of our proprietary rights. Litigation by or against us
could result in significant expense and divert the efforts of our technical
personnel and management, whether or not the litigation results in a favorable
determination. In the event of an adverse result in any litigation, we could be
required to:
- pay substantial damages;
- indemnify our customers;
- stop manufacturing, use and sale of the infringing products;
- expend significant resources to develop non-infringing technology;
- discontinue the use of certain processes; or
- obtain licenses to the technology.
We may be unsuccessful in developing non-infringing products or negotiating
licenses upon reasonable terms, or at all. These problems might not be resolved
in time to avoid harming our results of operations. If any third party makes a
successful claim against our customers or us and a license is not made available
to us on commercially reasonable terms, our business could be harmed.
On February 26, 1999, a lawsuit was filed against 88 firms, including
TriQuint, in the United States District Court for the District of Arizona. The
suit alleges that the defendants, including us, infringe upon certain patents
held by The Lemelson Medical, Education and Research Foundation, Limited
Partnership. Although we believe the suit is without merit and intend to
vigorously defend ourselves against the charges, we cannot be certain that we
will be successful. Moreover, this litigation may require us to spend a
substantial amount of time and money and could distract management from our day
to day operations.
OUR BUSINESS MAY SUFFER DUE TO RISKS ASSOCIATED WITH INTERNATIONAL SALES.
Our sales outside of the United States were 30.4% of total revenues in 1996,
34.0% of total revenues in 1997 and 24.0% of total revenues in 1998. We face
inherent risks from these sales, including:
- imposition of government controls;
12
<PAGE>
- currency exchange fluctuations;
- longer payment cycles and difficulties related to the collection of
receivables from international customers;
- reduced protection for intellectual property rights in some countries;
- the impact of recessionary environments in economies outside the United
States;
- unfavorable tax consequences;
- political instability; and
- tariffs and other trade barriers.
In addition, due to the technological advantages provided by gallium
arsenide integrated circuits in many military applications, all of our sales
outside of North America must be licensed by the Office of Export Administration
of the U.S. Department of Commerce. If we fail to obtain these licenses or
experience delays in obtaining these licenses in the future, our results of
operations could be harmed. Also, because substantially all of our foreign sales
are denominated in U.S. dollars, increases in the value of the dollar would
increase the price in local currencies of our products and make our products
less price competitive.
WE MAY BE SUBJECT TO A SECURITIES CLASS ACTION SUIT IF OUR STOCK PRICE FALLS.
Following periods of volatility in the market price of a company's stock,
some stockholders may file a securities class action litigation. For example, in
1994, a stockholder class action lawsuit was filed against us, our underwriters,
and some of our officers, directors and investors, which alleged that we, our
underwriters, and certain of our officers, directors and investors intentionally
misled the investing public regarding our financial prospects. We settled the
action and recorded a special charge of $1.4 million associated with the
settlement of this lawsuit and related legal expenses, net of accruals in 1998.
Any future securities class action litigation could be expensive and divert our
management's attention and harm our business, regardless of its merits.
WE FACE RISKS FROM THE YEAR 2000 ISSUE.
Many information technology hardware and software systems, as well as other
non-information technology equipment utilizing microprocessors, can accept only
two digit entries in the date code field. To operate using dates after December
31, 1999, the date code fields will need to accept four digit entries to
distinguish twenty-first century dates from twentieth century dates. This is
commonly referred to as the "Year 2000" issue. We have initiated a comprehensive
Year 2000 audit program, which consists of a six step plan to inventory and
correct any systems that are not Year 2000 compliant. We have completed the
planning phase of our audit program and are currently in the remediation phase,
for both information technology and non-information technology systems as well
as third-party vendors, manufacturers and suppliers. Because of the existence of
numerous systems and related components within our organization and the
interdependency of these systems, it is possible that some of our systems, or
systems at our suppliers, may fail to operate in the year 2000. Our inability to
become Year 2000 compliant on a timely basis or the failure of one or more of
our systems or our suppliers' systems may have a material impact on our future
operating results.
13
<PAGE>
OUR CERTIFICATE OF INCORPORATION AND BYLAWS INCLUDE ANTITAKEOVER PROVISIONS
WHICH MAY DETER OR PREVENT A TAKEOVER ATTEMPT.
Some provisions of our certificate of incorporation and bylaws and
provisions of Delaware law may deter or prevent a takeover attempt, including a
takeover that might result in a premium over the market price for our common
stock. These provisions include:
CUMULATIVE VOTING. Our stockholders are entitled to cumulate their votes
for directors. This may limit the ability of the stockholders to remove a
director other than for cause.
STOCKHOLDER PROPOSALS AND NOMINATIONS. Our stockholders must give advance
notice, generally 120 days prior to the relevant meeting, to nominate a
candidate for director or present a proposal to our stockholders at a meeting.
These notice requirements could inhibit a takeover by delaying stockholder
action.
STOCKHOLDER RIGHTS PLAN. We may trigger our stockholder rights plan in the
event our board of directors does not agree to an acquisition proposal. The
rights plan may make it more difficult and costly to acquire our company.
PREFERRED STOCK. Our certificate of incorporation authorizes our board of
directors to issue up to 5 million shares of preferred stock and to determine
what rights, preferences and privileges such shares have. No action by our
stockholders is necessary before our board of directors can issue the preferred
stock. Our board of directors could use the preferred stock to make it more
difficult and costly to acquire our company.
DELAWARE ANTI-TAKEOVER STATUTE. The Delaware anti-takeover law restricts
business combinations with some stockholders once the stockholder acquires 15%
or more of our common stock. The Delaware statute makes it harder for our
company to be acquired without the consent of our board of directors and
management.
FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" contains forward-looking statements. These
statements relate to future events or our future financial performance and
involve known and unknown risks, uncertainties and other factors that may cause
our or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. These risks and other factors include, among other
things, those listed under "Risk Factors" and elsewhere in this prospectus. In
some cases, you can identify forward-looking statements by terminology such as
"may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," "continue," "our future success depends,"
"seek to continue" or the negative of these terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially. In evaluating these statements, you should specifically
consider various factors, including the risks outlined under "Risk Factors."
These factors may cause our actual results to differ materially from any
forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of these statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus to conform these statements to actual results.
14
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 3,006,746 shares of
common stock that we are selling in this offering will be approximately
$102,331,000, based on an assumed public offering price of $36.00 per share and
after deducting the estimated underwriting discounts and commissions and
estimated offering expenses payable by us. If the underwriters exercise their
over-allotment option in full, we estimate the net proceeds will be
approximately $122,158,000. We will not receive any proceeds from the sale of
the 858,254 shares being sold by the selling stockholder.
We expect to use the net proceeds from this offering for capital
expenditures, working capital and general corporate purposes. We may use a
portion of the net proceeds to acquire complementary products, technologies or
businesses when the opportunity arises; however, we currently have no
commitments or agreements and are not involved in any negotiations with respect
to any such transactions.
Pending these uses, we intend to invest the net proceeds in interest
bearing, investment grade securities.
PRICE RANGE OF COMMON STOCK
Our common stock has been traded on the Nasdaq National Market under the
symbol TQNT since December 13, 1993. The following table sets forth for the
periods indicated the high and low sale prices for our common stock, as reported
by the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
Fiscal year ended December 31, 1997:
First Quarter............................................................ $ 25.25 $ 13.67
Second Quarter........................................................... 20.17 14.08
Third Quarter............................................................ 30.33 21.50
Fourth Quarter........................................................... 20.67 11.58
Fiscal year ended December 31, 1998:
First Quarter............................................................ $ 18.33 $ 13.17
Second Quarter........................................................... 16.67 11.08
Third Quarter............................................................ 14.42 9.67
Fourth Quarter........................................................... 15.08 7.33
Fiscal year ending December 31, 1999:
First Quarter............................................................ $ 17.83 $ 10.33
Second Quarter (through June 25, 1999)................................... 40.83 12.42
</TABLE>
On June 25, 1999, the last reported sale price of our common stock on the
Nasdaq National Market was $36.00. As of June 18, 1999 there were approximately
14,563,256 shares of our common stock outstanding held by approximately 214
holders of record.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock and do
not anticipate paying cash dividends in the foreseeable future. We are
prohibited from paying cash dividends without the consent of our lenders.
15
<PAGE>
CAPITALIZATION
The following table sets forth on an unaudited basis our capitalization as
of March 31, 1999 and as adjusted to reflect the sale of the 3,006,746 shares of
common stock we are offering at an assumed offering price of $36.00 and after
deducting the estimated underwriting discounts and commissions and estimated
offering expenses payable by us and the exercise on a net exercise basis of
warrants to purchase shares of common stock resulting in the issuance of 166,666
shares of common stock assuming a market price of $36.00 for the common stock.
<TABLE>
<CAPTION>
MARCH 31, 1999
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current installments of capital lease and installment note obligations................... $ 5,132 $ 5,132
---------- -----------
---------- -----------
Capital lease and installment note obligations, less current installments................ $ 8,012 $ 8,012
Stockholders' equity:
Preferred stock, $.001 par value per share, 5,000,000 shares authorized; no shares
issued and outstanding............................................................... -- --
Common stock, $.001 par value per share, 25,000,000 shares authorized; 14,354,823
shares issued and outstanding, actual; and 17,528,235 shares issued and outstanding,
as adjusted.......................................................................... 14 17
Additional paid-in capital............................................................. 133,628 235,956
Accumulated deficit.................................................................... (22,764) (22,764)
---------- -----------
Total stockholders' equity........................................................... 110,878 213,209
---------- -----------
Total capitalization............................................................. $ 118,890 $ 221,221
---------- -----------
---------- -----------
</TABLE>
The table above excludes:
- 3,146,748 shares of common stock issuable upon exercise of options
outstanding under our option plans at March 31, 1999 at a weighted average
exercise price of $10.64 per share; and
- 1,047,951 shares of common stock reserved for future grant or issuance under
our option plans and employee stock purchase plan.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read
together with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our financial statements and the related notes
included in this prospectus. The selected consolidated financial data set forth
below as of December 31, 1997 and 1998 and for the years ended December 31,
1996, 1997 and 1998 have been derived from our audited financial statements
included in this prospectus. The selected consolidated financial data as of
December 31, 1994, 1995 and 1996 and for the years ended December 31, 1994 and
1995 are derived from our audited financial statements that are not included or
incorporated in this prospectus. The selected consolidated financial data as of
March 31, 1999 and for the three months ended March 31, 1998 and 1999 are
derived from unaudited financial statements included in this prospectus. These
unaudited financial statements have been prepared on the same basis as the
audited financial statements and, in our management's opinion, contain all
adjustments consisting of normal recurring adjustments necessary for a fair
presentation of our financial position and results of operations. Our historical
results are not necessarily indicative of results to be expected for any future
period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------ -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues............................. $ 30,261 $ 45,943 $ 59,526 $ 71,367 $111,605 $ 23,681 $ 33,695
Operating costs and expenses:
Cost of goods sold....................... 19,790 25,509 34,258 40,028 72,784 18,341 20,951
Research, development and engineering.... 9,945 9,210 10,858 11,518 18,984 4,424 4,594
Selling, general and administrative...... 10,013 9,009 10,975 14,188 15,962 3,460 5,183
Special charges.......................... 443 -- -- -- 10,220 10,220 --
-------- -------- -------- -------- -------- --------- --------
Total operating costs and expenses..... 40,191 43,728 56,091 65,734 117,950 36,445 30,728
-------- -------- -------- -------- -------- --------- --------
Income (loss) from operations.......... (9,930) 2,215 3,435 5,633 (6,345) (12,764) 2,967
Other income, net.......................... 198 930 3,083 2,117 2,484 474 525
-------- -------- -------- -------- -------- --------- --------
Income (loss) before income taxes...... (9,732) 3,145 6,518 7,750 (3,861) (12,290) 3,492
Income tax expense......................... -- 83 231 890 94 -- 279
-------- -------- -------- -------- -------- --------- --------
Net income (loss)........................ $ (9,732) $ 3,062 $ 6,287 $ 6,860 $ (3,955) $ (12,290) $ 3,213
-------- -------- -------- -------- -------- --------- --------
-------- -------- -------- -------- -------- --------- --------
Per share data:
Net income (loss):
Basic.................................. $ (1.21) $ 0.32 $ 0.52 $ 0.55 $ (0.28) $ (0.89) $ 0.22
Diluted................................ $ (1.21) $ 0.28 $ 0.48 $ 0.50 $ (0.28) $ (0.89) $ 0.21
Weighted average shares:
Basic.................................. 8,019 9,537 12,067 12,560 14,099 13,867 14,339
Diluted................................ 8,019 10,856 13,144 13,662 14,099 13,867 15,149
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------------------------ -------------------
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 9,443 $ 35,051 $ 12,907 $ 18,734 $ 14,602 $ 12,949
Working capital............................ 16,409 65,513 37,591 35,180 44,494 46,634
Total assets............................... 34,227 94,024 107,596 121,418 141,306 146,751
Capital lease and installment note
obligations, less current installments... 4,062 7,392 9,891 12,550 9,369 8,012
Total stockholders' equity................. 20,785 72,644 80,246 90,038 107,615 110,878
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS IN CONJUNCTION WITH
THE OUR FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED IN THIS PROSPECTUS
AND THE SELECTED CONSOLIDATED FINANCIAL DATA ABOVE. THE DISCUSSION IN THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THESE FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THOSE
STATEMENTS INCLUDING THE WORDS "EXPECTS," "ANTICIPATES," "INTENDS," "BELIEVES"
AND SIMILAR LANGUAGE. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED BELOW. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO THESE DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS DISCUSSED IN THE SECTION TITLED "RISK
FACTORS" IN THIS PROSPECTUS.
OVERVIEW
We are a leading supplier of high performance gallium arsenide integrated
circuits for the wireless communications, telecommunications, data
communications and aerospace markets. Our products incorporate our proprietary
analog and mixed signal designs and our advanced gallium arsenide manufacturing
processes to address a broad range of applications and customers. We sell our
products worldwide to end user customers, including Alcatel, CellNet Data
Systems, Ericsson, Hughes, Lucent, Motorola, Nokia, Nortel, QUALCOMM and
Raytheon.
We recognize revenues on standard products when we ship them. With respect
to foundry and customer-specific products, we recognize revenues based on the
achievement of various design, manufacturing and other milestones. We recognize
revenues on cost plus contracts as we perform the work. We estimate and
establish allowances and reserves for product returns, warranty obligations,
excess and obsolete inventories, accounts receivable for which collection is
doubtful and price adjustments.
We sell our products through independent manufacturer representatives and
distributors, as well as our direct sales staff. As of December 31, 1998, we had
21 independent manufacturer representative firms and two distributors in North
America. Our seven person direct sales management staff provides sales direction
and support to manufacturer representatives and distributors. We have domestic
sales management offices in Los Angeles, California; Philadelphia, Pennsylvania;
Portland, Oregon; San Jose, California and Raleigh, North Carolina. Our
international business is supported by a network of 15 manufacturer
representatives and distributors in Europe and the Pacific Rim. We also have a
foreign subsidiary, TriQuint Semiconductor GmbH, with offices in Germany and
France. The primary activity of this subsidiary is sales and marketing.
We include in our backlog all purchase orders and contracts for products
requested by the customer for delivery within 12 months. Our business is
characterized by long-term purchase contracts predominantly relating to
customer-specific products, which are typically cancelable without significant
penalty at the option of the purchaser. Our customers have canceled these
purchase contracts or rescheduled delivery dates in the past, and we expect that
these events may also occur in the future. In addition, we produce standard
semiconductors that frequently can be shipped from inventory within a short time
after receipt of an order. These orders may not be reflected in backlog, and
backlog as of any particular date may not necessarily be representative of
actual sales for any future period.
On January 13, 1998, we acquired our Millimeter Wave Communications
operation, which includes substantially all of the assets of the monolithic
microwave integrated circuit operations of Texas Instruments' former Defense
Systems & Electronics Group. We acquired our Millimeter Wave Communications
operation for approximately $19.5 million in cash and 1,266,919 shares of our
common stock then valued at approximately $19.5 million. We financed the cash
portion of the purchase price through an operating lease.
18
<PAGE>
We accounted for the acquisition as a purchase and charged in-process
research and development of $8.8 million to our statement of operations and
recorded other intangibles of approximately $2.1 million on our balance sheet.
We amortize these other intangible assets on a straight-line basis over seven
years. We recognized amortization of approximately $362,000 in 1998 and $74,000
during the three months ended March 31, 1999 related to these intangibles. The
following table presents the purchase price allocations associated with the
acquisition of the Millimeter Wave Communications operation:
<TABLE>
<S> <C>
Tangible assets.................................................... $ 28,048
Workforce in place and purchased technology........................ 2,132
In-process research and development................................ 8,820
---------
$ 39,000
---------
---------
</TABLE>
We allocated the purchase price based on the fair value of the net tangible
and intangible assets acquired. In performing this allocation, we considered,
among other factors, the research and development projects in process at the
date of acquisition. The Millimeter Wave Communications operation's in-process
research and development program consisted of the development of its advanced
pseudomorphic high electron mobility transistor and heterojunction bipolar
transistor processes for millimeter wave applications. At the date of the
acquisition, the Millimeter Wave Communications operation's research and
development was not complete, and we expect total continuing research and
development commitments to complete the projects to be approximately $11.0
million. We anticipated these projects to be successfully completed within three
to four years of the acquisition date. We determined the value assigned to
purchased in-process research and development by estimating the costs to develop
the Millimeter Wave Communications operation's purchased in-process research and
development into commercially viable products, estimating the resulting net cash
flows from the projects and discounting the net cash flows to their present
value. In estimating the value of qualifying in-process research and
development, we applied a stage of completion factor to exclude cash flows
related to development efforts that had not yet begun. We used a discount rate
of 75% for valuing the in-process research and development that was intended to
be commensurate with rates of return demanded by venture capital investors for
investments in start-up companies with similar risks to those of the in-process
products. Additionally, we believe the projects will require maintenance
expenditures if and when they reach a state of technological and commercial
feasibility.
In various quarters, our fiscal quarters ended on different days near the
end of each calendar quarter. For convenience, we have indicated in this
prospectus that fiscal quarter ends coincide with the end of each calendar
quarter.
19
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the results of our operations expressed as a
percentage of total revenues. Our historical operating results are not
necessarily indicative of the results for any future period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER THREE MONTHS ENDED
31, MARCH 31,
--------------------- ------------------
1996 1997 1998 1998 1999
----- ----- ------- -------- -----
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues................................................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of goods sold.......................................................... 57.6 56.1 65.2 77.4 62.2
Research, development and engineering....................................... 18.2 16.1 17.0 18.7 13.6
Selling, general and administrative......................................... 18.4 19.9 14.3 14.6 15.4
Special charges............................................................. -- -- 9.2 43.2 --
----- ----- ------- -------- -----
Total operating costs and expenses........................................ 94.2 92.1 105.7 153.9 91.2
----- ----- ------- -------- -----
Income (loss) from operations............................................. 5.8 7.9 (5.7) (53.9) 8.8
Other income, net............................................................. 5.2 3.0 2.2 2.0 1.6
----- ----- ------- -------- -----
Income (loss) before income taxes........................................... 11.0 10.9 (3.5) (51.9) 10.4
Income tax expense............................................................ 0.4 1.3 0.1 -- 0.8
----- ----- ------- -------- -----
Net income (loss)........................................................... 10.6% 9.6% (3.6)% (51.9)% 9.6%
----- ----- ------- -------- -----
----- ----- ------- -------- -----
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
TOTAL REVENUES
We derive revenues from the sale of standard and customer-specific products
and services. Our revenues also include non-recurring engineering revenues
relating to the development of customer-specific products. Total revenues for
the three months ended March 31, 1999 increased 42.3% to $33.7 million, over the
three months ended March 31, 1998. The increase in revenues during the three
months ended March 31, 1999 reflected strong demand for our products, especially
those for wireless communications applications. Domestic revenues were $24.8
million and international revenues were $8.9 million for the three months ended
March 31, 1999, as compared to domestic revenues of $18.4 million and
international revenues of $5.3 million for the three months ended March 31,
1998.
OPERATING COSTS AND EXPENSES
COST OF GOODS SOLD. Cost of goods sold includes all direct material, labor
and overhead expenses and certain production costs related to non-recurring
engineering revenues. In general, gross profit generated from the sale of
customer-specific products and from non-recurring engineering revenues is
typically higher than gross profit generated from the sale of standard products.
The factors affecting product mix include the relative demand in our various
market segments, as well as the number of non-recurring engineering contracts.
Cost of goods sold was $21.0 million for the three months ended March 31,
1999, an increase of $2.6 million from the three months ended March 31, 1998. As
a percentage of total revenues, cost of goods sold for the three months ended
March 31, 1999 decreased to 62.2% from 77.4% for the three months ended March
31, 1998. The decrease in cost of goods sold as a percentage of revenues is
attributable to continuing improvements in production yields and increased
economies of scale associated with increased sales volumes. In addition, cost of
goods sold for the three months ended March 31, 1998 included nonrecurring costs
related to the relocation of our manufacturing facility to our Hillsboro
facility. The factors related to these non-recurring costs included lower than
expected
20
<PAGE>
yields on the initial products manufactured in the new facility, lower than
expected yields on products built in the old fabrication facility during our
final operation, and equipment downtime following relocation to the new
facility.
RESEARCH, DEVELOPMENT AND ENGINEERING. Research, development and
engineering expenses include the costs incurred in the design of products
associated with nonrecurring engineering revenues, as well as ongoing product
development and research and development expenses. Our research, development and
engineering expenses for the three months ended March 31, 1999 increased to $4.6
million from $4.4 million for the three months ended March 31, 1998. Research,
development and engineering expenses as a percentage of total revenues for the
three months ended March 31, 1999 decreased to 13.6% from 18.7% for the three
months ended March 31, 1998. The slight increase in the absolute dollar level of
research, development and engineering expenses was primarily due to the addition
of new employees. The decrease in research, development and engineering expenses
as a percentage of total revenues was due to revenues increasing at a faster
rate than research, development and engineering spending. We are committed to
substantial investments in research, development and engineering and expect
these expenses will continue to increase in absolute dollar amount in the
future.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the three months ended March 31, 1999 increased to $5.2 million
from $3.5 million for the three months ended March 31, 1998. Selling, general
and administrative expenses as a percentage of total revenues for the three
months ended March 31, 1999 increased to 15.4% from 14.6% for the three months
ended March 31, 1998. The increase in selling, general and administrative
expenses was primarily due to increased selling costs associated with the
increased sales volume and increased costs associated with ongoing development
of our information systems at our Dallas, Texas and Hillsboro, Oregon
facilities.
SPECIAL CHARGES. For the three months ended March 31, 1998, we recorded a
write-off of in-process research and development of $8.8 million associated with
our acquisition of our Millimeter Wave Communications business.
During the three months ended March 31, 1998, we settled a stockholder class
action filed in 1994 and recorded a charge of $1.4 million associated with the
settlement of this lawsuit and related legal expenses, net of accruals and
insurance proceeds.
OTHER INCOME, NET
Other income, net for the three months ended March 31, 1999 increased to
$525,000 from $474,000 for the three months ended March 31, 1998. This increase
resulted primarily from increased interest income on higher cash balances and
decreased interest expense due to reductions in long-term debt.
INCOME TAX EXPENSE
Income tax expense for the three months ended March 31, 1999 was $279,000.
No income tax expense was recorded for the three months ended March 31, 1998,
due to our operating loss in that period.
YEARS ENDED DECEMBER 31, 1998 AND 1997
TOTAL REVENUES
Total revenues for 1998 increased 56.4% to $111.6 million from $71.4 million
for 1997. The increase in total revenues primarily reflects the inclusion of
revenues from the newly acquired Millimeter Wave Communications operation since
the date of acquisition and a strong demand for wireless communication products,
offset by a reduction in demand for telecommunication products.
21
<PAGE>
Domestic and international revenues for 1998 were $84.8 million and $26.8
million, as compared to $47.1 million and $24.3 million for 1997.
OPERATING COSTS AND EXPENSES
COST OF GOODS SOLD. Cost of goods sold was $72.8 million in 1998 and
increased from $40.0 million in 1997. Cost of goods sold for 1998 increased as a
percentage of total revenues to 65.2% from 56.1% for 1997. The increase in
absolute dollar value of cost of goods sold was primarily attributable to the
related increase in sales volume. The increase in cost of goods sold as a
percentage of total revenues was due to an increase in lower-margin products in
the mix of products sold and costs related to the transition to our Hillsboro
wafer fabrication facility. However, cost of goods sold, as a percentage of
total revenues, improved sequentially over each quarter of 1998 due to continued
yield improvements and increases in economies of scale from higher production
volumes.
RESEARCH, DEVELOPMENT AND ENGINEERING. Our research, development and
engineering expenses for 1998 increased 64.8% to $19.0 million from $11.5
million for 1997. Research, development and engineering expenses as a percentage
of total revenues increased to 17.0% for 1998 from 16.1% for 1997. The increase
in research, development and engineering expenses reflected the inclusion of
research, development and engineering expenses related to the newly acquired
Millimeter Wave Communications operation and increased product development
activities and nonrecurring engineering expenses.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for 1998 increased 12.5% to $16.0 million from $14.2 million for 1997.
Selling, general and administrative expenses decreased as a percentage of total
revenues to 14.3% for 1998 from 19.9% for 1997. The increase in absolute dollar
level of selling, general and administrative expenses was primarily attributable
to the inclusion of selling, general and administrative expenses related to the
newly acquired Millimeter Wave Communications operation and increased selling
expenses associated with increased sales volume. As a percentage of total
revenues, the decrease in selling, general and administrative expenses was due
to revenues increasing at a faster rate than these expenses.
SPECIAL CHARGES. During 1998, we recorded a one time write-off of
in-process research and development of $8.8 million. This charge was associated
with our acquisition of the Millimeter Wave Communications operation.
During 1998, we settled a stockholder class action filed in 1994 and
recorded a charge of $1.4 million associated with the settlement of this lawsuit
and related legal expenses, net of accruals and insurance proceeds.
OTHER INCOME, NET
Other income, net for 1998 increased to $2.5 million as compared to $2.1
million for 1997. This increase resulted primarily from lower interest expense,
gain on sale of assets and other miscellaneous receipts, partially offset by
lower interest income.
INCOME TAX EXPENSE
Income tax expense for 1998 decreased to $94,000 from $890,000 for 1997. The
decrease in income tax expense was attributable to our operating loss in 1998.
At December 31, 1998, we had federal and Oregon state net operating loss
carryforwards for tax reporting purposes of approximately $45.7 million and
$22.0 million. Our ability to use our net operating loss carryforwards against
taxable income is subject to additional restrictions and limitations under
Section 382 of the Internal Revenue Code of 1986 if we experience a change of
ownership as defined in that section.
22
<PAGE>
YEARS ENDED DECEMBER 31, 1997 AND 1996
TOTAL REVENUES
Total revenues for 1997 increased 19.9% to $71.4 million from $59.5 million
for 1996. The increase in total revenues was due to significantly increased
demand for products in all three product areas: wireless communications,
telecommunications and computing revenues. Domestic and international revenues
for 1997 were $47.1 million and $24.3 million as compared to $41.4 million and
$18.1 million for 1996.
OPERATING COSTS AND EXPENSES
COST OF GOODS SOLD. Cost of goods sold was $40.0 million in 1997 and
increased from $34.3 million in 1996. Cost of goods sold for 1997 decreased
slightly as a percentage of total revenues to 56.1% from 57.6% for 1996. The
decrease in cost of goods sold as a percentage of total revenues was primarily
attributable to improvements in production yields and increased volume, which
were partially offset by costs associated with startup of our Hillsboro wafer
fabrication facility and expediting costs.
RESEARCH, DEVELOPMENT AND ENGINEERING. Our research, development and
engineering expenses for 1997 increased 6.1% to $11.5 million from $10.9 million
for 1996. Research, development and engineering expenses as a percentage of
total revenues decreased to 16.1% for 1997 from 18.2% for 1996. The increase in
the absolute dollar level of research, development and engineering expenses was
primarily due to increased product development activities and nonrecurring
engineering expenses in response to increased demand from customers.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for 1997 increased 29.3% to $14.2 million from $11.0 million for 1996.
Selling, general and administrative expenses increased as a percentage of total
revenues to 19.9% for 1997 from 18.4% for 1996. The increase in the level of
selling, general and administrative expenses was primarily due to costs
associated with our move to our facility in Hillsboro, Oregon, increased
information technology support costs, increased sales commissions in connection
with the increase in the level of total revenues and professional fees.
OTHER INCOME, NET
Other income, net for 1997 decreased to $2.1 million as compared to $3.1
million for 1996. This decrease resulted from a one-time gain of $680,000 from
our sale of a minority interest in our primary distributor in Europe in 1996 and
from higher interest expense in 1997 associated with an increase in capital
lease obligations.
INCOME TAX EXPENSE
Our effective tax rate for 1997 was 11.5%, which was less than the federal
and state statutory rate of approximately 40% due to the use of net operating
loss carryforwards. The effective tax rate for 1996 was 3.5%.
QUARTERLY RESULTS OF OPERATIONS
The following table presents our operating results for each of the five
quarters in the period ended March 31, 1999 as well as those results expressed
as a percentage of total revenues. The information for each of these quarters is
unaudited and has been prepared on the same basis as the audited financial
statements appearing elsewhere in this prospectus. In the opinion of management,
all necessary adjustments, consisting only of normal recurring adjustments, have
been included to present
23
<PAGE>
fairly the unaudited quarterly results when read together with our audited
financial statements and the related notes. These operating results are not
necessarily indicative of the results of any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1998 1998 1998 1998 1999
------------- ------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues................................. $ 23,681 $ 27,874 $ 29,112 $ 30,938 $ 33,695
Operating costs and expense:
Cost of goods sold........................... 18,341 17,610 17,933 18,900 20,951
Research, development and engineering........ 4,424 5,075 4,568 4,917 4,594
Selling, general and administrative.......... 3,460 3,560 4,288 4,654 5,183
Special charges.............................. 10,220 -- -- -- --
------------- ------------- ------------- ------------- -------------
Total operating costs and expenses......... 36,445 26,245 26,789 28,471 30,728
Income (loss) from operations.............. (12,764) 1,629 2,323 2,467 2,967
Other income, net.............................. 474 441 567 1,002 525
------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes............ (12,290) 2,070 2,890 3,469 3,492
Income tax expense............................. -- 65 29 -- 279
------------- ------------- ------------- ------------- -------------
Net income (loss)........................ $ (12,290) $ 2,005 $ 2,861 $ 3,469 $ 3,213
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
AS A PERCENTAGE OF TOTAL REVENUES:
Total revenues................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of goods sold........................... 77.4 63.2 61.6 61.1 62.2
Research, development and engineering........ 18.7 18.2 15.7 15.9 13.6
Selling, general and administrative.......... 14.6 12.8 14.7 15.0 15.4
Special charges.............................. 43.2 0.0 0.0 0.0 0.0
------------- ------------- ------------- ------------- -------------
Total operating costs and expenses......... 153.9 94.2 92.0 92.0 91.2
Income (loss) from operations.............. (53.9) 5.8 8.0 8.0 8.8
Other income, net.............................. 2.0 1.6 1.9 3.2 1.6
------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes............ (51.9) 7.4 9.9 11.2 10.4
Income tax expense............................. 0.0 0.2 0.1 0.0 0.8
------------- ------------- ------------- ------------- -------------
Net income (loss)........................ (51.9)% 7.2% 9.8% 11.2% 9.6%
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
Our revenues increased in each of the five quarters ended March 31, 1999.
The overall growth trend reflects increasing demand for our wireless
communications products and growing revenue from our Millimeter Wave
Communications operation, partially offset by reduced demand for our
telecommunications products. The lower gross margin of 22.6% in the three months
ended March 31, 1998 was attributable to certain nonrecurring costs related to
the relocation of our wafer fabrication and manufacturing facilities to our new
Hillsboro facility. In connection with the relocation, we realized lower than
expected yields on initial products manufactured in the new facility, lower than
expected yields on products built in the old fabrication facility during final
operation and equipment downtime on some equipment following transfer to the new
facility. Thereafter, improvements in production yields and increased economies
of scale associated with increased sales volume resulted in gross margins
remaining relatively constant over the succeeding four quarters. Our research,
development and engineering expense fluctuated from quarter to quarter primarily
as a result of the level of expenditures for design activities. Selling, general
and administrative expenses increased over the five quarters as sales volume
increased and as we expanded our administrative and support functions. See "Risk
Factors--Our operating results may fluctuate substantially."
24
<PAGE>
We expect that our quarterly operating results will continue to fluctuate in
the future as a result of risk factors such as cancellation or delay of customer
orders or shipments, our success in achieving design wins in which our products
are designed into those of our customers, market acceptance of our products and
those of our customers, and the variability of the life cycles of our customers'
products. Any unfavorable changes in these or other factors could cause our
results of operations to suffer as some of these factors have had in the past.
Due to potential fluctuations, we believe that period to period comparisons of
our results of operations are not necessarily meaningful and should not be
relied upon as indicators of our future performance.
LIQUIDITY AND CAPITAL RESOURCES
We completed a follow-on public offering in September 1995 and raised
approximately $48.1 million, net of offering expenses. In December 1993 and
January 1994, we completed our initial public offering and raised approximately
$16.7 million, net of offering expenses. In addition, we have funded our
operations to date through other sales of equity, bank borrowing, equipment
leases and cash flow from operations. As of March 31, 1999, we had working
capital of approximately $46.6 million, including $27.5 million in cash, cash
equivalents and investments.
We have a $10.0 million unsecured revolving line of credit with a financial
institution. Restrictive covenants included in the line of credit require us to
maintain (a) a total liability to tangible net worth ratio of not more than 0.75
to 1.00, (b) a current ratio of not less than 1.75 to 1.00, (c) minimum tangible
net worth greater than $82.2 million and (d) cash and investments, including
restricted investments, greater than $45.0 million. As of March 31, 1999 we were
in compliance with the restrictive covenants contained in this line of credit.
In May 1996, we entered into a five year synthetic lease through a
participation agreement with Wolverine Leasing Corp., Matisse Holding Company
and United States National Bank of Oregon ("USNB"). The lease provides for the
construction and occupancy of our headquarters and wafer fabrication facility in
Hillsboro, Oregon under an operating lease from Wolverine and provides us with
an option to purchase the property or renew our lease for an additional five
years. Under the terms of the agreement, USNB and Matisse made loans to
Wolverine, which in turn advanced the funds to us for the construction of the
Hillsboro facility and other associated costs and expenses. The loan from USNB
is collateralized by investment securities we have pledged. These investment
securities are classified on our balance sheet as restricted securities. In
addition, restrictive covenants in the participation agreement require us to
maintain (a) a total liability to tangible net worth ratio of not more than 0.75
to 1.00, (b) minimum tangible net worth greater than $50.0 million and (c) cash
and liquid investment securities, including restricted securities, greater than
$45.0 million. As of March 31, 1999, we were in compliance with the covenants
described above.
In November 1997, we entered into a $1.5 million lease for land adjacent to
our Hillsboro facility. Under the terms of that agreement, USNB provided loans
to Matisse to purchase the land, and Matisse in turn leased it to us under a
renewable one year lease agreement. The loan from USNB is partially
collateralized by a guarantee from us. As of March 31, 1999, we were in
compliance with the terms of the agreement.
In January 1998, we acquired our Millimeter Wave Communications operation
for approximately $19.5 million in cash and 1,266,919 shares of our common stock
then valued at approximately $19.5 million. The cash portion of the purchase
price was financed through an operating lease.
25
<PAGE>
The following table presents a summary of our cash flows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------- --------------------
1996 1997 1998 1998 1999
---------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by operating activities.................. $ 5,374 $ 4,152 $ 10,218 $ 1,727 $ 4,207
Net cash and cash equivalents provided (used) by investing
activities............................................... (25,687) 3,266 (10,874) (4,812) (4,751)
Net cash used by financing activities...................... (1,831) (1,591) (3,476) (1,048) (1,109)
---------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents....... $ (22,144) $ 5,827 $ (4,132) $ (4,133) $ (1,653)
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
</TABLE>
Of the cash provided by operating activities for the three months ended
March 31, 1999, net income was $3.2 million and an increase in accounts payable
and accrued expenses was $3.3 million, which were offset by increases in
accounts receivable and inventories of $2.9 million and $1.4 million. The cash
used by operating activities for the three months ended March 31, 1998 related
to an increase in accounts payable and accrued expenses of $4.1 million and an
adjustment of $8.8 million related to the special charges associated with the
acquisition of the Millimeter Wave Communications operation as an offset to the
net loss of $12.3 million.
The cash used by investing activities for the three months ended March 31,
1999 related to the purchase of $64.9 million of investments and $1.6 million of
capital expenditures, offset in part by the sale or maturity of $61.8 million of
investments. The cash used by investing activities for the three months ended
March 31, 1998 related to the net purchase of investments of $3.5 million and
capital expenditures of approximately $1.3 million.
The cash used by financing activities for the three months ended March 31,
1999 related primarily to the payment of principal on capital leases and was
offset in part by the issuance of common stock upon option exercises. The cash
used by financing activities for the three months ended March 31, 1998 also
related primarily to the payment of principal on capital leases and was offset
in part by the issuance of common stock upon option exercises.
Capital expenditures for the three months ended March 31, 1999 were
approximately $1.6 million. During the quarter ended March 31, 1999, we did not
establish any new capital leases. We anticipate that our capital equipment
needs, including manufacturing and test equipment and computer hardware and
software, will require additional expenditures of approximately $13.3 million
during the remainder of 1999.
We believe that our current cash and cash equivalent balances, together with
cash anticipated to be generated from operations, anticipated financing
arrangements and this offering, will satisfy our projected working capital and
capital expenditure requirements, at a minimum, through the end of 2000.
However, we may be required to finance any additional requirements through
additional equity, debt financings or credit facilities. We may not be able to
obtain additional financing or credit facilities, or if these funds are
available, they may not be available on satisfactory terms.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 also requires that changes in the derivative's fair value be
recognized currently in results of operations unless specific hedge accounting
criteria are met. SFAS No. 133 is effective for fiscal years beginning
26
<PAGE>
after June 15, 1999. We do not expect SFAS No. 133 to have a significant impact
on our consolidated financial statements.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET AND INTEREST RATE RISK
We are exposed to minimal market risks. We manage the sensitivity of our
results of operations to these risks by maintaining a conservative investment
portfolio, which is comprised solely of highly-rated, short-term investments. We
do not hold or issue derivative, derivative commodity instruments or other
financial instruments for trading purposes. We are exposed to currency exchange
fluctuations, as we sell our products internationally. We manage the sensitivity
of our international sales by denominating all transactions in U.S. dollars.
We are exposed to interest rate risk, as we use additional financing
periodically to fund capital expenditures. The interest rate that we may be able
to obtain on financings will depend on market conditions at that time and may
differ from the rates we have secured in the past. Sensitivity of results of
operations to market and interest rate risks is managed by maintaining a
conservative investment portfolio.
YEAR 2000 READINESS
Many information technology hardware and software systems, as well as other
non-information technology equipment utilizing microprocessors, can accept only
two digit entries in the date code field. To operate using dates after December
31, 1999, the date code fields will need to accept four digit entries to
distinguish twenty-first century dates from twentieth century dates. This is
commonly referred to as the "Year 2000" issue.
STATE OF READINESS. We have initiated a comprehensive Year 2000 audit
program, which consists of a six step plan to inventory and correct any
non-compliant systems. We expect to complete this audit by October 1999. These
six steps are: inventory, assessment, planning, remediation, testing and
implementation. Our audit program encompasses a review of information technology
systems used in our internal business as well as non-information technology
systems such as manufacturing systems and building systems. It also includes an
audit and evaluation of third party vendors, manufacturers and suppliers. We
have completed the planning phase of our audit program and are currently in the
remediation phase, for both information technology and non-information
technology systems as well as third-party vendors, manufacturers and suppliers.
Our products have no specific date functions or date dependencies and will
operate according to specifications through the Year 2000 date rollover and
thereafter.
COSTS. We do not believe that the historical or anticipated costs of
remediation have had, or will have, a material effect on our financial condition
or results of operations. For information technology systems and most
non-information technology systems, the costs of remediation have been or will
be encompassed in the normal anticipated expenditures for maintenance contracts
and version upgrades. We estimate total incremental cost of remediation at
$150,000.
RISK, CONTINGENCY PLANS AND REASONABLY LIKELY WORST CASE SCENARIO. While we
rely heavily on our computer systems, software applications and other
electronics containing date-sensitive, embedded technology as part of our
business operations, the components upon which we primarily rely were developed
with current state-of-the-art technology. Accordingly, we anticipate that our
audit and remediation program will demonstrate that many of our high-priority
systems do not present material Year 2000 compliance issues. For computer
systems, software applications and other electronics containing date-sensitive
embedded technology that have met our desired level of Year 2000 readiness, we
will use our existing contingency plans to mitigate or eliminate problems we may
experience if an unanticipated system failure were to occur. For components that
have not met our desired level of
27
<PAGE>
readiness, specific contingency plans will be developed to determine the actions
we would take if such a component failed. We will be better able to develop a
contingency plan as we move through the testing phase of the audit program and
as we continue to monitor progress of critical third-party vendors,
manufacturers and suppliers. At the present time, we anticipate the development
in the third quarter of 1999 of a contingency plan to respond to a worst case
scenario. Because of our numerous systems and related components and the
interdependency of these systems, it is possible that certain of our systems, or
systems at entities that provide us services or goods may fail to operate in the
year 2000. Our inability to become Year 2000 compliant on a timely basis or the
failure of our systems or at an entity that provides services or goods to us may
have a material impact on our future operating results or financial condition.
See "Risk Factors--We face risks from the Year 2000 issue."
28
<PAGE>
BUSINESS
THE FOLLOWING BUSINESS SECTION CONTAINS FORWARD LOOKING STATEMENTS RELATING
TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF TRIQUINT, WHICH INVOLVE
RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS,
INCLUDING THOSE SET FORTH IN "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
TriQuint Semiconductor designs, develops, manufactures and markets a broad
range of high performance analog and mixed signal integrated circuits for
communications markets. Our integrated circuits are incorporated into a variety
of communications products, including cellular phones and pagers, fiber optic
telecommunications equipment, satellite communications systems, high performance
data networking products and aerospace applications. We use our proprietary
gallium arsenide technology to enable our products to overcome the performance
barriers of silicon devices in a variety of applications. Gallium arsenide has
inherent physical properties that allow its electrons to move up to five times
faster than those of silicon. This higher electron mobility permits the
manufacture of gallium arsenide integrated circuits that operate at much higher
speeds than silicon devices, or operate at the same speeds with reduced power
consumption. We sell our products worldwide to end user customers, including
Alcatel, CellNet Data Systems, Ericsson, Hughes, Lucent, Motorola, Nokia,
Nortel, QUALCOMM and Raytheon.
We own and operate advanced wafer fabrication facilities and utilize
proprietary processes designed to enable us to cost effectively produce analog
and mixed signal integrated circuits in high volumes. We believe that control of
wafer fabrication assures a reliable source of supply and provides greater
opportunities to enhance quality and reliability and achieve manufacturing
efficiency. In addition, this control can facilitate new process and product
development and enables us to be more responsive to customer requirements. Our
wafer fabrication capabilities have allowed us to establish a strategic foundry
business serving leading communications companies. Our foundry business
leverages our extensive library of proprietary analog and mixed signal cells and
our advanced integrated circuit manufacturing processes.
TRIQUINT STRATEGY
We are a leading supplier of high performance gallium arsenide integrated
circuits for the wireless communications, telecommunications, data
communications and aerospace markets. Our products incorporate our proprietary
analog and mixed signal designs and our advanced gallium arsenide manufacturing
processes to address a broad range of applications and customers. Key elements
of our strategy include:
FOCUSING ON ANALOG AND MIXED SIGNAL DESIGN EXCELLENCE. We have made
substantial investments in our analog and mixed signal circuit design
capabilities. Our design staff has specialized expertise to address the needs of
each of our target markets. The foundation of our design resources is an
extensive library of digital and analog cells and associated software tools and
databases necessary to develop new products rapidly and cost effectively. We
believe that our analog and mixed signal design capabilities provide us with a
competitive advantage in designing and developing integrated circuits for
standard or customer specific products in our target markets.
CONTINUING TO SERVE CUSTOMERS ACROSS A BROAD ARRAY OF APPLICATIONS IN
COMMUNICATIONS MARKETS. We offer a broad range of standard and customer specific
integrated circuits, as well as manufacturing and design services, which address
numerous end-user applications in a variety of communications markets. The
breadth of our offerings resulted in the direct delivery of products and
services to more than 380 customers during 1998. In addition, we had over 20
customers that each contributed $1.0 million or more to our revenues in 1998. We
believe that our broad customer base and wide range of
29
<PAGE>
applications provide us with significant insights into future customer
requirements, which facilitates the timely development of new products and
services for our target markets. This enables us to participate in emerging
communications markets.
TARGETING HIGH GROWTH MARKETS WITH HIGH PERFORMANCE SOLUTIONS. We use our
advanced proprietary gallium arsenide technology to produce high performance
integrated circuits that are intended to overcome the performance limitations of
silicon devices in the wireless communications, telecommunications, data
communications and aerospace markets. We design and manufacture innovative
analog and mixed signal products that provide high performance solutions for
targeted applications within these growing markets. These applications require
integrated circuits that have one or more attributes of gallium arsenide
technology, such as low noise for superior signal quality, high speed for
operation at higher frequencies and low power consumption for battery powered
portability.
OFFERING FOUNDRY SERVICES. We believe that our foundry capabilities are a
key element in forming long-term partnerships with our customers and enable us
to capitalize further on the growth in communications markets. We also believe
many semiconductor companies are embracing a manufacturing outsourcing model and
that, as a result, foundries will play an important role in the overall growth
of the semiconductor industry. We believe our ability to offer both leading edge
analog and mixed signal devices, as well as state-of-the-art gallium arsenide
processes, is a key competitive advantage. We seek to continue to expand our
foundry capabilities, including our integrated circuit manufacturing,
post-fabrication and product engineering services, in order to meet the rigorous
demands of our customers. For example, we have entered into agreements with a
number of design firms to offer design services to our customers. These
agreements enable us to enhance the value of our services without significantly
increasing overhead. We currently provide foundry services for, among others,
CellNet Data Systems, Ericsson, Lucent, Motorola and QUALCOMM.
CAPITALIZING ON PARTNERSHIPS WITH INDUSTRY LEADERS IN OUR TARGET
MARKETS. We seek to continue to establish and maintain close working
relationships with industry leaders in each of our target market segments. We
also intend to establish strategic relationships with companies that provide
access to new technologies, products and markets. We have relationships with
leading manufacturers in our target markets such as Alcatel, Bosch, Ericsson,
Hughes, Lucent, Nokia, Nortel, Philips and QUALCOMM.
TARGET MARKETS
We focus on commercial and aerospace applications in the wireless
communications, telecommunications, data communications and millimeter wave
communication markets, which can benefit significantly from the performance of
gallium arsenide and our analog and mixed signal design expertise.
WIRELESS COMMUNICATIONS. Gallium arsenide design and manufacturing
technologies are being used in commercial communications applications such as
satellites, satellite receivers, wireless transceivers for data networks,
wireless local area networks, cellular telephones and pagers.
Frequency bands are allocated to the various wireless communications
applications by government regulatory bodies throughout the world. The
allocation is based, among other factors, upon the availability of unallocated
frequency bands and the ability of equipment to operate effectively in these
bands. As the lower frequency bands become fully allocated and congested, and
the volume and rate of communications increases, the trend is toward the
allocation and use of higher frequency bands. The speed of gallium arsenide
technology makes it well suited for applications at these higher frequencies.
The ability of gallium arsenide to operate at higher frequencies also makes
it well suited for use in aerospace applications. In addition, other key
performance advantages of gallium arsenide over silicon in key wireless
communications system functions for both commercial and aerospace applications
are
30
<PAGE>
improved signal reception and transmission, better signal processing in
congested bands and greater power efficiency for longer battery life in portable
applications.
TELECOMMUNICATIONS. Gallium arsenide technologies are well suited for the
growing markets and applications that require the transmission or manipulation
of large amounts of information at high speeds with high data integrity. These
applications typically require customer specific solutions. These applications
include digital, analog and mixed signal functions and are found primarily in
the telecommunications industry, but also include other industries such as
instrumentation and aerospace. For many of these applications, we believe our
products enable these systems to achieve superior performance.
We believe that the increasing use of fiber optic cable in
telecommunications and data communications systems has created a significant
growth opportunity for our gallium arsenide products. Because data transmission
rates in fiber optic cable can be many times greater than those of copper lines,
a single fiber line can cost-effectively replace multiple copper lines. In order
to take advantage of the potential cost advantages of fiber optic
communications, information must be transmitted at higher rates generally
achievable by using gallium arsenide products such as those manufactured by us.
The telecommunications industry has established a series of standards that
define transmission rates, protocols, signal quality and reliability. These
standards include synchronous optical network, integrated services digital
network and asynchronous transfer mode. Gallium arsenide integrated circuits
address the performance requirements of these standards, as well as higher speed
communication standards (2.48 gigabits per second and above).
DATA COMMUNICATIONS. Data communications equipment is typically used to
interconnect mainframe computers, clients and servers, workstations, disk
storage arrays and other peripheral devices. Other applications that require
transmission of large amounts of data at high speed include multimedia
computing, supercomputing, multiprocessor systems, interactive computer aided
design/ computer aided manufacturing, medical imaging and high speed, high
resolution printing. As new applications requiring higher volume data transfer
have proliferated, the use of gallium arsenide technology has also increased.
Using our mixed signal technology, our products enable high speed data
transmission with high data integrity.
MILLIMETER WAVE COMMUNICATIONS. On January 13, 1998, we acquired from
Raytheon TI Systems our Millimeter Wave Communications operation, which included
substantially all of the assets of the monolithic microwave integrated circuit
operations of Texas Instruments' former Defense Systems & Electronics Group. The
Millimeter Wave Communications operation designs, develops, manufactures and
markets advanced gallium arsenide integrated circuits that are used in
commercial applications such as wireless and satellite communications as well as
in aerospace systems.
We provide products that are used in applications for the digital radio
market. The point to point radio market is driven by expansion of the wireless
telephone market, as these radios serve as the infrastructure to link the
various remote towers to the switching centers. The point to multipoint radio
market is being driven by local multipoint distribution systems for wireless
distribution of phone, video and two-way data services and the growing demand
for other high speed wireless networks.
31
<PAGE>
CUSTOMERS
We have a broad customer base of leading systems manufacturers. We shipped
products or provided manufacturing services directly to more than 265 end user
customers and distributors in 1998. Our largest customers include Nokia, which
accounted for approximately 12.0%, and Raytheon, which accounted for
approximately 11.7%, of our total revenues in 1998. In 1997, Nortel accounted
for approximately 12.0% of our total revenues. No other single customer
accounted for greater than 10% of total revenues during these periods.
The following is a list of our customers that contributed $1.0 million or
more to our revenues in 1998:
<TABLE>
<S> <C>
Alcatel Motorola
Ascend Nokia
Bosch Nortel
CellNet Data Systems Northrop Grumman
Cisco Systems Philips
DSC Communications QUALCOMM
Ericsson Raytheon
Hittite Rockwell
Hughes Stratus
Lucent Tellabs
Mini-Circuits
</TABLE>
OPERATIONS
Our Oregon wafer manufacturing facility is located in Hillsboro. We moved
our executive, administrative, test and technical offices to this 124,000 square
foot facility in the first quarter of 1997. The adjoining Hillsboro wafer
fabrication facility consists of an additional 38,000 square feet, of which
17,000 square feet are operated as a class 10 performance clean room.
Our Texas facility is located in Dallas. The Texas facility comprises
approximately 100,000 square feet, of which 15,000 square feet are operated as a
class 10 performance clean room. We sublease the Texas facility from Raytheon
through July 10, 2002. Raytheon leases the premises from Texas Instruments. We
have the right to renew our sublease of this facility for up to three additional
five-year periods if Raytheon exercises its rights to renew its lease from Texas
Instruments.
Our research and development efforts are focused on the design of new
integrated circuits, improvement of existing device performance, development of
new processes, cost reductions in the manufacturing process and improvements in
device packaging. Our research, development and engineering expenses were
approximately $10.9 million in 1996, $11.5 million in 1997 and $19.0 million in
1998, and include nonrecurring engineering expenses funded by customers.
Expenses in 1998 related to research, development and engineering increased
substantially from the level incurred in 1997 primarily due to the inclusion of
the new Millimeter Wave Communications operation. We expect that we will
continue to spend substantial funds on research and development.
As of March 31, 1999, we employed a total of 709 persons, including 328 in
manufacturing, 255 employees engaged in activities related to process and
product research and development, 20 in quality and reliability, 40 in marketing
and sales and 66 in finance and administration. None of our employees are
represented by a collective bargaining agreement, nor have we experienced any
work stoppage. We consider our relations with our employees to be good.
32
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of June 18, 1999, and as adjusted to
reflect the sale of common stock offered hereby by:
- each stockholder known by us to own beneficially more than five percent of
our common stock,
- each of the executive officers named in the Summary Compensation Table set
forth in our proxy materials on Schedule 14A incorporated by reference in
this prospectus,
- each of our directors, and
- all directors and executive officers as a group.
Except as otherwise noted below, the address of each person listed on the
table is 2300 N.E. Brookwood Parkway, Hillsboro, Oregon 97124.
The table below assumes the underwriters do not exercise their
over-allotment option. If the over-allotment option is exercised in full, we
will sell an aggregate of 3,586,496 shares of common stock.
We have determined beneficial ownership in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person, we
include shares of common stock subject to options or warrants held by that
person that are currently exercisable or will become exercisable within 60 days
after June 18, 1999, while those shares are not included for purposes of
computing percentage ownership of any other person. Unless otherwise indicated,
the persons and entities named in the table have sole voting and investment
power with respect to all shares beneficially owned, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK SHARES BENEFICIALLY OWNED
BENEFICIALLY OWNED PRIOR NUMBER OF
TO OFFERING SHARES AFTER OFFERING
------------------------- BEING -------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE
- ------------------------------------------------- ---------- ------------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Lucent Technologies, Inc.(1)..................... 991,588 6.7% 858,254 0 --
600 Mountain Avenue
Murray Hill, New Jersey 07974
Steven J. Sharp(2)............................... 263,866 1.8 -- 263,866 1.5%
Edward C.V. Winn(3).............................. 81,937 * -- 81,937 *
Charles Scott Gibson(4).......................... 66,712 * -- 66,712 *
Bruce Fournier(5)................................ 64,878 * -- 64,878 *
Walden Rhines(6)................................. 54,000 * -- 54,000 *
J. David Pye(7).................................. 44,850 * -- 44,850 *
Edward F. Tuck(8)................................ 43,500 * -- 43,500 *
Thomas V. Cordner(9)............................. 28,270 * -- 28,270 *
Paul A. Gary(10)................................. 5,025 * -- 5,025 *
All executive officers and directors as a
group(13) persons(11).......................... 848,450 5.6% -- 848,450 4.6%
</TABLE>
- ------------------------
* Less than 1% of the outstanding shares of common stock.
(1) We were advised in a Schedule 13D filed with the Securities and Exchange
Commission on December 11, 1996 by Lucent Technologies, Inc. as follows:
Lucent acquired sole voting and dispositive power over 991,588 shares of
our common stock from AT&T Corp. on September 27, 1996. The interest in our
common stock was transferred to Lucent from AT&T pursuant to the
33
<PAGE>
Separation and Distribution Agreement dated February 1, 1996 and Amended
and Restated as of March 29, 1996 between AT&T, Lucent and NCR Corporation.
Lucent's beneficial ownership of 991,588 shares includes 300,000 shares
issuable pursuant to a presently exercisable warrants. Number of shares
being offered reflects the exercise on a net exercise basis of the warrants
to purchase 300,000 shares resulting in the issuance of 166,666 shares of
common stock assuming a market price of $36.00 for the common stock.
(2) Includes 246,625 shares issuable pursuant to options exercisable within 60
days of June 18, 1999.
(3) Includes 75,436 shares issuable pursuant to options exercisable within 60
days of June 18, 1999.
(4) Includes 7,500 shares held by Mr. Gibson's wife, 2,977 held in trust for
Mr. Gibson's minor sons, 29,985 held in Trust by Mr. Gibson, and 24,000
shares issuable pursuant to options exercisable within 60 days of June 18,
1999.
(5) Includes 60,274 shares issuable pursuant to options exercisable within 60
days of June 18, 1999.
(6) Includes 3,000 shares held by Mr. Rhines' wife and daughter and 31,500
shares issuable pursuant to options exercisable within 60 days of June 18,
1999.
(7) Represents 44,850 shares issuable pursuant to options exercisable within 60
days of June 18, 1999.
(8) Includes 22,500 shares issuable pursuant to options exercisable within 60
days of June 18, 1999.
(9) Includes 26,982 shares issuable pursuant to options exercisable within 60
days of June 18, 1999.
(10) Mr. Gary is a former employee of the predecessor of Lucent, AT&T. Mr. Gary
has no shared voting or investment control over the shares of our common
stock held by Lucent. Mr. Gary does not represent Lucent on our board of
directors.
(11) Includes 706,014 shares issuable pursuant to options exercisable within 60
days of June 18, 1999.
34
<PAGE>
UNDERWRITING
TriQuint, the selling stockholder and the underwriters named below will
enter into an underwriting agreement with respect to the shares being offered.
Subject to the terms and conditions of the underwriting agreement, each
underwriter has severally agreed to purchase the number of shares indicated in
the following table at the public offering price less the underwriting discounts
and commissions set forth on the cover page of this prospectus. SG Cowen
Securities Corporation, Donaldson, Lufkin & Jenrette Securities Corporation,
Banc of America Securities LLC, CIBC World Markets Corp., Dain Rauscher Wessels,
a division of Dain Rauscher Incorporated, and U.S. Bancorp Piper Jaffray Inc.,
are the underwriters.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
SG Cowen Securities Corporation............................................
Donaldson, Lufkin & Jenrette Securities Corporation........................
Banc of America Securities LLC.............................................
CIBC World Markets Corp....................................................
Dain Rauscher Wessels......................................................
U.S. Bancorp Piper Jaffray Inc.............................................
-----------------
Total.............................................................. 3,865,000
-----------------
-----------------
</TABLE>
The underwriting agreement provides that the obligations of the underwriters
are conditional and may be terminated at their discretion based on their
assessment of the state of the financial markets. The obligations of the
underwriters may also be terminated upon the occurrence of other events
specified in the underwriting agreement. The underwriters are severally
committed to purchase all of the common stock being offered by us if any shares
are purchased, other than those covered by the over-allotment option described
below.
The underwriters propose to offer the common stock directly to the public at
the public offering price set forth on the cover page of this prospectus. The
underwriters may offer the common stock to securities dealers at that price less
a concession not in excess of $ per share. Securities dealers may reallow a
concession not in excess of $ per share to other dealers. After the shares
of the common stock are released for sale to the public, the underwriters may
vary the offering price and other selling terms from time to time.
We have granted to the underwriters an option to purchase up to 579,750
additional shares of common stock at the public offering price set forth on the
cover of this prospectus to cover over-allotments, if any. The option is
exercisable for a period of 30 days. If the underwriters exercise their
over-allotment option, the underwriters have severally agreed to purchase shares
in approximately the same proportion as shown in the table above.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
that the underwriters may be required to make in respect of those liabilities.
TriQuint and our directors and executive officers who hold an aggregate of
848,450 shares (including 706,014 shares issuable pursuant to options
exercisable within 60 days of June 18, 1999) have agreed with the underwriters
that for a period of 90 days following the date of this prospectus, without the
prior written consent of SG Cowen Securities Corporation, they will not dispose
of or hedge any shares of common stock or any securities convertible into or
exchangeable for common stock, except for an aggregate of 200,000 shares which
may be sold by our executive officers and directors, not to exceed 40,000 shares
to be sold by any individual officer or director.
35
<PAGE>
The underwriters may engage in over-allotment, stabilizing transactions,
covering transactions, penalty bids and passive market making in accordance with
Regulation M under the Securities Exchange Act of 1934. Over-allotment involves
syndicate sales in excess of the offering size, which creates a syndicate short
position. Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified maximum.
Syndicate covering transactions involve purchases of the common stock in the
open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the representatives to reclaim a
selling concession from a syndicate member when the common stock originally sold
by such syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions. In passive market making, market makers in the
common stock who are underwriters or prospective underwriters may, subject to
certain limitations, make bids for or purchases of the common stock until the
time, if any, at which a stabilizing bid is made. These stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
price of the common stock to be higher than it would otherwise be in the absence
of these transactions. These transactions may be effected on the Nasdaq National
Market or otherwise and, if commenced, may be discontinued at any time.
We estimate that our out of pocket expenses for this offering will be
approximately $500,000.
36
<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
TriQuint by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. Pillsbury Madison & Sutro LLP, Palo Alto, California, is
acting as counsel for the underwriters in connection with selected legal matters
relating to the shares of common stock offered by this prospectus.
EXPERTS
The consolidated financial statements and related consolidated financial
statement schedule of TriQuint Semiconductor, Inc. as of December 31, 1997 and
1998, and for each of the years in the three-year period ended December 31,
1998, included herein and in the registration statement are included in reliance
upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein and in the registration statement and
upon the authority of said firm as experts in accounting and auditing.
INFORMATION INCORPORATED BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents that we have
previously filed with the Commission or documents that we will file with the
Commission in the future. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below, and any future filings made
with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
of 1934, until we close this offering, and the over-allotment option expires or
is exercised. The documents we incorporate by reference are:
1. Our Annual Report on Form 10-K for the year ended December 31, 1998.
2. Our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
3. Our proxy materials on Schedule 14A as filed with the Commission on
April 22, 1999.
4. The description of our common stock contained in our registration
statement on Form 8-A as filed with the Commission on October 21, 1993.
5. The description of our common stock contained in our registration
statement on Form 8-B as filed with the Commission on February 18, 1997.
6. The description of our Preferred Share Purchase Rights contained in our
registration statement on Form 8-A as filed with the Commission on July
24, 1998.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address and number: TriQuint Semiconductor,
Inc., 2300 N.E. Brookwood Parkway, Hillsboro, Oregon 97124; telephone number
(503) 615-9000.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any materials we file with the Commission at the Commission's public reference
room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the
Commission at 1-800-SEC-0330 for more information on its public reference rooms.
The Commission also maintains an Internet Website at http://www.sec.gov that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Commission.
37
<PAGE>
We have filed with the Commission a registration statement (which contains
this prospectus) on Form S-3 under the Securities Act of 1933. The registration
statement relates to the common stock offered by us and the selling stockholder.
This prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules to the registration
statement. Please refer to the registration statement and its exhibits and
schedules for further information with respect to us and our common stock.
Statements contained in this prospectus as to the contents of any contract or
other document are not necessarily complete and, in each instance, we refer you
to the copy of that contract or document filed as an exhibit to the registration
statement. You may read and obtain a copy of the registration statement and its
exhibits and schedules from the Commission, as described in the preceding
paragraph.
38
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Form of Independent Auditors' Report....................................................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998 and March 31, 1999 (unaudited)................ F-3
Consolidated Statements of Operations for the years ended December 31, 1996, 1997 and 1998 and the three
months ended March 31, 1998 and 1999 (unaudited)......................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1997 and 1998 and
the three months ended March 31, 1999 (unaudited)........................................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998 and the three
months ended March 31, 1998 and 1999 (unaudited)......................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
When the stock split effected in the form of a stock dividend referred to in
note 6(a) of the notes to the consolidated financial statements has been
consummated, we will render the following opinion.
FORM OF INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
TriQuint Semiconductor, Inc.:
We have audited the accompanying consolidated balance sheets of TriQuint
Semiconductor, Inc. and subsidiary as of December 31, 1997 and 1998, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1998.
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 consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of TriQuint
Semiconductor, Inc. and subsidiary as of December 31, 1997 and 1998, and the
results of its operations, and its cash flows for each of the years in the
three-year period ended December 31, 1998 in conformity with generally accepted
accounting principles.
Portland, Oregon
February 11, 1999, except as to note 13
which is as of February 26, 1999 and
note 6(a) which is as of
July , 1999
F-2
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1997 1998 1999
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 18,734 $ 14,602 $ 12,949
Investments........................................................ 5,729 11,460 14,591
Trade accounts receivable, net..................................... 15,986 21,020 23,963
--------- --------- -----------
40,449 47,082 51,503
--------- --------- -----------
Inventories, net:
Raw material..................................................... 2,776 5,066 6,236
Work in process.................................................. 7,708 10,749 11,496
Finished goods................................................... 1,804 3,891 3,397
--------- --------- -----------
12,288 19,706 21,129
--------- --------- -----------
Prepaid expenses and other assets.................................. 1,273 2,028 1,863
--------- --------- -----------
Total current assets........................................... 54,010 68,816 74,495
--------- --------- -----------
Property, plant and equipment, net................................... 27,235 30,529 30,386
Other non-current assets, net........................................ 11 1,798 1,707
Restricted investments............................................... 40,162 40,163 40,163
--------- --------- -----------
Total assets................................................... $ 121,418 $ 141,306 $ 146,751
--------- --------- -----------
--------- --------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of capital lease and installment note
obligations...................................................... $ 5,045 $ 4,934 $ 5,132
Accounts payable................................................... 8,737 10,027 11,933
Other accrued liabilities.......................................... 2,609 6,237 7,242
Accrued payroll.................................................... 2,439 3,124 3,554
--------- --------- -----------
Total current liabilities...................................... 18,830 24,322 27,861
Capital lease and installment note obligations, less current
installments....................................................... 12,550 9,369 8,012
--------- --------- -----------
Total liabilities.............................................. 31,380 33,691 35,873
--------- --------- -----------
Commitments and contingency
Stockholders' equity:
Preferred stock, $.001 par value. Authorized 5,000,000 shares at
December 31, 1997 and 1998, and March 31, 1999; none issued and
outstanding at December 31, 1997 and 1998, and March 31, 1999.... -- -- --
Common stock, $.001 par value. Authorized 25,000,000 shares at
December 31, 1997 and 1998, and March 31, 1999; issued and
outstanding 12,741,348, 14,327,670 and 14,354,823 shares at
December 31, 1997 and 1998, and March 31, 1999, respectively..... 12 14 14
Additional paid-in capital......................................... 112,048 133,578 133,628
Accumulated deficit................................................ (22,022) (25,977) (22,764)
--------- --------- -----------
Total stockholders' equity..................................... 90,038 107,615 110,878
--------- --------- -----------
Total liabilities and stockholders' equity..................... $ 121,418 $ 141,306 $ 146,751
--------- --------- -----------
--------- --------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
---------------------------------------- --------------------------
1996 1997 1998 1998 1999
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Total revenues............................. $ 59,526 $ 71,367 $ 111,605 $ 23,681 $ 33,695
Operating costs and expenses:
Cost of goods sold....................... 34,258 40,028 72,784 18,341 20,951
Research, development and engineering.... 10,858 11,518 18,984 4,424 4,594
Selling, general and administrative...... 10,975 14,188 15,962 3,460 5,183
Special charges.......................... -- -- 10,220 10,220 --
------------ ------------ ------------ ------------ ------------
Total operating costs and expenses..... 56,091 65,734 117,950 36,445 30,728
------------ ------------ ------------ ------------ ------------
Income (loss) from operations.......... 3,435 5,633 (6,345) (12,764) 2,967
------------ ------------ ------------ ------------ ------------
Other income (expense):
Interest income.......................... 3,460 3,497 3,375 857 791
Interest expense......................... (1,015) (1,463) (1,454) (379) (313)
Other, net............................... 638 83 563 (4) 47
------------ ------------ ------------ ------------ ------------
3,083 2,117 2,484 474 525
------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes...... 6,518 7,750 (3,861) (12,290) 3,492
Income tax expense......................... 231 890 94 -- 279
------------ ------------ ------------ ------------ ------------
Net income (loss)...................... $ 6,287 $ 6,860 $ (3,955) $ (12,290) $ 3,213
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Per share data:
Net income (loss):
Basic.................................. $ 0.52 $ 0.55 $ (0.28) $ (0.89) $ 0.22
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Diluted................................ $ 0.48 $ 0.50 $ (0.28) $ (0.89) $ 0.21
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Weighted average shares:
Basic.................................. 12,066,872 12,559,965 14,099,484 13,867,116 14,338,940
Diluted................................ 13,144,076 13,662,323 14,099,484 13,867,116 15,148,643
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------------ ------------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
----------- ----------- ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995............... -- $ -- 11,894,822 $ 12 $ 107,801 $ (35,169)
Issuance of common stock under option
plans and warrant exercises............ -- -- 356,198 -- 897 --
Issuance of common stock under stock
purchase plan.......................... -- -- 34,168 -- 264 --
Tax benefit of stock option exercises.... -- -- -- -- 154 --
Net income............................... -- -- -- -- -- 6,287
--- ----- ------------ ----- ---------- ------------
Balance, December 31, 1996............... -- -- 12,285,188 12 109,116 (28,882)
Issuance of common stock under option
plans and warrant exercises............ -- -- 384,114 -- 1,428 --
Issuance of common stock under stock
purchase plan.......................... -- -- 72,046 -- 996 --
Tax benefit of stock option exercises.... -- -- -- -- 508 --
Net income............................... -- -- -- -- -- 6,860
--- ----- ------------ ----- ---------- ------------
Balance, December 31, 1997............... -- -- 12,741,348 12 112,048 (22,022)
Issuance of common stock under option
plans and warrant exercises............ -- -- 152,759 -- 498 --
Issuance of common stock under stock
purchase plan.......................... -- -- 166,644 -- 1,924 --
Issuance of common stock for acquisition
of Millimeter Wave Communications
operation.............................. -- -- 1,266,919 2 19,108 --
Net loss................................. -- -- -- -- -- (3,955)
--- ----- ------------ ----- ---------- ------------
Balance, December 31, 1998............... -- -- 14,327,670 14 133,578 (25,977)
Issuance of common stock under option
plans and warrant exercises
(unaudited)............................ -- -- 27,153 -- 50 --
Net income (unaudited)................... -- -- -- -- -- 3,213
--- ----- ------------ ----- ---------- ------------
Balance, March 31, 1999 (unaudited)...... -- $ -- 14,354,823 $ 14 $ 133,628 $ (22,764)
--- ----- ------------ ----- ---------- ------------
--- ----- ------------ ----- ---------- ------------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
------------
<S> <C>
Balance, December 31, 1995............... $ 72,644
Issuance of common stock under option
plans and warrant exercises............ 897
Issuance of common stock under stock
purchase plan.......................... 264
Tax benefit of stock option exercises.... 154
Net income............................... 6,287
------------
Balance, December 31, 1996............... 80,246
Issuance of common stock under option
plans and warrant exercises............ 1,428
Issuance of common stock under stock
purchase plan.......................... 996
Tax benefit of stock option exercises.... 508
Net income............................... 6,860
------------
Balance, December 31, 1997............... 90,038
Issuance of common stock under option
plans and warrant exercises............ 498
Issuance of common stock under stock
purchase plan.......................... 1,924
Issuance of common stock for acquisition
of Millimeter Wave Communications
operation.............................. 19,110
Net loss................................. (3,955)
------------
Balance, December 31, 1998............... 107,615
Issuance of common stock under option
plans and warrant exercises
(unaudited)............................ 50
Net income (unaudited)................... 3,213
------------
Balance, March 31, 1999 (unaudited)...... $ 110,878
------------
------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 6,287 $ 6,860 $ (3,955) $ (12,290) $ 3,213
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization......................... 3,068 4,249 5,889 1,375 1,837
Non-cash special charge............................... -- -- 8,820 8,820 --
(Gain) loss on sale of assets......................... (728) (32) (475) 4 --
Change in assets and liabilities:
Receivables......................................... (4,614) (3,984) 939 (1,679) (2,943)
Inventories......................................... (1,141) (2,438) (2,795) 446 (1,423)
Prepaid expenses and other assets................... (79) (710) (66) 671 182
Accounts payable.................................... 2,637 (896) (453) 4,053 3,341
Other accrued liabilities........................... (56) 1,103 2,314 327 --
--------- --------- --------- --------- ---------
Net cash provided by operating activities....... 5,374 4,152 10,218 1,727 4,207
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchase of investments................................. (97,266) (42,410) (67,993) (65,168) (64,892)
Sale of investments..................................... 75,415 46,290 62,262 61,653 61,761
Decrease (increase) in restricted cash.................. (504) 504 -- -- --
Capital expenditures.................................... (4,060) (1,388) (5,618) (1,297) (1,620)
Proceeds from sale of assets............................ 728 270 475 -- --
--------- --------- --------- --------- ---------
Net cash provided (used) by investing
activities.................................... (25,687) 3,266 (10,874) (4,812) (4,751)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Principal payments under capital lease and installment
note obligations........................................ (2,992) (4,015) (5,508) (1,468) (1,159)
Issuance of common stock, net............................. 1,161 2,424 2,032 420 50
--------- --------- --------- --------- ---------
Net cash used by financing activities........... (1,831) (1,591) (3,476) (1,048) (1,109)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents................................... (22,144) 5,827 (4,132) (4,133) (1,653)
Cash and cash equivalents at beginning of year.............. 35,051 12,907 18,734 18,734 14,602
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of year.................... $ 12,907 $ 18,734 $ 14,602 $ 14,601 $ 12,949
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental disclosures of cash flow information:
Cash paid for:
Interest................................................ $ 1,015 $ 1,489 $ 1,452 $ 410 $ 295
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income taxes............................................ $ 20 $ 54 $ 4 $ -- $ 94
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental schedule of non-cash investing and financing
activities:
Purchase of assets through capital lease and installment
notes................................................. $ 6,535 $ 8,346 $ 2,216 $ 2,216 $ --
Tax benefit of stock option exercises................... 154 508 --
Recorded in acquisition of Millimeter Wave:
Receivables........................................... -- -- 5,973 5,973 --
Inventories........................................... -- -- 4,623 4,623 --
Prepaid expenses and other assets..................... -- -- 2,839 2,839 --
Equipment............................................. -- -- 987 987 --
Accounts payable...................................... -- -- 1,743 1,743 --
Accrued liabilities................................... -- -- 1,999 1,999 --
Common stock.......................................... -- -- 19,500 19,500 --
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998, AND MARCH 31, 1998 AND 1999
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND 1999 IS UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF THE COMPANY
TriQuint Semiconductor, Inc. (the Company) is a leading supplier of high
performance gallium arsenide integrated circuits for the wireless
communications, telecommunications, data communications and aerospace markets.
The Company's products incorporate its proprietary analog and mixed signal
design and its advanced gallium arsenide manufacturing processes to address a
broad range of applications and customers.
(B) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary. All significant inter-company
accounts and transactions are eliminated in consolidation.
(C) MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(D) REVENUE RECOGNITION
Standard product revenue is recognized upon shipment of product. The Company
recognizes revenue on foundry and customer-specific products based on certain
design, manufacturing and other milestones. The Company recognizes revenue on
cost plus contracts as work is performed.
(E) CASH EQUIVALENTS
The Company considers all highly liquid debt and equity instruments
purchased with an original maturity of three months or less to be cash
equivalents.
(F) INVESTMENTS
The Company's investments, both restricted and unrestricted, are comprised
of medium term corporate notes, commercial paper and market auction preferred
stock and have been classified as available-for-sale securities in accordance
with Statement of Financial Accounting Standards (SFAS) No. 115, ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. The carrying value of
available-for-sale securities approximates fair value.
(G) TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable are shown net of allowance for doubtful accounts
of $196 and $262 at December 31, 1997 and 1998, respectively.
F-7
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(H) INVENTORIES
Inventories are stated at the lower of cost (approximates actual cost on a
first-in, first-out basis) or market (net realizable value). Inventories are
shown net of a valuation reserve of $1,324, $2,422 and $2,612 at December 31,
1997 and 1998, and March 31, 1999, respectively.
(I) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Machinery and equipment
under capital leases are stated at the lower of the present value of the minimum
lease payments at the beginning of the lease term or the fair value of the
leased assets at the inception of the lease.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets, which are as follows: five years for machinery and
equipment, furniture and fixtures and computer equipment; three to seven years
for leasehold improvements; and ten years for buildings. Leasehold improvements
are amortized over the shorter of the estimated life of the asset or the term of
the related lease. Depreciation begins on assets in process at the time the
related assets are placed in service. Maintenance and repairs are expensed as
incurred.
(J) RESEARCH AND DEVELOPMENT COSTS
The Company charges all research and development costs associated with the
development of new products to expense when incurred.
Engineering and design costs related to revenues on non-recurring
engineering services billed to customers are classified as research, development
and engineering expense. Additionally, certain related contract engineering
costs are also included in research, development and engineering expense.
(K) COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130, REPORTING COMPREHENSIVE INCOME. The objective of SFAS No. 130 is to report
all changes in equity that result from transactions and economic events other
than transactions with owners. There is no difference between net income (loss)
and comprehensive income (loss) for any of the periods presented.
(L) NET INCOME PER SHARE
The Company has adopted SFAS No. 128, EARNINGS PER SHARE. SFAS No. 128
requires presentation of basic and diluted net income per share. Basic net
income per share is net income available to common stockholders divided by the
weighted-average number of common shares outstanding. Diluted net income per
share is similar to basic except that the denominator includes potential common
shares
F-8
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
that, had they been issued, would have had a dilutive effect. The reconciliation
of shares used to calculate basic and diluted income per share consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------------------------- --------------------------
1996 1997 1998 1998 1999
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic weighted average shares of common
stock.................................... 12,066,872 12,559,965 14,099,484 13,867,116 14,338,940
Effect of dilutive securities:
Stock options and warrants............. 1,077,204 1,102,358 -- -- 809,703
------------ ------------ ------------ ------------ ------------
Diluted weighted average shares of common
stock.................................... 13,144,076 13,662,323 14,099,484 13,867,116 15,148,643
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
Common stock equivalents related to stock options and warrants totaling
395,976, 56,358, 664,247, 879,504 and 849,305 are anti-dilutive and, therefore,
were not included in the diluted per share calculation for the years ended
December 31, 1996, 1997 and 1998, and for the three month periods ended March
31, 1998 and 1999, respectively.
(M) INCOME TAXES
The Company accounts for income taxes under the asset and liability method.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized.
(N) FINANCIAL INSTRUMENTS
The carrying amount of cash equivalents, investments, trade accounts
receivable and accounts payable approximate fair value because of the short-term
nature of these instruments. The fair value of long-term borrowings was
estimated by discounting the future cash flows using market interest rates and
does not differ significantly from that reflected in the accompanying financial
statements.
Fair value estimates are made at a specific point in time, based on relevant
market information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
(O) STOCK OPTION PLANS
The Company accounts for its stock option plans in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES, and related interpretations. As such, compensation
expense would be recorded on the date of grant only if the current market price
of the underlying stock exceeded the exercise price. The Company also applies
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, which allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide pro forma net
income and pro forma earnings per
F-9
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
share disclosures for employee stock option grants as if the fair-value-based
method defined in SFAS No. 123 had been applied.
(P) RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 and 1997 statements to
conform with the 1998 presentation.
(Q) UNAUDITED QUARTERLY INFORMATION
The financial statements and related notes as of March 31, 1999 and for the
three months ended March 31, 1998 and 1999 are unaudited but, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, which are necessary for a fair presentation of the financial
condition, results of operations and cash flows of the Company. The operating
results for the three months ended March 31, 1999 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1999.
(2) MILLIMETER WAVE COMMUNICATIONS ACQUISITION
On January 13, 1998, the Company acquired substantially all of the assets of
the Millimeter Wave Communications operation of Texas Instruments' former
Defense Systems and Electronics Group from Raytheon TI Systems, Inc. (RTIS), a
Delaware corporation and a wholly-owned subsidiary of Raytheon company. The
Millimeter Wave Communications business designs, develops, manufactures and
markets advanced GaAs MMIC products which are used in defense and commercial
applications. Pursuant to an Asset Purchase Agreement (the Agreement) with RTIS,
the Company acquired the Millimeter Wave Communications business for
approximately $19,500 in cash and 1,266,919 shares of the Company's common stock
then valued at approximately $19,500 for total purchase consideration of
approximately $39,000. The cash portion of the purchase price was financed
through an operating lease arrangement involving certain assets pursuant to the
Agreement.
The following table presents the purchase price allocations associated with
this acquisition:
<TABLE>
<S> <C>
Tangible assets.................................................... $ 28,048
Workforce in place and purchased technology........................ 2,132
In-process research and development................................ 8,820
---------
$ 39,000
---------
---------
</TABLE>
Workforce in place and purchased technology, classified as other non-current
assets, are amortized on a straight line basis over 7 years, and are shown net
of related accumulated amortization of $0 and $362 at December 31, 1997 and
1998, respectively.
The Company allocated the purchase price based on the fair value of the net
tangible and intangible assets acquired. In performing this allocation, the
Company considered, among other factors, the research and development projects
in process at the date of acquisition. Millimeter Wave Communication's
in-process research and development program consisted of the development of its
advanced pHEMT and HBT processes for millimeter wave applications (the
projects). At the date of the acquisition, Millimeter Wave Communications'
research and development was not complete and total continuing research and
development commitments to complete the projects were expected to be
approximately $11.0 million. The projects were anticipated to be successfully
completed within three to four years of the acquisition date. The value assigned
to purchased in-process research and
F-10
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
development was determined by estimating the costs to develop Millimeter Wave
Communications' purchased in-process research and development into commercially
viable products, estimating the resulting net cash flows from the projects and
discounting the net cash flows to their present value. In estimating the value
of qualifying in-process research and development, a stage of completion factor
was applied to exclude cash flows related to development efforts not yet
underway. A discount rate of 75% was used for valuing the in-process research
and development and is intended to be commensurate with rates of return demanded
by venture capital investors for investments in start-up companies with similar
risks to those of the in-process products. Additionally, the projects will
require maintenance expenditures if and when they reach a state of technological
and commercial feasibility.
The pro forma results shown below assume the acquisition described above
occurred as of the beginning of the earliest year presented, and exclude special
charges for in-process research and development totaling $8,820:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1997 1998
--------- ----------
<S> <C> <C>
Revenues............................................................... $ 95,170 $ 112,407
Net income............................................................. 4,383 4,417
Diluted net income per share........................................... $ 0.29 $ 0.31
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred had the acquisition been in effect for the periods presented. In
addition, they are not intended to be a projection of future results that may be
achieved from the combined operations.
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Machinery and equipment................................................. $ 40,834 $ 47,539
Leasehold improvements.................................................. 424 2,507
Building and equipment.................................................. -- 103
Furniture and fixtures.................................................. 1,556 1,657
Computer equipment...................................................... 9,893 11,841
Assets in process....................................................... 10,058 7,192
Other................................................................... 618 619
--------- ---------
63,383 71,458
Less accumulated depreciation and amortization.......................... 36,148 40,929
--------- ---------
$ 27,235 $ 30,529
--------- ---------
--------- ---------
</TABLE>
(4) CAPITAL LEASE AND INSTALLMENT NOTE OBLIGATIONS
At December 31, 1997 and 1998, the Company had outstanding $7,595 and
$14,303, respectively of capital leases and installment notes with interest
rates ranging from 7.9% to 9.9%. The notes are payable in monthly installments
of principal and interest through 2003 and are secured by equipment with a net
book value of $16,991 and $14,002 at December 31, 1997 and 1998, respectively.
F-11
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
Additionally, the Company leases certain equipment under capital and
operating leases. The future minimum lease payments under installment notes and
non-cancelable leases as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
INSTALLMENT
NOTES AND
CAPITAL OPERATING
LEASES LEASES
----------- -----------
<S> <C> <C>
Year ending:
1999................................................................ $ 5,944 $ 10,024
2000................................................................ 5,181 5,485
2001................................................................ 3,091 3,195
2002................................................................ 1,705 1,024
2003................................................................ 389 --
----------- -----------
Total....................................................... 16,310 $ 19,728
-----------
-----------
Less amounts representing interest.................................... 2,007
-----------
Present value of minimum payments........................... 14,303
-----------
Less current installments............................................. 4,934
-----------
$ 9,369
-----------
-----------
</TABLE>
Balances applicable to capital leases and installment notes, which are
included in machinery and equipment, are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Machinery and equipment................................................. $ 24,922 $ 26,149
Less accumulated amortization........................................... 7,931 12,147
--------- ---------
$ 16,991 $ 14,002
--------- ---------
--------- ---------
</TABLE>
Rent expense under operating leases was $1,065, $2,736 and $9,779 during the
years ended December 31, 1996, 1997 and 1998, respectively.
The Company entered into a five year agreement to construct and lease an
office building and fabrication facility in Hillsboro, Oregon (Hillsboro
Facility) in 1996. Rent obligations began in February of 1997 and are equal to
the lessor's debt service costs. At the end of the lease term, the Company may
(i) renew the lease for up to five additional years, (ii) exercise its purchase
option, or (iii) cause the leased assets to be sold to a third party whereby the
Company guarantees up to a maximum of 85% of the original cost. The future
minimum lease payments stated above exclude any payments required at the end of
the lease term.
As part of the above lease, the Company restricted $40,163 of its securities
as collateral for specified obligations of the lessor under the lease. These
securities will be restricted as to withdrawal and will be managed by the
Company subject to certain limitations under its investment policy. In addition,
the Company must maintain a minimum consolidated tangible net worth of $50
million, total liabilities to net worth ratio equal to or less than 0.75 to 1.00
and maintain cash and liquid investments, including restricted investments,
greater than $45 million.
F-12
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
In November 1997, the Company entered into a $1,500 lease agreement for
additional property adjacent to its Hillsboro Facility. Pursuant to the terms of
that agreement, the transaction is partially collateralized by a guarantee from
the Company.
In 1997 and 1998, the Company entered into two-year agreements to lease
equipment in Dallas, Texas and Hillsboro, Oregon. Rent obligations are equal to
the lessor's debt service costs and will expire at the end of the initial lease
terms. At the end of the lease terms, the Company may (i) renew the leases for
up to three additional years, (ii) exercise its purchase options, or (iii) cause
the equipment to be sold to a third party whereby the Company guarantees
residual values to the lessor. The future minimum lease payments stated above
exclude any payments required at the end of the lease term. The Company intends
to renew the leases for three additional years at the end of each initial lease
term.
(5) DEBT
The Company has a line of credit agreement for general corporate purposes
with a commercial bank. The agreement is unsecured, and provides for aggregate
borrowings of $10,000. The interest rate is based on three pricing options
(LIBOR, bankers' acceptance, and prime) plus an interest rate spread which is
determined quarterly based on the Company's ratio of total liabilities to
tangible net worth. Interest is payable periodically with maturity set at May
31, 2000. No amount was outstanding on the line of credit at December 31, 1997
or 1998. The line of credit is subject to loan covenants for which the Company
was in compliance at December 31, 1997 and 1998.
F-13
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(6) STOCKHOLDERS' EQUITY
(A) STOCK SPLIT EFFECTED IN THE FORM OF A STOCK DIVIDEND
On June 10, 1999, the Board of Directors approved a three-for-two stock
split of the outstanding common shares to be effected in the form of a stock
dividend on July 2, 1999 to stockholders of record as of June 22, 1999. Common
share and per share data for all periods presented in the accompanying financial
statements have been adjusted to give effect to the stock split effected in the
form of a stock dividend.
(B) STOCK OPTION PLANS AND EMPLOYEE STOCK PURCHASE PLANS
Under the 1987 and 1996 Stock Incentive Programs and the 1998 Nonstatutory
Stock Option Plan (the Plans), the Company has authorized the issuance of
2,846,652, 1,875,000 and 750,000 common shares, respectively, of which a total
of 454,322 shares were available to grant at December 31, 1998. The Plans
provide for the grant of incentive stock options to officers and other employees
of the Company or any parent or subsidiary, and non-qualified stock options to
officers and other employees of the Company, directors, and consultants of the
Company. Subject to the discretion of the Board of Directors, options granted
under the Plans generally vest and become exercisable at the rate of 28% at the
end of the first year, and thereafter at a rate of 2% per month and have a
ten-year term.
The exercise price of all incentive stock options granted under the Plans
must be at least equal to the fair market value of the shares on the date of
grant. With respect to any participant who owns stock possessing more than 10%
of the voting rights of the Company's outstanding capital stock, the exercise
price of any incentive stock option granted must equal at least 110% of the fair
market value on the grant date. The exercise price of all non-statutory stock
options granted under the Plans must be at least 50% of the fair market value of
the common stock on the date of grant. However, it is the Company's practice to
issue options at fair market value. The terms of all options granted under the
Plans may not exceed ten years.
Under the 1992 and 1998 Employee Stock Purchase Plans (the "Purchase
Plans"), the Company has authorized the issuance of 900,000 common shares, of
which 627,141 were available for issuance at December 31, 1998. The Purchase
Plans allow eligible employees to purchase the Company's common stock through
payroll deductions, which may not exceed 15% of an employee's base compensation,
not to exceed $25 per year, including commissions, bonuses and overtime, at a
price equal to 85% of the lower of the fair value at the beginning or end of
each enrollment period.
F-14
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
The fair value of each stock based compensation award is estimated on the
date of grant using the Black-Scholes option pricing model assuming no dividend
yield and the following weighted average assumptions for stock based
compensation awards during the years ended December 31:
<TABLE>
<CAPTION>
STOCK OPTION PLANS
-------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Risk-free interest rate............................................ 6.3% 6.2% 5.2%
Expected lives in years............................................ 5 5 5
Expected volatility................................................ 75% 78% 62%
</TABLE>
<TABLE>
<CAPTION>
EMPLOYEE STOCK
PURCHASE PLANS
-------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Risk-free interest rate............................................ 5.3% 5.1% 4.8%
Expected lives in years............................................ 0.5 0.5 0.5
Expected volatility................................................ 57% 56% 66%
</TABLE>
The weighted average fair value of stock based compensation awards under the
various plans are as follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Stock Option Plans....................................................... $ 7 $ 11 $ 7
Employee Stock Purchase Plans............................................ $ 3 $ 10 $ 4
</TABLE>
The Company applies APB Opinion No. 25 in accounting for its Plans and,
accordingly, no compensation cost has been recognized for its stock based
compensation awards in the financial statements. Had the Company determined
compensation cost based on the fair value at the date of grant for its stock
based compensation awards under SFAS No. 123, the Company's net (loss) income
would have changed to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Net income (loss)
As reported............................................................. $ 6,287 $ 6,860 $ (3,955)
Pro forma............................................................... 5,481 4,136 (8,314)
Net income per share:
Basic
As reported............................................................. 0.52 0.55 (0.28)
Pro forma............................................................... 0.45 0.33 (0.59)
Diluted
As reported............................................................. 0.48 0.50 (0.28)
Pro forma............................................................... 0.42 0.30 (0.59)
</TABLE>
Pro forma net income (loss) reflects only stock based compensation awards
granted in 1998, 1997 and 1996. Therefore, the full impact of calculating
compensation cost for stock based compensation awards under SFAS No. 123 is not
reflected in the pro forma net income (loss) amounts presented above because
compensation cost is reflected over the option's vesting period of four years
and
F-15
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
compensation cost for options granted prior to January 1, 1996 is not considered
and additional stock based compensation awards are anticipated in future years.
Activity under the Company's stock option plans is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER AVERAGE
OF EXERCISE
SHARES PRICE
----------- -----------
<S> <C> <C>
Options outstanding at December 31, 1995....................................... 1,708,074 $ 3.69
Options:
Granted...................................................................... 407,639 12.00
Exercised.................................................................... (356,198) 2.57
Canceled..................................................................... (128,225) 7.39
-----------
Options outstanding at December 31, 1996....................................... 1,631,290 5.72
Options:
Granted...................................................................... 1,022,282 15.89
Exercised.................................................................... (384,114) 3.74
Canceled..................................................................... (208,176) 17.11
-----------
Options outstanding at December 31, 1997....................................... 2,061,282 9.96
Options:
Granted...................................................................... 2,431,751 12.75
Exercised.................................................................... (152,759) 3.25
Canceled..................................................................... (1,185,255) 15.02
-----------
Options outstanding at December 31, 1998....................................... 3,155,019 $ 10.54
-----------
-----------
</TABLE>
In September 1998, the Compensation Committee of the Board of Directors
adopted a resolution to offer employees holding stock options for 1,324,818
shares the opportunity to exchange their existing stock options for new stock
options. The exchange allowed employees to receive options for the same number
of shares at $10.75 per share, which exceeded the market price during the
employee decision period, instead of an average original exercise price of
$14.75. The new options vest over one to four years. The offer was made because
the Board of Directors believed the lower priced options provide greater
retention advantage and incentive. Options for directors and officers were not
repriced. Option holders elected to exchange options covering 1,056,941 shares,
which is included as both options granted and canceled during 1998 in the
preceding table.
F-16
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
The following table summarizes information concerning stock options
outstanding and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
NUMBER WEIGHTED- NUMBER
OUTSTANDING AVERAGE WEIGHTED- EXERCISABLE WEIGHTED-
AS OF REMAINING AVERAGE AS OF AVERAGE
RANGE OF DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICES 1998 LIFE PRICE 1998 PRICE
- ---------------------- ------------ ------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
$ 0.9333 - 4.2500 593,649 5.04 $ 3.4734 578,999 $ 3.4558
4.3333 - 10.5833 230,747 6.91 8.2950 176,501 8.1252
10.6667 - 10.7500 1,066,361 9.73 10.7499 15,246 10.7500
10.7917 - 14.0000 804,789 9.08 12.7915 127,139 12.8251
14.1667 - 26.7083 459,474 7.34 16.3341 154,046 17.1863
------------ --- ---------- ------------ ----------
$ 0.9333 - 26.7083 3,155,019 8.13 $ 10.5353 1,051,929 $ 7.4881
------------ --- ---------- ------------ ----------
------------ --- ---------- ------------ ----------
</TABLE>
(C) WARRANTS
On August 31, 1993, the Company issued a warrant to purchase up to 187,500
shares of common stock at $16.00 per share which is exercisable through August
2000. On December 19, 1994, the Company issued an additional warrant to purchase
up to 112,500 shares of common stock at $16.00 per share which is exercisable
through December 2001.
(D) PREFERRED SHARES RIGHTS AGREEMENT
On June 30, 1998, the Company adopted a Preferred Shares Rights Agreement
(the "Agreement"). Pursuant to the Agreement, rights were distributed as a
dividend at the rate of one right for each share of TriQuint common stock, par
value $0.001 per share of the Company held by stockholders of record as of the
close of business on July 24, 1998. The rights will expire on June 29, 2008,
unless redeemed or exchanged. Under the Agreement, each right initially will
entitle the registered holder to buy one unit of a share of preferred stock for
$83.33. The rights will become exercisable only if a person or group (other than
stockholders currently owning 15% of the Company's common stock) acquires
beneficial ownership of 15% or more of the Company's common stock, or commences
a tender offer or exchange offer upon consummation of which such person or group
would beneficially own 15% or more of the Company's common stock.
F-17
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(7) INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1997 1998
--------- --------- -----
<S> <C> <C> <C>
Current:
Federal.............................................................. $ 145 $ 637 $ --
State................................................................ 86 200 94
Foreign.............................................................. -- 53 --
--------- --------- ---
Total current...................................................... 231 890 94
--------- --------- ---
Deferred:
Federal.............................................................. -- -- --
State................................................................ -- -- --
Foreign.............................................................. -- -- --
--------- --------- ---
Total deferred..................................................... -- -- --
--------- --------- ---
Total.............................................................. $ 231 $ 890 $ 94
--------- --------- ---
--------- --------- ---
</TABLE>
The effective tax rate differs from the federal statutory income tax rate as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Tax computed at federal statutory rate.......................................... 34.0% 34.0% (34.0)%
State income tax, net of federal effect......................................... 4.4 4.4 (4.3)
Increase (decrease) in valuation allowance...................................... (16.3) (6.7) 55.8
Differences between financial and tax reporting for stock option exercises...... (19.2) (25.0) (13.3)
Other........................................................................... 0.6 4.8 (1.8)
--------- --------- ---------
Effective tax rate.............................................................. 3.5% 11.5% 2.4%
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-18
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
The deferred income tax provision (benefit) results from changes in deferred
tax assets and liabilities as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1997 1998
--------- ---------- ---------
<S> <C> <C> <C>
Reserves not currently deductible...................................... $ (45) $ 382 $ (379)
Tax depreciation and amortization...................................... 384 (20,509) (1,813)
Capital leases......................................................... -- 20,417 7,896
Accrued liabilities.................................................... 85 231 (233)
Net operating loss carryforward........................................ 801 207 (7,528)
Valuation allowance.................................................... (1,060) (517) 2,207
Other.................................................................. (165) (211) (150)
--------- ---------- ---------
Total.............................................................. $ -- $ -- $ --
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
The tax effects of significant items comprising the Company's deferred tax
asset and liability are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
---------- ----------
<S> <C> <C>
Deferred tax liabilities:
Amortization.................................................................. $ -- $ 686
Capital leases................................................................ 20,417 28,313
---------- ----------
Total deferred tax liability................................................ 20,417 28,999
---------- ----------
---------- ----------
Deferred tax assets:
Accounts receivable........................................................... 75 81
Inventory..................................................................... 629 1,002
Accrued liabilities........................................................... 395 628
Net operating loss carryforwards.............................................. 9,277 16,805
Depreciation.................................................................. 19,532 22,031
Other......................................................................... 644 794
---------- ----------
Total deferred tax asset before valuation allowance......................... 30,552 41,341
Valuation allowance........................................................... (10,135) (12,342)
---------- ----------
Total deferred tax asset.................................................... 20,417 28,999
---------- ----------
Net deferred tax liability (asset).......................................... $ -- $ --
---------- ----------
---------- ----------
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1996 was
$11,712. The net change in the total valuation allowance for the years ended
December 31, 1996, 1997 and 1998 was an increase (decrease) of $(1,060), $(517)
and $2,207, respectively. Approximately $5,151 of the valuation allowance for
deferred tax assets will be credited directly to stockholders' equity in the
event tax benefits of net operating losses that resulted from stock option
exercises are subsequently recognized.
At December 31, 1998, the Company had approximately $45,700 of net operating
loss carryforwards to offset against future income for federal income tax
purposes which expire from 2003
F-19
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
through 2018, and $22,003 for Oregon state income tax purposes which expire in
years 2006 through 2013.
The Company's ability to use its net operating loss carryforwards to offset
future taxable income is subject to annual restrictions contained in the United
States Internal Revenue Code of 1986, as amended (the Code). These restrictions
act to limit the Company's future use of its net operating losses following
certain substantial stock ownership changes enumerated in the Code and referred
to hereinafter as an "ownership change."
Consummation of the Company's initial public offering created an ownership
change that has resulted in approximately $12,600 of the pre-1994 net operating
loss carryforwards being limited to approximately $1,750 per year. In addition,
approximately $7,108 are further limited to approximately $967 per year due to
changes in the Company's ownership structure during 1991.
(8) CONTINGENCIES
EMPLOYMENT AGREEMENTS
The Company has employment contracts with two key officers that in the event
of their termination provide for total payments up to approximately $365.
(9) BENEFIT PLANS
The Company sponsors a voluntary contribution profit sharing and savings
plan under Section 401(k) of the Internal Revenue Code which is available to
substantially all employees. Employees can make voluntary contributions up to
limitations prescribed by the Internal Revenue Code. Company matching
contributions are discretionary. For the years ended December 31, 1996, 1997 and
1998 the Company made no discretionary matching contributions.
(10) CONCENTRATION OF RISK
(A) SUPPLIERS
The Company currently procures certain components and services for its
products from single sources. The Company purchases these components and
services on a purchase order basis, does not carry significant inventories of
these components and does not have any long-term supply contracts with its sole
source vendors. If the Company were to change any of its sole source vendors,
the Company would be required to requalify the components with each new vendor.
Requalification could prevent or delay product shipments which could materially
adversely affect the Company's results of operations. In addition, the Company's
reliance on sole source vendors involves several risks, including reduced
control over the price, timely delivery, reliability and quality of the
components. Any inability of the Company to obtain timely deliveries of
components of acceptable quality in required quantities or any increases in the
prices of components for which the Company does not have alternative sources
could materially adversely affect the Company's business, financial condition
and results of operations.
(B) CREDIT RISK
The Company generally sells its products to customers engaged in the design
and/or manufacture of high technology products either recently introduced or not
yet introduced to the marketplace. Substantially all the Company's trade
accounts receivable are due from such sources.
F-20
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
The Company performs continuing credit evaluations of its customers and
generally does not require collateral; however, in certain circumstances, the
Company may require letters of credit from its customers.
(11) SEGMENT INFORMATION
The Company has adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 establishes standards for the
reporting by public business enterprises of information about operating
segments, products and services, geographic areas and major customers. The
method for determining what information to report is based on the way that
management organizes the segments within the Company for making operating
decisions and assessing financial performance.
The Company's chief operating decision maker is considered to be the
President and Chief Executive Officer (CEO). The Company's CEO evaluates both
consolidated and disaggregated financial information in deciding how to allocate
resources and assess performance. The CEO uses certain disaggregated financial
information for the Company's product lines: Wireless Communications;
Telecommunications and Data Communications; and Millimeter Wave Communications.
The Company has aggregated its three product lines into a single reportable
segment as allowed under SFAS No. 131 because these product lines have similar
long-term economic characteristics, such as average gross margin, and product
lines are similar in regards to (a) nature of products and production processes,
(b) type of customers, and (c) method used to distribute products.
Accordingly, the Company describes its reportable segment as gallium
arsenide integrated circuits for the communications market. All of the Company's
revenues result from sales in its product lines. The Company's operating
expenses are allocated to its three product lines, with the exception of certain
manufacturing variances (cost of goods sold) and, to a lesser extent, certain
general and administrative expenses for all years presented and, for 1998, the
Company's legal settlement discussed in note 12. Unallocated corporate operating
expenses totaled $4,651, $8,538 and $12,103 for the years ended December 31,
1996, 1997 and 1998, respectively. In addition, all non-operating income and
expenses are recorded in Corporate. The Company does not allocate assets to its
product lines.
Revenues by product line (as defined by the Company) as a percentage of
total revenues for years ended December 31, 1996, 1997 and 1998 were as follows:
Wireless Communications, 49%, 47% and 45%, respectively; Telecommunications and
Data Communications, 51%, 53% and 18%, respectively; Millimeter Wave
Communications, 0%, 0% and 37%, respectively.
Revenues outside of the United States were approximately $18,100, $24,300
and $26,800 in 1996, 1997 and 1998, respectively, of which sales to Canada
comprised $6,100, $8,527 and $10,524, respectively. There were no other foreign
countries to which sales represented 5% or more of total revenues.
F-21
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
Revenues for significant customers, those representing approximately 10% or
more of total revenues for each period, are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Customer A............................................................. 12% 12% 10%
Customer B............................................................. 17 -- --
Customer C............................................................. 13 -- --
Customer D............................................................. -- -- 12
Customer E............................................................. -- -- 12
</TABLE>
Related receivables from such customers were 31% and 26% of trade accounts
receivable at December 31, 1997 and 1998, respectively.
(12) LITIGATION
SETTLEMENT OF LAWSUIT
On July 12, 1994, a stockholder class action lawsuit was filed against the
Company, its underwriters, and certain of its officers, directors and investors
in the United States District Court for the Northern District of California. The
suit alleged that the Company, its underwriters, and certain of its officers,
directors and investors intentionally misled the investing public regarding the
financial prospects of the Company. Following the filing of the complaint, the
plaintiffs dismissed without prejudice a director defendant, the principal
stockholder defendant, the underwriter defendants and certain analyst
defendants. During 1998, the Company settled the action and recorded a special
charge of $1,400 associated with the settlement of the lawsuit and the related
legal expenses, net of accruals.
From time to time the Company is involved in various claims and legal
actions arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not have a material
effect on the Company's consolidated financial position, results of operations
or cash flows.
(13) SUBSEQUENT EVENT
On February 26, 1999, a lawsuit was filed against 88 firms, including the
Company, in the United States District Court for the District of Arizona. The
suit alleges that the defendants infringe upon certain patents held by The
Lemelson Medical, Education and Research Foundation, Limited Partnership. The
Company believes the suit is without merit and intends to vigorously defend
itself against the charges.
F-22
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,865,000 Shares
[LOGO]
Common Stock
---------------------
PROSPECTUS
---------------------
SG COWEN
DONALDSON, LUFKIN & JENRETTE
BANC OF AMERICA SECURITIES LLC
CIBC WORLD MARKETS
DAIN RAUSCHER WESSELS
a division of Dain Rauscher Incorporated
U.S. BANCORP PIPER JAFFRAY
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by TriQuint in connection with
the sale of common stock being registered. All amounts are estimates except the
SEC registration fee, the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee.............................................................. $ 43,558
NASD filing fee................................................................... 16,168
Nasdaq National Market listing fee................................................ 17,500
Printing and engraving costs...................................................... 120,000
Legal fees and expenses........................................................... 125,000
Accounting fees and expenses...................................................... 110,000
Blue Sky fees and expenses........................................................ 5,000
Transfer Agent, Custodian and Registrar fees...................................... 15,000
Miscellaneous expenses............................................................ 47,774
----------
Total......................................................................... $ 500,000
----------
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's board of directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article VI, Section 1, of the Registrant's
bylaws provides for mandatory indemnification of its directors and officers and
permissible indemnification of employees and other agents to the maximum extent
permitted by the Delaware General Corporation Law. The Registrant's certificate
of incorporation provides that, pursuant to Delaware law, its directors shall
not be liable for monetary damages for breach of the directors' fiduciary duty
as directors to the Registrant and its stockholders. This provision in the
certificate of incorporation does not eliminate the directors' fiduciary duty,
and in appropriate circumstances equitable remedies such as injunctive or other
forms of non-monetary relief will remain available under Delaware law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Registrant for acts or omission not in
good faith or involving international misconduct, for knowing violations of law,
for actions leading to improper personal benefit to the director, and for
payment of dividends or approval of stock repurchases or redemptions that are
unlawful under Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws. The Registrant has entered into
Indemnification Agreements with its officers and directors, a form of which was
attached as Exhibit 10.1 to the Registrant's registration statement on Form 8-B
filed with the Commission on February 18, 1997 and incorporated herein by
reference. The Indemnification Agreements provide the Registrant's officers and
directors with further indemnification to the maximum extent permitted by the
Delaware General Corporation Law. Reference is made to Section 9 of the
Underwriting Agreement contained in Exhibit 1.1 hereto, indemnifying officers
and directors of the Registrant against certain liabilities.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
<C> <S>
1.1* Form of Underwriting Agreement
4.1(1) Specimen Stock Certificate
4.2(2) Preferred Shares Rights Agreement, dated as of June 30, 1998 between TriQuint Semiconductor,
Inc. and Chase Mellon Shareholder Services L.L.C., including the Certificate of Determination,
the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A, B and
C, respectively.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
23.1* Form of consent of KPMG Peat Marwick LLP, Independent Auditors
23.2** Consent of Counsel (included in Exhibit 5.1)
24.1** Power of Attorney
</TABLE>
----------------------------
* Filed herewith.
** Previously filed.
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (File No. 33-70594) as declared effective by the Securities and
Exchange Commission on December 13, 1993.
(2) Incorporated by reference to the Registrant's Registration Statement on
Form 8-A/A (File No. 000-22660) as declared effective by the Securities
and Exchange Commission on July 24, 1998.
(B) CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedule and independent
auditors' report thereon are filed herewith:
<TABLE>
<CAPTION>
PAGE NO.
---------
<S> <C>
Form of Independent Auditors' Report on Consolidated Financial Statement Schedule... S-1
Schedule II--Valuation and Qualifying Accounts...................................... S-2
</TABLE>
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions referenced in
Item 15 of this Registration Statement, the Underwriting Agreement 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 Securities Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, 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
II-2
<PAGE>
a court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new registrant on statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(3) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(5) For the purpose of determining liability under the Securities Act, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934, (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment No. 1 to this Registration Statement to be signed on our
behalf by the undersigned, thereunto duly authorized, in the City of Hillsboro,
State of Oregon, on the 28th day of June 1999.
<TABLE>
<S> <C> <C>
TRIQUINT SEMICONDUCTOR, INC.
By: /s/ STEVEN J. SHARP
-----------------------------------------
Steven J. Sharp
PRESIDENT, CHIEF EXECUTIVE OFFICER &
CHAIRMAN
</TABLE>
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended,
Amendment No. 1 to this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
/s/ STEVEN J. SHARP Officer and Chairman
- ------------------------------ (Principal Executive June 28, 1999
(Steven J. Sharp) Officer)
Executive Vice President,
Finance and
/s/ EDWARD C. V. WINN Administration, Chief
- ------------------------------ Financial Officer and June 28, 1999
(Edward C. V. Winn) Secretary (Principal
Financial and Accounting
Officer)
/s/ PAUL A. GARY *
- ------------------------------ Director June 28, 1999
(Paul A. Gary)
- ------------------------------ Director June , 1999
(Charles Scott Gibson)
/s/ WALDEN C. RHINES *
- ------------------------------ Director June 28, 1999
(Walden C. Rhines)
/s/ EDWARD F. TUCK *
- ------------------------------ Director June 28, 1999
(Edward F. Tuck)
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ EDWARD C.V. WINN
-------------------------
(Edward C.V. Winn)
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
When the stock split effected in the form of a stock dividend referred to in
note 6(a) of the notes to the consolidated financial statements has been
consummated, we will render the following opinion.
FORM OF INDEPENDENT AUDITORS' REPORT
ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
The Board of Directors
TRIQUINT SEMICONDUCTOR, INC.:
Under date of February 11, 1999, except as to note 13 which is as of
February 26, 1999 and note 6(a) which is as of July , 1999, we reported on the
consolidated balance sheets of TriQuint Semiconductor, Inc. and subsidiary as of
December 31, 1997 and 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1998. In connection with our audit of the
aforementioned consolidated financial statements, we also audited the
accompanying related consolidated financial statement schedule. This
consolidated financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this consolidated
financial statement schedule based on our audits. In our opinion, such
consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
KPMG PEAT MARWICK LLP
Portland, Oregon
February 11, 1999
S-1
<PAGE>
TRIQUINT SEMICONDUCTOR, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for doubtful accounts................................ $ 202 119 102 219
Inventory valuation reserve.................................... 2,309 3,668 3,594 2,383
Year ended December 31, 1997:
Allowance for doubtful accounts................................ 219 0 23 196
Inventory valuation reserve.................................... 2,383 4,539 5,598 1,324
Year ended December 31, 1998:
Allowance for doubtful accounts................................ 196 99 33 262
Inventory valuation reserve.................................... 1,324 7,429 6,331 2,422
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER NUMBER
- ----------- -----------
<C> <S> <C>
1.1* Form of Underwriting Agreement
4.1(1) Specimen Stock Certificate
4.2(2) Preferred Shares Rights Agreement, dated as of June 30, 1998 between TriQuint Semiconductor,
Inc. and Chase Mellon Shareholder Services L.L.C., including the Certificate of
Determination, the form of Rights Certificate and the Summary of Rights attached thereto as
Exhibits A, B and C, respectively.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
23.1* Form of consent of KPMG Peat Marwick LLP, Independent Auditors
23.2** Consent of Counsel (included in Exhibit 5.1)
24.1** Power of Attorney
</TABLE>
- ------------------------
* Filed herewith.
** Previously filed.
(1) Incorporated by reference to the Registration Statement on Form S-1 (File
No. 33-70594) as declared effective by the Securities and Exchange
Commission on December 13, 1993.
(2) Incorporated by reference to the Registrant's Registration Statement on Form
8-A/A (File No. 000-22660) as declared effective by the Securities and
Exchange Commission on July 24, 1998.
<PAGE>
3,865,000
TRIQUINT SEMICONDUCTOR, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
SG COWEN SECURITIES CORPORATION
Donaldson, Lufkin & Jenrette Securities Corporation
Banc of America Securities LLC
CIBC World Markets Corp.
Dain Rauscher Wessels, a division of Dain Rauscher Incorporated
U.S. Bancorp Piper Jaffray Inc.
c/o SG Cowen Securities Corporation
Financial Square
New York, New York 10005
Dear Sirs:
1. INTRODUCTORY. TriQuint Semiconductor, Inc., a Delaware corporation
(the "Company"), and the selling stockholder named in Schedule B hereto (the
"Selling Stockholder") proposes to sell, pursuant to the terms of this
Agreement, to the several underwriters named in Schedule A hereto (the
"Underwriters," or, each, an "Underwriter"), an aggregate of 3,865,000 shares
of Common Stock, $.001 par value (the "Common Stock") of the Company. The
aggregate of 3,865,000 shares so proposed to be sold is hereinafter referred to
as the "Firm Stock." The Company also proposes to sell to the Underwriters, upon
the terms and conditions set forth in Section 3 hereof, up to an additional
579,750 shares of Common Stock (the "Optional Stock"). The Firm Stock and the
Optional Stock are hereinafter collectively referred to as the "Stock."
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-81245) (the
"Initial Registration Statement") in respect of the Stock has been filed with
the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in the
form heretofore delivered to you, and, excluding exhibits thereto but including
all documents incorporated by reference in the prospectus contained therein, to
you for each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any, increasing
the size of the offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act") and the rules and regulations (the "Rules and Regulations") of
the Commission thereunder, which became effective upon filing, no other document
with respect to the Initial Registration Statement or document incorporated by
reference therein has hereto-
-1-
<PAGE>
fore been filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any, has been
issued and no proceeding for that purpose has been initiated or threatened by
the Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule 424(a)
of the Rules and Regulations, is hereinafter called a "Preliminary
Prospectus"); the various parts of the Initial Registration Statement and the
Rule 462(b) Registration Statement, if any, including all exhibits thereto
and including (i) the information contained in the form of final prospectus
filed with the Commission pursuant to Rule 424(b) under the Securities Act
and deemed by virtue of Rule 430A under the Securities Act to be part of the
Initial Registration Statement at the time it was declared effective and (ii)
the documents incorporated by reference in the prospectus contained in the
Initial Registration Statement at the time such part of the Initial
Registration Statement became effective, each as amended at the time such
part of the Initial Registration Statement became effective or such part of
the Rule 462(b) Registration Statement, if any, became or hereafter becomes
effective, are hereinafter collectively called the "Registration Statements";
and such final prospectus, in the form first filed pursuant to Rule 424(b)
under the Securities Act, is hereinafter called the "Prospectus"; and any
reference herein to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the Securities Act, as of the
date of such Preliminary Prospectus or Prospectus, as the case may be; any
reference to any amendment or supplement to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include any documents filed after
the date of such Preliminary Prospectus or Prospectus, as the case may be,
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and incorporated by reference in such Preliminary Prospectus or Prospectus,
as the case may be; and any reference to any amendment to the Registration
Statements shall be deemed to refer to and include any annual report of the
Company filed pursuant to Section 13(a) or 15(d) of the Exchange Act after
the effective date of the Initial Registration Statement that is incorporated
by reference in the Registration Statements. No document has been or will be
prepared or distributed in reliance on Rule 434 under the Securities Act. No
order preventing or suspending the use of any Preliminary Prospectus has been
issued by the Commission.
(b) The Registration Statement conforms (and the Rule 462(b)
Registration Statement, if any, the Prospectus and any amendments or
supplements to either of the Registration Statements or the Prospectus, when
they become effective or are filed with the Commission, as the case may be,
will conform) in all material respects to the requirements of the Securities
Act and the Rules and Regulations and do not and will not, as of the
applicable effective date (as to the Registration Statements and any
amendment thereto) and as of the applicable filing date (as to the Prospectus
and any amendment or supplement thereto) contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; PROVIDED,
however, that the foregoing representations and warranties shall not apply to
information contained in or omitted from the Registration Statements or the
Prospectus or any such amendment or supplement thereto in reliance upon, and
in conformity with, written information furnished to the Company through the
Underwriters by or on behalf of any Underwriter specifically for inclusion
therein.
(c) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may be,
conformed in all material
-2-
<PAGE>
respects to the requirements of the Securities Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder, and
none of such documents contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary
to make the statements therein not misleading; and any further documents so
filed and incorporated by reference in the Prospectus, when such documents
become effective or filed with Commission, as the case may be, will conform
in all material respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder and will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
(d) The Company and each of its subsidiaries (as defined in Section
15) have been duly incorporated and are validly existing as corporations in
good standing under the laws of their respective jurisdictions of
incorporation, are duly qualified to do business and are in good standing as
foreign corporations in each jurisdiction in which their respective ownership
or lease of property or the conduct of their respective businesses requires
such qualification, and have all power and authority necessary to own or hold
their respective properties and to conduct the businesses in which they are
engaged, except where the failure to so qualify or have such power or
authority would not have, singularly or in the aggregate, a material adverse
effect on the condition (financial or otherwise), results of operations,
business or prospects of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect"). The Company owns or controls, directly or
indirectly, only the following corporations, associations or other entities:
TriQuint Semiconductor GmbH.
(e) This Agreement has been duly authorized executed and delivered by
the Company.
(f) The Stock to be issued and sold by the Company to the Underwriters
hereunder has been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein, will be duly and validly issued,
fully paid and nonassessable and free of any preemptive or similar rights and
will conform to the description thereof contained in the Prospectus.
(g) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company,
including the Stock, have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description thereof contained in the
Prospectus.
(h) All the outstanding shares of capital stock of each subsidiary of
the Company have been duly authorized and validly issued, are fully paid and
nonassessable and, except to the extent set forth in the Prospectus, are owned
by the Company directly or indirectly through one or more wholly owned
subsidiaries, free and clear of any claim, lien, encumbrance, security interest,
restriction upon voting or transfer or any other claim of any third party.
(i) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any inden-
-3-
<PAGE>
ture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject, nor
will such actions result in any violation of the provisions of the charter or
bylaws of the Company or any of its subsidiaries or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties or assets.
(j) Except for the registration of the Stock under the Securities Act
and such consents, approvals, authorizations, registrations or qualifications as
may be required under the Exchange Act and applicable state securities laws in
connection with the purchase and distribution of the Stock by the Underwriters,
no consent, approval, authorization or order of, or filing or registration with,
any such court or governmental agency or body is required for the execution,
delivery and performance of this Agreement by the Company and the consummation
of the transactions contemplated hereby.
(k) KPMG Peat Marwick LLP, who have expressed their opinions on the
audited financial statements and related schedules included or incorporated by
reference in the Registration Statements and the Prospectus are independent
public accountants as required by the Securities Act and the Rules and
Regulations.
(l) The financial statements, together with the related notes and
schedules, included or incorporation by reference in the Prospectus and in each
Registration Statement fairly present the financial position and the results of
operations and changes in financial position of the Company and its consolidated
subsidiaries at the respective dates or for the respective periods therein
specified. Such statements and related notes and schedules have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis except as may be set forth in the Prospectus.
(m) Neither the Company nor any of its subsidiaries has sustained,
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, any material loss or interference
with its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the Prospectus;
and, since such date, there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any material adverse
change, or any development involving a prospective material adverse change, in
or affecting the business, general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries taken as a whole, otherwise than as set forth or contemplated in
the Prospectus.
(n) Except as set forth in the Prospectus, there is no legal or
governmental proceeding pending to which the Company or any of its subsidiaries
is a party or of which any property or assets of the Company or any of its
subsidiaries is the subject which, singularly or in the aggregate, if determined
adversely to the Company or any of its subsidiaries, might have a Material
Adverse Effect or would prevent or adversely affect the ability of the Company
to perform its obligations under this Agreement; and to the best of the
Company's knowledge, no
-4-
<PAGE>
such proceedings are threatened or contemplated by governmental authorities
or threatened by others.
(o) Neither the Company nor any of its subsidiaries (i) is in
violation of its charter or bylaws, (ii) is in default in any respect, and no
event has occurred which, with notice or lapse of time or both, would constitute
such a default, in the due performance or observance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which it is a party or by which it is bound or
to which any of its property or assets is subject or (iii) is in violation in
any respect of any law, ordinance, governmental rule, regulation or court decree
to which it or its property or assets may be subject except any violations or
defaults which, singularly or in the aggregate, would not have a Material
Adverse Effect.
(p) The Company and each of its subsidiaries possess all licenses,
certificates, authorizations and permits issued by, and have made all
declarations and filings with, the appropriate state, federal or foreign
regulatory agencies or bodies which are necessary or desirable for the ownership
of their respective properties or the conduct of their respective businesses as
described in the Prospectus except where any failures to possess or make the
same, singularly or in the aggregate, would not have a Material Adverse Effect,
and the Company has not received notification of any revocation or modification
of any such license, authorization or permit and has no reason to believe that
any such license, certificate, authorization or permit will not be renewed.
(q) Neither the Company nor any of its subsidiaries is or, after
giving effect to the offering of the Stock and the application of the proceeds
thereof as described in the Prospectus will become an "investment company"
within the meaning of the Investment Company Act of 1940, as amended and the
rules and regulations of the Commission thereunder.
(r) Neither the Company nor any of its officers, directors or
affiliates has taken or will take, directly or indirectly, any action designed
or intended to stabilize or manipulate the price of any security of the Company,
or which caused or resulted in, or which might in the future reasonably be
expected to cause or result in, stabilization or manipulation of the price of
any security of the Company.
(s) The Company and its subsidiaries own or possess the right to use
all patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Prospectus as being owned by them for the conduct of
their respective businesses, and the Company is not aware of any claim to the
contrary or any challenge by any other person to the rights of the Company and
its subsidiaries with respect to the foregoing. The Company's business as now
conducted and as proposed to be conducted does not and will not infringe or
conflict with any patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses or other intellectual property or franchise right of any
person. Except as described in the Prospectus, no claim has been made against
the Company alleging the infringement by the Company of any patent, trademark,
service mark, trade name, copyright, trade secret, license in or other
intellectual property right or franchise right of any person.
-5-
<PAGE>
(t) The Company and each of its subsidiaries have good and marketable
title in fee simple to, or have valid rights to lease or otherwise use, all
items of real or personal property which are material to the business of the
Company and its subsidiaries taken as a whole, in each case free and clear of
all liens, encumbrances, claims and defects that may result in a Material
Adverse Effect.
(u) No labor disturbance by the employees of the Company or any of its
subsidiaries exists or, to the best of the Company's knowledge, is imminent
which might be expected to have a Material Adverse Effect. The Company is not
aware that any key employee or significant group of employees of the Company or
any subsidiary plans to terminate employment with the Company or any such
subsidiary.
(v) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or Section 4975
of the Internal Revenue Code of 1986, as amended from time to time (the "Code"))
or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any
of the events set forth in Section 4043(b) of ERISA (other than events with
respect to which the 30-day notice requirement under Section 4043 of ERISA has
been waived) has occurred with respect to any employee benefit plan which could
have a Material Adverse Effect; each employee benefit plan is in compliance in
all material respects with applicable law, including ERISA and the Code; the
Company has not incurred and does not expect to incur liability under Title IV
of ERISA with respect to the termination of, or withdrawal from, any "pension
plan"; and each "pension plan" (as defined in ERISA) for which the Company would
have any liability that is intended to be qualified under Section 401(a) of the
Code is so qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which could cause the loss of such
qualification.
(w) There has been no storage, generation, transportation, handling,
treatment, disposal, discharge, emission, or other release of any kind of toxic
or other wastes or other hazardous substances by, due to, or caused by the
Company or any of its subsidiaries (or, to the best of the Company's knowledge,
any other entity for whose acts or omissions the Company or any of its
subsidiaries is or may be liable) upon any of the property now or previously
owned or leased by the Company or any of its subsidiaries, or upon any other
property, in violation of any statute or any ordinance, rule, regulation, order,
judgment, decree or permit or which would, under any statute or any ordinance,
rule (including rule of common law), regulation, order, judgment, decree or
permit, give rise to any liability, except for any violation or liability which
would not have, singularly or in the aggregate with all such violations and
liabilities, a Material Adverse Effect; there has been no disposal, discharge,
emission or other release of any kind onto such property or into the environment
surrounding such property of any toxic or other wastes or other hazardous
substances with respect to which the Company or any of its subsidiaries have
knowledge, except for any such disposal, discharge, emission, or other release
of any kind which would not have, singularly or in the aggregate with all such
discharges and other releases, a Material Adverse Effect.
(x) The Company and its subsidiaries each (i) have filed with all
necessary federal, state and foreign income and franchise tax returns, (ii) have
paid all federal sate, local and foreign taxes due and payable for which it is
liable, and (iii) do not have any tax deficiency or
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<PAGE>
claims outstanding or assessed or, to the best of the Company's knowledge,
proposed against it which could reasonably be expected to have a Material
Adverse Effect.
(y) The Company and each of its subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for the conduct
of their respective businesses and the value of their respective properties and
as is customary for companies engaged in similar businesses in similar
industries.
(z) The Company and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(aa) The minute books of the Company and each of its subsidiaries have
been made available to the Underwriters and counsel for the Underwriters, and
such books (i) contain a complete summary of all meetings and actions of the
directors and stockholders of the Company and each of its subsidiaries since the
time of its respective incorporation through the date of the latest meeting and
action, and (ii) accurately in all material respects reflect all transactions
referred to in such minutes.
(bb) There is no franchise, lease, contract, agreement or document
required by the Securities Act or by the Rules and Regulations to be described
in the Prospectus or to be filed as an exhibit to the Registration Statements
which is not described or filed therein as required; and all descriptions of any
such franchises, leases, contracts, agreements or documents contained in the
Registration Statements are accurate and complete descriptions of such documents
in all material respects.
(cc) No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, stockholders, customers or
suppliers of the Company on the other hand, which is required to be described in
the Prospectus and which is not so described.
(dd) No person or entity has the right to require registration of
shares of Common Stock or other securities of the Company because of the filing
or effectiveness of the Registration Statements or otherwise, except for persons
and entities who have expressly waived such right or who have been given proper
notice and have failed to exercise such right within the time or times required
under the terms and conditions of such right.
(ee) Neither the Company nor any of its subsidiaries own any "margin
securities" as that term is defined in Regulations G and U of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"), and none
of the proceeds of the sale of the Stock will be used, directly or indirectly,
for the purpose of purchasing or carrying any margin security, for the purpose
of reducing or retiring any indebtedness which was originally incurred to
purchase or carry any margin security or for any other purpose which might cause
any of the Securities to be
-7-
<PAGE>
considered a "purpose credit" within the meanings of Regulation G, T, U or X
of the Federal Reserve Board.
(ff) Neither the Company nor any of its subsidiaries is a party to any
contract, agreement or understanding with any person that would give rise to a
valid claim against the Company or the Underwriters for a brokerage commission,
finder's fee or like payment in connection with the offering and sale of the
Stock.
(gg) No forward-looking statement (within the meaning of Section 27A of
the Securities Act and Section 21E of the Exchange Act) contained in the
Prospectus has been made or reaffirmed without a reasonable basis or has been
disclosed other than in good faith.
(hh) The Company has reviewed its operations and that of its
subsidiaries and any third parties with which the Company or any of its
subsidiaries has a material relationship to evaluate the extent to which the
business or operations of the Company or any of its subsidiaries will be
affected by the Year 2000 Problem. As a result of such review, the Company has
no reason to believe, and does not believe, that the Year 2000 Problem will have
a Material Adverse Effect. The "Year 2000 Problem" as used herein means any
significant risk that computer hardware or software used in the receipt,
transmission, processing, manipulation, storage, retrieval, retransmission or
other utilization of data or in the operation of mechanical or electrical
systems of any kind will not, in the case of dates or time periods occurring
after December 31, 1999, function at least as effectively as in the case of
dates or time periods occurring prior to January 1, 2000.
(ii) The Stock is listed on the NASDAQ Stock Market's National Market.
3. REPRESENTATIONS AND WARRANTIES AND AGREEMENTS OF THE SELLING
STOCKHOLDER. The Selling Stockholder represents and warrants to, and agrees
with, the Underwriters that such Selling Stockholder:
(a) Has, and immediately prior to each Closing Date (as defined in
Section 3 hereof) the Selling Stockholder will have, good and valid title to the
shares of Stock to be sold by the Selling Stockholder hereunder on such date,
free and clear of all liens, encumbrances, equities or claims; and upon delivery
of such shares and payment therefor pursuant hereto, good and valid title to
such shares, free and clear of all liens, encumbrances, equities or claims, will
pass to the Underwriters.
(b) Has duly and irrevocably executed and delivered a power of
attorney, in substantially the form heretofore delivered by the Underwriters
(the "Power of Attorney"), appointing, Steven J. Sharp and Edward C.V. Winn and
each of them, as attorney-in-fact (the "Attorneys-in-fact") with authority to
execute and deliver this Agreement on behalf of such Selling Stockholder, to
authorize the delivery of the shares of Stock to be sold by such Selling
Stockholder hereunder and otherwise to act on behalf of such Selling Stockholder
in connection with the transactions contemplated by this Agreement.
(c) Has duly and irrevocably executed and delivered a custody
agreement, in substantially the form heretofore delivered by the Underwriters
(the "Custody Agreement"), with Chase Mellon Shareholder Services LLC as
custodian (the "Custodian"), pursuant to which certificates in
-8-
<PAGE>
negotiable form for the shares of Stock to be sold by such Selling
Stockholder hereunder have been placed in custody for delivery under this
Agreement.
(d) Has full right, power and authority to enter into this Agreement,
the Power of Attorney and the Custody Agreement; the execution, delivery and
performance of this Agreement, the Power of Attorney and the Custody Agreement
by such Selling Stockholder and the consummation by such Selling Stockholder of
the transactions contemplated hereby and thereby will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which such Selling Stockholder is
a party or by which the Selling Stockholder is bound or to which any of the
property or assets of the Selling Stockholder is subject, nor will such actions
result in any violation of the provisions of the charter or bylaws of the
Selling Stockholder, the articles of partnership of the Selling Stockholder or
the deed of trust of the Selling Stockholder or any statute or any order, rule
or regulation of any court or governmental agency or body having jurisdiction
over the Selling Stockholder or the property or assets of the Selling
Stockholder; and, except for the registration of the Stock under the Securities
Act and such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and applicable state
securities laws in connection with the purchase and distribution of the Stock by
the Underwriters, no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is required for
the execution, delivery and performance of this Agreement, the Power of Attorney
or the Custody Agreement by such Selling Stockholder and the consummation by the
Selling Stockholder of the transactions contemplated hereby and thereby.
(e) The Registration Statements do not, and the Prospectus and any
further amendments or supplements to the Registration Statements or the
Prospectus will not, as of the applicable effective date (as to the Registration
Statements and any amendment thereto) and as of the applicable filing date (as
to the Prospectus and any amendment or supplement thereto) contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. The
preceding sentence applies only to the extent that any information contained in
or omitted from the Registration Statements or Prospectus was in reliance upon
and in conformity with written information furnished to the Company by such
Selling Stockholder specifically for inclusion therein.
4. PURCHASE SALE AND DELIVERY OF OFFERED SECURITIES. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company and the Selling
Stockholder agrees, severally and not jointly, to sell to each Underwriter, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
and the Selling Stockholder, that number of shares of Firm Stock (rounded up or
down, as determined by SG Cowen in its discretion, in order to avoid fractions)
obtained by multiplying 3,865,000 shares of Firm Stock in the case of the
Company and the number of shares of Firm Stock set forth opposite the name of
such Selling Stockholder in Schedule B hereto, in the case of a Selling
Stockholder, in each case by a fraction the numerator of which is the number of
shares of Firm Stock set forth opposite the name of such Underwriter in
Schedule A hereto and the denominator of which is the total number of shares of
Firm Stock.
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<PAGE>
The purchase price per share to be paid by the Underwriters to the
Company and the Selling Stockholder for the Stock will be $_____ per share (the
"Purchase Price").
The Company and the Selling Stockholder will deliver the Firm Stock to
the Underwriters for the respective accounts of the several Underwriters (in
the form of definitive certificates, issued in such names and in such
denominations as the Underwriters may direct by notice in writing to the
Company given at or prior to 12:00 Noon, New York time, on the second full
business day preceding the First Closing Date (as defined below) against
payment of the aggregate Purchase Price therefor by wire transfer to an
account at a bank acceptable to SG Cowen, payable to the order of the Company
and Chase Mellon Shareholder Services LLC as Custodian for the Selling
Stockholder, all at the offices of __________. Time shall be of the essence,
and delivery at the time and place specified pursuant to this Agreement is a
further condition of the obligations of each Underwriter hereunder. The time
and date of the delivery and closing shall be at 10:00 a.m., New York time,
on ___________, 1999, in accordance with Rule 15c6-1 of the Exchange Act.
The time and date of such payment and delivery are herein referred to as the
"First Closing Date." The First Closing Date and the location of delivery
of, and the form of payment for, the Firm Stock may be varied by agreement
among the Company, the Selling Stockholder and SG Cowen.
The Company and the Selling Stockholder shall make the certificates for
the Stock available to the Underwriters for examination on behalf of the
Underwriters in New York, New York at least twenty-four hours prior to the First
Closing Date.
For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Stock as contemplated by the Prospectus, the
Underwriters may purchase all or less than all of the Optional Stock. The price
per share to be paid for the Optional Stock shall be the Purchase Price. The
Company agrees to sell to the Underwriters the number of shares of Optional
Stock specified in the written notice by SG Cowen described below and the
Underwriters agree, severally and not jointly, to purchase such shares of
Optional Stock for the account of each Underwriter in the same proportion as the
number of shares of Firm Stock set forth opposite such Underwriter's name bears
to the total number of shares of Firm Stock (subject to adjustment by SG Cowen
to eliminate fractions). The option granted hereby may be exercised as to all or
any part of the Optional Stock at any time, and from time to time, not more than
thirty (30) days subsequent to the date of this Agreement. No Optional Stock
shall be sold and delivered unless the Firm Stock previously has been, or
simultaneously is, sold and delivered. The right to purchase the Optional Stock
or any portion thereof may be surrendered and terminated at any time upon notice
by SG Cowen to the Company.
The option granted hereby may be exercised by written notice being given
to the Company by SG Cowen setting forth the number of shares of the Optional
Stock to be purchased by the Underwriters and the date and time for delivery of
and payment for the Optional Stock. Each date and time for delivery of and
payment for the Optional Stock (which may be the First Closing Date, but not
earlier) is herein called the "Option Closing Date" and shall in no event be
earlier than two (2) business days nor later than five (5) business days after
written notice is given. (The Option Closing Date and the First Closing Date
are herein called the "Closing Dates.")
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<PAGE>
The Company will deliver the Optional Stock to the Underwriter (in the
form of definitive certificates, issued in such names and in such denominations
as the Underwriters may direct by notice in writing to the Company given at or
prior to 12:00 Noon, New York time, on the second full business day preceding
the Option Closing Date against payment of the aggregate Purchase Price therefor
in federal (same day) funds by certified or official bank check or checks or
wire transfer to an account at a bank acceptable to SG Cowen payable to the
order of the Company all at the offices of SG Cowen. Time shall be of the
essence, and delivery at the time and place specified pursuant to this Agreement
is a further condition of the obligations of each Underwriter hereunder. The
Company shall make the certificates for the Optional Stock available to the
Underwriters for examination on behalf of the Underwriters in New York, New York
not later than 10:00 a.m., New York Time, on the business day preceding the
Option Closing Date. The Option Closing Date and the location of delivery of,
and the form of payment for, the Optional Stock may be varied by agreement
between the Company and SG Cowen.
The several Underwriters propose to offer the Stock for sale upon the
terms and conditions set forth in the Prospectus.
5. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters that:
(a) The Company will prepare the Rule 462(b) Registration Statement,
if necessary, in a form approved by the Underwriters and file such Rule 462(b)
Registration Statement with the Commission on the date hereof; prepare the
Prospectus in a form approved by the Underwriters and file such Prospectus
pursuant to Rule 424(b) under the Securities Act not later than the second
business day following the execution and delivery of this Agreement; make no
further amendment or any supplement to the Registration Statements or to the
Prospectus prior to the Option Closing Date to which the Underwriters shall
reasonably object by notice to the Company after a reasonable period to review;
advise the Underwriters, promptly after it receives notice thereof, of the time
when any amendment to either Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus has been
filed and to furnish the Underwriters with copies thereof; file promptly all
reports and any definitive proxy or information statements required to be filed
by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of the Prospectus and for so long as
the delivery of a prospectus is required in connection with the offering or sale
of the Stock; advise the Underwriters, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, of the suspension of the qualification of the Stock for offering or
sale in any jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statements or the Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or the Prospectus
or suspending any such qualification, use promptly its best efforts to obtain
its withdrawal.
(b) If at any time prior to the expiration of nine months after the
effective date of the Initial Registration Statement when a prospectus relating
to the Stock is required to be delivered any event occurs as a result of which
the Prospectus as then amended or supplemented would
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<PAGE>
include any untrue statement of a material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus or to file under the Exchange
Act any document incorporated by reference in the Prospectus to comply with
the Securities Act or the Exchange Act, the Company will promptly notify the
Underwriters thereof and upon their request will prepare an amended or
supplemented Prospectus or make an appropriate filing pursuant to Section 13
or 14 of the Exchange Act which will correct such statement or omission or
effect such compliance. The Company will furnish without charge to each
Underwriter and to any dealer in securities as many copies as the
Underwriters may from time to time reasonably request of such amended or
supplemented Prospectus; and in case any Underwriter is required to deliver a
prospectus relating to the Stock nine months or more after the effective date
of the Initial Registration Statement, the Company upon the request of the
Underwriters and at the expense of such Underwriter will prepare promptly an
amended or supplemented Prospectus as may be necessary to permit compliance
with the requirements of Section 10(a)(3) of the Securities Act.
(c) To furnish promptly to each of the Underwriters and to counsel for
the Underwriters a signed copy of each of the Registration Statements as
originally filed with the Commission, and each amendment thereto filed with the
Commission, including all consents and exhibits filed therewith.
(d) To deliver promptly to the Underwriters in New York City such
number of the following documents as the Underwriters shall reasonably request:
(i) conformed copies of the Registration Statements as originally filed with the
Commission and each amendment thereto (in each case excluding exhibits),
(ii) each Preliminary Prospectus, (iii) the Prospectus (not later than
10:00 a.m., New York time, of the business day following the execution and
delivery of this Agreement) and any amended or supplemented Prospectus (not
later than 10:00 a.m., New York City time, on the business day following the
date of such amendment or supplement) and (iv) any document incorporated by
reference in the Prospectus (excluding exhibits thereto).
(e) To make generally available to its stockholders as soon as
practicable, but in any event not later than 18 months after the effective date
of the Registration Statement (as defined in Rule 158(c) under the Securities
Act), an earnings statement of the Company and its subsidiaries (which need not
be audited) complying with Section 11(a) of the Securities Act and the Rules and
Regulations (including, at the option of the Company, Rule 158).
(f) The Company will promptly take from time to time such actions as
the Underwriters may reasonably request to qualify the Stock for offering and
sale under the securities or Blue Sky laws of such jurisdictions as the
Underwriters may designate and to continue such qualifications in effect for so
long as required for the distribution of the Stock; PROVIDED that the Company
and its subsidiaries shall not be obligated to qualify as foreign corporations
in any jurisdiction in which they are not so qualified or to file a general
consent to service of process in any jurisdiction;
(g) During the period of five years from the date hereof, the Company
will deliver to the Underwriters and, upon request, to each of the other
Underwriters, (i) as soon as they are available, copies of all reports or other
communications furnished to stockholders and (i) as soon
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<PAGE>
as they are available, copies of any reports and financial statements
furnished or filed with the Commission pursuant to the Exchange Act or any
national securities exchange or automatic quotation system on which the Stock
is listed or quoted.
(h) The Company will not directly or indirectly offer, sell, assign,
transfer, pledge, contract to sell, or otherwise dispose of any shares of Common
Stock or securities convertible into or exercisable or exchangeable for Common
Stock for a period of 90 days from the date of the Prospectus without the prior
written consent of SG Cowen other than the Company's sale of the Stock hereunder
and the issuance of shares pursuant to employee benefit plans, qualified stock
option plans or other employee compensation plans existing on the date hereof or
pursuant to currently outstanding options, warrants or rights, except as
otherwise contemplated in such letter. The Company will cause each officer,
director and stockholder listed in Schedule C to furnish to the Underwriters,
prior to the First Closing Date, a letter, substantially in the form of Exhibit
I hereto, pursuant to which each such person shall agree not to directly or
indirectly offer, sell, assign, transfer, pledge, contract to sell, or otherwise
dispose of any shares of Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock for a period of 90 days from the
date of the Prospectus, without the prior written consent of SG Cowen, except as
otherwise contemplated in such letter.
(i) The Company will supply the Underwriters with copies of all
correspondence to and from, and all documents issued to and by, the Commission
in connection with the registration of the Stock under the Securities Act.
(j) Prior to each of the Closing Dates the Company will furnish to the
Underwriters, as soon as they have been prepared, copies of any unaudited
interim consolidated financial statements of the Company for any periods
subsequent to the periods covered by the financial statements appearing in the
Registration Statement and the Prospectus.
(k) Prior to each of the Closing Dates, the Company will not issue any
press release or other communication directly or indirectly or hold any press
conference with respect to the Company, its condition, financial or otherwise,
or earnings, business affairs or business prospects (except for routine oral
marketing communications in the ordinary course of business and consistent with
the past practices of the Company and of which the Underwriters are notified),
without the prior written consent of the Underwriters, unless in the judgment of
the Company and its counsel, and after notification to the Underwriters, such
press release or communication is required by law.
(l) In connection with the offering of the Stock, until SG Cowen shall
have notified the Company of the completion of the resale of the Stock, the
Company will not, and will cause its affiliated purchasers (as defined in
Regulation M under the Exchange Act) not to, either alone or with one or more
other persons, bid for or purchase, for any account in which it or any of its
affiliated purchasers has a beneficial interest, any Stock, or attempt to induce
any person to purchase any Stock; and not to, and to cause its affiliated
purchasers not to, make bids or purchase for the purpose of creating actual, or
apparent, active trading in or of raising the price of the Stock.
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<PAGE>
(m) The Company will not take any action prior to the Option Closing
Date which would require the Prospectus to be amended or supplemented pursuant
to Section 4(b);
(n) The Company will apply the net proceeds from the sale of the Stock
as set forth in the Prospectus under the heading "Use of Proceeds."
6. FURTHER AGREEMENTS OF THE SELLING STOCKHOLDER. The Selling
Stockholder agrees with the several Underwriters that:
(a) It will not directly or indirectly offer, sell, assign, transfer,
pledge, contract to sell, or otherwise dispose of any shares of Common Stock or
securities convertible into or exercisable or exchangeable for Common Stock
other than the sale of the Stock hereunder for a period of 90 days from the date
of the Prospectus, without the prior written consent of SG Cowen.
(b) The shares of Stock represented by the certificates held in
custody under the Custody Agreement are for the benefit of and coupled with and
subject to the interests of the Underwriters and the Selling Stockholder, and
that the arrangement for such custody and the appointment of the
Attorneys-in-fact are irrevocable; that the obligations of such Selling
Stockholder hereunder shall not be terminated by operation of law, whether by
the death or incapacity, liquidation or distribution of such Selling
Stockholder, or any other event, that if such Selling Stockholder should die or
become incapacitated or is liquidated or dissolved or any other event occurs,
before the delivery of the Stock hereunder, certificates for the Stock to be
sold by such Selling Stockholder shall be delivered on behalf of such Selling
Stockholder in accordance with the terms and conditions of this Agreement and
the Custody Agreement, and action taken by the Attorneys-in-fact or any of them
under the Power of Attorney shall be as valid as if such death, incapacity,
liquidation or dissolution or other event had not occurred, whether or not the
Custodian, the Attorneys-in-fact or any of them shall have notice of such death,
incapacity, liquidation or dissolution or other event.
(c) They will deliver to SG Cowen on or prior to the First Closing
Date a properly completed and executed United States Treasury Department Form
W-8 (if the Selling Stockholder is a non-United States person) or Form W-9
(if the Selling Stockholder is a United States person) or such other
applicable form or statement specified by Treasury Department regulations in
lieu thereof.
7. PAYMENT OF EXPENSES. The Company agrees with the Underwriter to
pay (a) the costs incident to the authorization, issuance, sale, preparation and
delivery of the Stock and any taxes payable in that connection; (b) the costs
incident to the Registration of the Stock under the Securities Act; (c) the
costs incident to the preparation, printing and distribution of the Registration
Statement, Preliminary Prospectus, Prospectus any amendments and exhibits
thereto or any document incorporated by reference therein the costs of printing,
reproducing and distributing the Power of Attorney, the Custody Agreement, the
"Agreement Among Underwriters" between the Underwriters and the Underwriters,
the Master Selected Dealers' Agreement, the Underwriters' Questionnaire and this
Agreement by mail, telex or other means of communications; (d) the fees and
expenses (including related fees and expenses of counsel for the Underwriters)
incurred in connection with filings made with the National Association of
Securities Dealers; (e) any applicable listing or other fees; (f) the fees and
expenses of qualifying the Stock under
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<PAGE>
the securities laws of the several jurisdictions as provided in Section 5(f)
and of preparing, printing and distributing Blue Sky Memoranda and Legal
Investment Surveys (including related fees and expenses of counsel to the
Underwriters); (g) all fees and expenses of the registrar and transfer agent
of the Stock; and (h) all other costs and expenses incident to the
performance of the obligations of the Company and of the Selling Stockholder
under this Agreement (including, without limitation, the fees and expenses of
the Company's counsel and the Company's independent accountants); PROVIDED
that, except as otherwise provided in this Section 5 and in Section 10, the
Underwriters shall pay their own costs and expenses, including the fees and
expenses of their counsel, any transfer taxes on the Stock which they may
sell and the expenses of advertising any offering of the Stock made by the
Underwriters.
8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective
obligations of the several Underwriters hereunder are subject to the accuracy,
when made and on each of the Closing Dates, of the representations and
warranties of the Company and the Selling Stockholder contained herein, to the
accuracy of the statements of the Company and the Selling Stockholder made in
any certificates pursuant to the provisions hereof, to the performance by the
Company and the Selling Stockholder of their obligations hereunder, and to each
of the following additional terms and conditions:
(a) No stop order suspending the effectiveness of either the
Registration Statements shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the Commission, and any
request for additional information on the part of the Commission (to be included
in the Registration Statements or the Prospectus or otherwise) shall have been
complied with to the reasonable satisfaction of the Underwriters. The Rule
462(b) Registration Statement, if any, and the Prospectus shall have been timely
filed with the Commission in accordance with Section 5(a).
(b) None of the Underwriters shall have discovered and disclosed to
the Company on or prior to the Closing Date that the Registration Statement or
the Prospectus or any amendment or supplement thereto contains an untrue
statement of a fact which, in the opinion of counsel for the Underwriters, is
material or omits to state any fact which, in the opinion of such counsel, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of each of this Agreement, the Custody
Agreements, the Powers of Attorney, the Stock, the Registration Statement and
the Prospectus and all other legal matters relating to this Agreement and the
transactions contemplated hereby shall be reasonably satisfactory in all
material respects to counsel for the Underwriters, and the Company and the
Selling Stockholder shall have furnished to such counsel all documents and
information that they may reasonably request to enable them to pass upon such
matters.
(d) Wilson Sonsini Goodrich & Rosati, P.C. shall have furnished to
the Underwriters such counsel's written opinion, as counsel to the Company,
addressed to the Underwriters and dated the Closing Date, in form and substance
reasonably satisfactory to the Underwriters, to the effect that:
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(i) The Company and each of its subsidiaries have been
duly incorporated and are validly existing as corporations in good
standing under the laws of their respective jurisdictions of
incorporation, are duly qualified to do business and are in good
standing as foreign corporations in each jurisdiction in which
their respective ownership or lease of property or the conduct of
their respective businesses requires such qualification, and have
all power and authority necessary to own or hold their respective
properties and to conduct the businesses in which they are
engaged, except where the failure to so qualify or have such power
or authority would not have, singularly or in the aggregate, a
Material Adverse Effect.
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital
stock of the Company, including the Stock being delivered on the
Closing Date, have been duly and validly authorized and issued,
are fully paid and non-assessable and conform to the description
thereof contained or incorporated by reference in the Prospectus.
(iii) All the outstanding shares of capital stock of each
subsidiary of the Company have been duly authorized and validly
issued, are fully paid and nonassessable and, except to the extent
set forth in the Prospectus, are owned by the Company directly or
indirectly through one or more wholly owned subsidiaries, free and
clear of any claim, lien, encumbrance, security interest,
restriction upon voting or transfer or any other claim of any
third party.
(iv) Except as disclosed in or contemplated by the
Prospectus, to such counsel's knowledge, there are no outstanding
options, warrants or other rights calling for the issuance of, and
no commitments, plans or arrangements to issue, any shares of
capital stock of the Company or any security convertible into or
exchangeable for capital stock of the Company. There are no
preemptive or other rights to subscribe for or to purchase, nor
any restriction upon the voting or transfer of, any shares of the
Stock pursuant to the Company's charter or bylaws or any agreement
or other instrument known to such counsel.
(v) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default
under any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel after
reasonable investigation to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the properties or assets
of the Company or any of its subsidiaries is subject, nor will
such actions result in any violation of the Charter or bylaws of
the Company or of any of its subsidiaries or any statute or any
order, rule or regulation of any court or governmental agency or
body or court having jurisdiction over the Company or any of its
subsidiaries or any of their properties or assets.
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<PAGE>
(vi) The Company has full corporate right, power and
authority to enter into this Agreement and to sell and deliver the
Common Shares to be sold by it to the several Underwriters; this
Agreement has been duly and validly authorized by all necessary
corporate action by the Company, has been duly and validly
executed and delivered by and on behalf of the Company, and is a
valid and binding agreement of the Company in accordance with its
terms, except as enforceability may be limited by general
equitable principles, bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and
except with respect to those provisions relating to indemnity or
contribution for liabilities arising under the Act as to which no
opinion need be expressed; and no approval, authorization, order,
consent, registration, filing, qualification, license or permit of
or with any court, regulatory, administrative or other
governmental body is required for the execution and delivery of
this Agreement by the Company or the consummation of the
transactions contemplated by this Agreement, except such as have
been obtained and are in full force and effect under the Act and
such as may be required under applicable Blue Sky laws in
connection with the purchase and distribution of the Common Stock
by the Underwriters and the clearance of such offering with NASD.
(vii) The description in the Registration Statement and
Prospectus of statutes, legal or governmental proceedings and
contracts and other documents are accurate in all material
respects; and to the best of such counsel's knowledge, there are
no statutes, legal or governmental proceedings, contracts or other
documents of a character required to be described in the
Registration Statement or Prospectus or to be filed as exhibits to
the Registration Statement which are not described or filed as
required.
(viii) To the best of such counsel's knowledge, neither the
Company nor any of its subsidiaries (i) is in violation of its
charter or bylaws, (ii) is in default, and no event has occurred,
which, with notice or lapse of time or both, would constitute a
default, in the due performance or observance of any term,
covenant or condition contained in any agreement or instrument to
which it is a party or by which it is bound or to which any of its
properties or assets is subject or (iii) is in violation of any
law, ordinance, governmental rule, regulation or court decree to
which it or its property or assets may be subject or has failed to
obtain any license, permit, certificate, franchise or other
governmental authorization or permit necessary to the ownership of
its property or to the conduct of its business except, in the case
of clauses (ii) and (iii), for those defaults, violations or
failures which, either individually or in the aggregate, would not
have a Material Adverse Effect.
(ix) To the best of such counsel's knowledge and other
than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property or asset of
the Company or any of its subsidiaries is the subject which,
singularly or in the aggregate, if determined adversely to the
Company or any of its subsidiaries, might have a Material Adverse
Effect or would prevent or adversely affect
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<PAGE>
the ability of the Company to perform its obligations under
this Agreement; and, to the best of such counsel's knowledge, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others.
(x) The Registration Statement was declared effective
under the Securities Act as of the date and time specified in such
opinion, the Rule 462(b) Registration Statement, if any, was filed
with the Commission on the date specified therein, the Prospectus
was filed with the Commission pursuant to the subparagraph of Rule
424(b) of the Rules and Regulations specified in such opinion on
the date specified therein and no stop order suspending the
effectiveness of the Registration Statement has been issued and,
to the knowledge of such counsel, no proceeding for that purpose
is pending or threatened by the Commission.
(xi) The Registration Statements, as of the respective
effective dates and the Prospectus, as of its date, and any
further amendments or supplements thereto, as of their respective
dates, made by the Company prior to the Closing Date (other than
the financial statements and other financial data contained
therein, as to which such counsel need express no opinion)
complied as to form in all material respects with the requirements
of the Securities Act and the Rules and Regulations; and the
documents incorporated by reference in the Prospectus and any
further amendment or supplement to any such incorporated document
made by the Company prior to the Closing Date (other than the
financial statements and related schedules therein, as to which
such counsel need express no opinion), when they became effective
or were filed with the Commission, as the case may be, complied as
to form in all material respects with the requirements of the
Securities Act or the Exchange Act, as applicable, and the rules
and regulations of the Commission thereunder.
(xii) To the best of such counsel's no person or entity
has the right to require registration of shares of Common Stock or
other securities of the Company because of the filing or
effectiveness of the Registration Statements or otherwise, except
for persons and entities who have expressly waived such right or
who have been given proper notice and have failed to exercise such
right within the time or times required under the terms and
conditions of such right.
Such counsel shall also have furnished to the Underwriters a written
statement, addressed to the Underwriters and dated the Closing Date, in form and
substance satisfactory to the Underwriters, to the effect that (x) such counsel
has acted as counsel to the Company in connection with the preparation of the
Registration Statements (y) based on such counsel's examination of the
Registration Statements and such counsel's investigations made in connection
with the preparation of the Registration Statements and "conferences with
certain officers and employees of and with auditors for and counsel to the
Company," such counsel has no reason to believe that (i) the Registration
Statements, as of the respective effective dates, contained any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading, or
that the Prospectus contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
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<PAGE>
they were made, not misleading or (ii) any document incorporated by reference
in the Prospectus or any further amendment or supplement to any such
incorporated document made by the Company prior to the Closing Date, when
they became effective or were filed with the Commission, as the case may be,
contained, in the case of a registration statement which became effective
under the Securities Act, any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading, or, in the case of other
documents which were filed under the Exchange Act with the Commission, any
untrue statement of a material fact or omitted to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; it being understood
that such counsel need express no opinion as to the financial statements or
other financial data contained in the Registration Statement or the
Prospectus.
The foregoing opinion and statement may be qualified by a statement to
the effect that such counsel has not independently verified the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus and takes no responsibility therefor except to the
extent set forth in the opinion described in clauses (viii) and (ix) above.
(e) _______________________ shall have furnished to the Underwriters
such counsel's written opinion, as counsel to the Selling Stockholder, addressed
to the Underwriters and dated the Closing Date, in form and substance reasonably
satisfactory to the Underwriters, to the effect that:
(i) The Selling Stockholder has full right, power and
authority to enter into this Agreement, the Power of Attorney and
the Custody Agreement; the execution, delivery and performance of
this Agreement, the Power of Attorney and the Custody Agreement by
the Selling Stockholder and the consummation by the Selling
Stockholder of the transactions contemplated hereby and thereby
will not conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default under, any
statute, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel to which the
Selling Stockholder is a party or by which the Selling Stockholder
is bound or to which any of the property or assets of the Selling
Stockholder is subject, nor will such actions result in any
violation of the provisions of the charter or bylaws of the
Selling Stockholder the articles of partnership of the Selling
Stockholder or the deed of trust of the Selling Stockholder or any
statute or any order, rule or regulation known to such counsel of
any court or governmental agency or body having jurisdiction over
the Selling Stockholder or the property or assets of the Selling
Stockholder; and, except for the registration of the Stock under
the Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the
Exchange Act and applicable state securities laws in connection
with the purchase and distribution of the Stock by the
Underwriters, no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency
or body is required for the execution, delivery and performance of
this Agreement, the Power of Attorney or the Custody Agreement by
the Selling Stockholder and the consum-
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mation by the Selling Stockholder of the transactions contemplated
hereby and thereby.
(ii) This Agreement has been duly authorized, executed
and delivered by or on behalf of the Selling Stockholder.
(iii) A Power-of-Attorney and a Custody Agreement have
been duly authorized, executed and delivered by the Selling
Stockholder and constitute valid and binding agreements of the
Selling Stockholder.
(iv) Upon payment for, and delivery of, the shares of
Stock to be sold by the Selling Stockholder under this Agreement
in accordance with the terms hereof, the Underwriters will acquire
good and valid title to such shares, free and clear of all liens,
encumbrances, equities or claims.
(f) An opinion of Skjerven, Morrill, MacPherson, Franklin & Friel,
patent counsel for the Company, dated the First Closing Date, or the Second
Closing Date, as the case may be, to the effect that:
(i) The Company is listed in the records of the U.S.
Patent and Trademark Office as the holder of trademarks set forth
in a schedule to such opinion. Such counsel knows of no claims of
third parties to any ownership interest or lien with respect to
any of such patents, patent applications or trademarks;
(ii) To the best of such counsel's knowledge, the Company
owns [fifty (50)] issued U.S. patents, [two (2)] issued foreign
patents, two (2) pending U.S. patent applications, [ten (10)]
pending foreign patent applications, [three (3)] registered U.S.
trademarks and [thirteen (13)] registered foreign trademarks;
(iii) Such counsel is not aware of any material defects of
form in the preparation or filing of patent applications or
trademark applications on behalf of the Company;
(iv) Such counsel (A) is not aware of any pending or
threatened action, suit, proceeding or claim by others that the
Company is infringing or otherwise violating any patents,
trademarks or trade secrets, and (B) is not aware of any pending
or threatened action, suit, proceeding, or claim by others
challenging the validity or scope of the patent applications or
the patents or trademarks held by or licensed to the Company; and
(v) According to such counsel's records, the Company is
listed or is in the process of being listed in the records of the
appropriate foreign office as the sole holder of record of the
foreign patent applications and foreign trademark applications set
forth in a schedule of such opinion. Such counsel has no actual
knowledge of any claims of third parties to any ownership interest
or lien with respect to any patents or patent applications or
trademarks or any trademark applications, and has not been advised
that any pending foreign patent applica-
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tions or pending foreign trademark applications have been rejected.
Such opinion and knowledge may be based upon inquiry of the foreign
patent and trademark attorneys engaged to prepare, file and prosecute
such patents, patent applications, trademarks and trademark applications.
Such counsel shall also state that they have participated in telephone
conferences with employees of the Company (that counsel are informed have
primary responsibility for the Company's patents, patent applications,
trademarks, trademark applications and other intellectual property) in which the
Company's patents, patent applications, trademarks, trademark applications and
the contents of the statements in the Prospectus under the captions "Risk
Factors - Our business may be harmed if we fail to protect our proprietary
technology" and "Risk Factors - Our ability to produce our semiconductors may
suffer if someone claims we infringe on their intellectual property"
(collectively, the "Intellectual Property Portion") were discussed, and,
although such counsel is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement (except to the extent stated in this subparagraph (f)),
on the basis of such conferences and such representation of the Company, and to
the best of such counsel's knowledge, the Intellectual Property Portion, insofar
as it constitutes a summary of the Company's patents and patent applications and
trademarks and trademark applications, is in all material respects an accurate
summary of, and fairly summarizes in all material respects the legal matters,
documents and proceedings relating to, the patents, patent applications,
trademarks and trademark application as described therein, and nothing has come
to the attention of such counsel which leads them to believe that the
Intellectual Property Portion of the Registration Statement, as of the time the
Registration Statement became effective under the Act, and such portion of the
Prospectus or any amendment or supplement thereto, on the date such Prospectus,
amendment or supplement thereto was filed pursuant to Rule 424(b), and such
portion of the Registration Statement and the Prospectus, or any amendment or
supplement thereto, as of the Closing Date or the Option Closing Date, as the
case may be, contains an untrue statement of a material fact or omits to state a
material fact required to be misleading. With respect to such statement,
Skjerven, Morrill, MacPherson, Franklin & Friel may state that their belief is
based upon the procedures set forth therein, but is without independent check
and verification not referred to therein.
(g) The Underwriters shall have received from Pillsbury Madison &
Sutro LLP counsel for the Underwriters, such opinion or opinions, dated the
Closing Date, with respect to such matters as the Underwriters may reasonably
require, and the Company and the Selling Stockholder shall have furnished to
such counsel such documents as they request for enabling them to pass upon such
matters.
(h) At the time of the execution of this Agreement, the Underwriters
shall have received from KPMG Peat Marwick LLP a letter, addressed to the
Underwriters and dated such date, in form and substance satisfactory to the
Underwriters (i) confirming that they are independent certified public
accountants with respect to the Company and its subsidiaries within the meaning
of the Securities Act and the Rules and Regulations and (ii) stating the
conclusions and findings of such firm with respect to the financial statements
and certain financial information contained or incorporated by reference in the
Prospectus.
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<PAGE>
(i) On the Closing Date, the Underwriters shall have received a
letter (the "bring-down letter") from KPMG Peat Marwick LLP addressed to the
Underwriters and dated the Closing Date confirming, as of the date of the
bring-down letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus as of a date not more than three
business days prior to the date of the bring-down letter), the conclusions
and findings of such firm with respect to the financial information and other
matters covered by its letter delivered to the Underwriters concurrently with
the execution of this Agreement pursuant to Section 6(g).
(j) The Company shall have furnished to the Underwriters a
certificate, dated the Closing Date, of its Chairman of the Board, its
President or a Vice President and its chief financial officer stating that
(i) such officers have carefully examined the Registration Statements and the
Prospectus and, in their opinion, the Registration Statements as of their
respective effective dates and the Prospectus, as of each such effective
date, did not include any untrue statement of a material fact and did not
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, (ii) since the effective date of
the Initial Registration Statement no event has occurred which should have
been set forth in a supplement or amendment to the Registration Statements or
the Prospectus, (iii) to the best of their knowledge after reasonable
investigation, as of the Closing Date, the representations and warranties of
the Company in this Agreement are true and correct and the Company has
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date, and (iv)
subsequent to the date of the most recent financial statements included or
incorporated by reference in the Prospectus, there has been no material
adverse change in the financial position or results of operation of the
Company and its subsidiaries, or any change, or any development including a
prospective change, in or affecting the condition (financial or otherwise),
results of operations, business or prospects of the Company and its
subsidiaries taken as a whole, except as set forth in the Prospectus.
(k) The Selling Stockholder (or the Custodian or one or more
attorneys-in-fact on behalf of the Selling Stockholder) shall have furnished to
the Underwriters on the Closing Date a certificate, dated the such date, signed
by, or on behalf of, the Selling Stockholder stating that the representations,
warranties and agreements of the Selling Stockholder contained herein are true
and correct as of the Closing Date and that the Selling Stockholder has complied
with all agreements contained herein to be performed by the Selling Stockholder
at or prior to the Closing Date.
(l) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus
(ii) since such date there shall not have been any change in the capital stock
[consider the appropriateness of adding other items] or long-term debt of the
Company or any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the business, general affairs, management,
financial position, stockholders' equity or results of operations of the Company
and its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in clause (i) or
(ii), is, in the judgment of the Underwriters, so
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<PAGE>
material and adverse as to make it impracticable or inadvisable to proceed
with the sale or delivery of the Stock on the terms and in the manner
contemplated in the Prospectus.
(m) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
or body which would, as of the Closing Date, prevent the issuance or sale of the
Stock; and no injunction, restraining order or order of any other nature by any
federal or state court of competent jurisdiction shall have been issued as of
the Closing Date which would prevent the issuance or sale of the Stock.
(n) Subsequent to the execution and delivery of this Agreement (i) no
downgrading shall have occurred in the rating accorded the Company's debt
securities by any "nationally recognized statistical rating organization," as
that term is defined by the Commission for purposes of Rule 436(g)(2) of the
Rules and Regulations and (ii) no such organization shall have publicly
announced that it has under surveillance or review (other than an announcement
with positive implications of a possible upgrading), its rating of any of the
Company's debt securities.
(o) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange or in
the over-the-counter market, or trading in any securities of the Company on any
exchange or in the over-the-counter market, shall have been suspended or minimum
prices shall have been established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body or governmental
authority having jurisdiction, (ii) a banking moratorium shall have been
declared by Federal or state authorities, (iii) the United States shall have
become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a declaration
of a national emergency or war by the United States or (iv) there shall have
occurred such a material adverse change in general economic, political or
financial conditions (or the effect of international conditions on the financial
markets in the United States shall be such) as to make it, in the judgment of
the Underwriters, impracticable or inadvisable to proceed with the sale or
delivery of the Stock on the terms and in the manner contemplated in the
Prospectus.
(p) The National Market System shall have approved the Stock for
inclusion, subject only to official notice of issuance.
(q) SG Cowen shall have received the written agreements, substantially
in the form of Exhibit I hereto, of the officers, directors and stockholders of
the Company listed in Schedule C to this Agreement.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
9. INDEMNIFICATION AND CONTRIBUTION. The Company shall indemnify and
hold harmless each Underwriter, its officers, employees, Underwriters and agents
and each person, if any, who controls any Underwriter within the meaning of the
Securities Act (collectively the "Underwriter Indemnified Parties" and, each an
"Underwriter Indemnified Party") against any loss, claim, damage or liability,
joint or several, or any action in respect thereof, to which that
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<PAGE>
Underwriter Indemnified Party may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises
out of or is based upon (i) any untrue statement or alleged untrue statement
of a material fact contained in the Preliminary Prospectus , either of the
Registration Statements or the Prospectus or in any amendment or supplement
thereto or (ii) the omission or alleged omission to state in any Preliminary
Prospectus, either of the Registration Statements or the Prospectus or in any
amendment or supplement thereto a material fact required to be stated therein
or necessary to make the statements therein not misleading or (iii) any act
or failure to act, or any alleged act or failure to act, by any Underwriter
in connection with, or relating in any manner to , the Stock or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon matters
covered by clause (i) or (ii) above, (provided that the Company shall not be
liable in the case of any matter covered by this clause (iii) to the extent
that it is determined in a final judgement by a court of competent
jurisdiction that such loss, claim, damage, liability or action resulted
directly from any such act or failure to act undertaken or omitted to be
taken by such Underwriter through its gross negligence or willful misconduct)
and shall reimburse each Underwriter Indemnified Party promptly upon demand
for any legal or other expenses reasonably incurred by that Underwriter
Indemnified Party in connection with investigating or preparing to defend or
defending against or appearing as a third party witness in connection with
any such loss, claim, damage, liability or action as such expenses are
incurred; PROVIDED, HOWEVER, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or action
arises out of or is based upon (i) an untrue statement or alleged untrue
statement in or omission or alleged omission from the Preliminary Prospectus,
either of the Registration Statements or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company through the Underwriters by or on behalf of any
Underwriter specifically for use therein, which information the parties
hereto agree is limited to the Underwriter's Information (as defined in
Section 17); provided, further however, that the foregoing indemnification
agreement with respect to the Preliminary Prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any such loss,
claim, damage or liability purchased Securities, or any officers, employees,
Underwriters, agents or controlling persons of such Underwriter, if (i) a
copy of the Prospectus (as then amended or supplemented) was required by law
to be delivered to such person at or prior to the written confirmation of the
sale of Securities to such person, (ii) a copy of the Prospectus (as then
amended or supplemented) excluding documents incorporated by reference
therein was not sent or given to such person by or on behalf of such
Underwriter and such failure was not due to non-compliance by the Company
with Section 5(d), and (iii) the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage or
liability. This indemnity agreement is not exclusive and will be in addition
to any liability which the Company might otherwise have and shall not limit
any rights or remedies which may otherwise be available at law or in equity
to each Underwriter Indemnified Party.
(a) The Selling Stockholder shall indemnify and hold harmless each
Underwriter Indemnified Party, against any loss, claim, damage or liability,
joint or several, or any action in respect thereof, to which that Underwriter
Indemnified may become subject, under the Securities Act or otherwise, insofar
as such loss, claim, damage, liability or action arises out of or is based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Prospectus , either of the Registration Statements
or the Prospectus or in any amend-
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<PAGE>
ment or supplement thereto or (ii) the omission or alleged omission to state
in any Preliminary Prospectus, either of the Registration Statements or the
Prospectus or in any amendment or supplement thereto a material fact required
to be stated therein or necessary to make the statements therein not
misleading but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company
through the Underwriters by or on behalf of the Selling Stockholder
specifically for inclusion therein, and shall reimburse each Underwriter
Indemnified Party promptly upon demand for any legal or other expenses
reasonably incurred by that Underwriter Indemnified Party in connection with
investigating or preparing to defend or defending against or appearing as a
third party witness in connection with any such loss, claim, damage,
liability or action as such expenses are incurred; PROVIDED, HOWEVER, the
liability of the Selling Stockholder under this Section 8 shall be limited to
the net proceeds received by the Selling Stockholder.
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company its officers, employees, Underwriters and agents, each
of its directors and each person, if any, who controls the Company within the
meaning of the Securities Act (collectively the "Company Indemnified Parties"
and each a "Company Indemnified Party") and the Selling Stockholder, its
officers, employees, Underwriters and agents and each person, if any, who
controls the Selling Stockholder within the meaning of the Securities Act
(collectively, the "Stockholder Indemnified Parties" and each a "Stockholder
Indemnified Party"), against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company Indemnified
Parties or the Selling Stockholder Indemnified Parties may become subject, under
the Securities Act or otherwise, insofar as such loss, claim, damage, liability
or action arises out of or is based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary Prospectus,
either of the Registration Statements or the Prospectus or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company through the Underwriters by or on behalf of that Underwriter
specifically for use therein, and shall reimburse the Company Indemnified
Parties and the Selling Stockholder Indemnified Parties for any legal or other
expenses reasonably incurred by such parties in connection with investigating or
preparing to defend or defending against or appearing as third party witness in
connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided that the parties hereto hereby agree that such
written information provided by the Underwriters consists solely of the
Underwriter's Information. This indemnity agreement is not exclusive and will
be in addition to any liability which the Underwriters might otherwise have and
shall not limit any rights or remedies which may otherwise be available at law
or in equity to the Company Indemnified Parties and Selling Stockholder
Indemnified Parties.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; PROVIDED, HOWEVER, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have
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<PAGE>
under this Section 8 except to the extent it has been materially prejudiced
by such failure; and, PROVIDED, FURTHER, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have
to an indemnified party otherwise than under this Section 8. If any such
claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly
with any other similarly notified indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its election
to assume the defense of such claim or action, the indemnifying party shall
not be liable to the indemnified party under this Section 8 for any legal or
other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation;
PROVIDED, HOWEVER, that any indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof
but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment thereof has been specifically
authorized by the indemnifying party in writing, (ii) such indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party and in the reasonable judgment of such
counsel it is advisable for such indemnified party to employ separate counsel
or (iii) the indemnifying party has failed to assume the defense of such
action and employ counsel reasonably satisfactory to the indemnified party,
in which case, if such indemnified party notifies the indemnifying party in
writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in connection
with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for all such indemnified parties,
which firm shall be designated in writing by SG Cowen, if the indemnified
parties under this Section 8 consist of any Underwriter Indemnified Party, or
by the Company if the indemnified parties under this Section 8 consist of any
Company Indemnified Parties. Each indemnified party, as a condition of the
indemnity agreements contained in Sections 8(a), 8(b) and 8(c), shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. Subject to the provisions of Section 8(e) below,
no indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees
to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
(d) If at any time an indemnified party shall have requested that an
indemnifying party reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by this Section 8 effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the request for reimbursement, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
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<PAGE>
(e) If the indemnification provided for in this Section 8 is
unavailable or insufficient to hold harmless an indemnified party under
Section 8(a), 8(b) or 8(c), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the Company and the
Selling Stockholder on the one hand and the Underwriters on the other from
the offering of the Stock or if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Selling Stockholder on the one
hand and the Underwriters on the other with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action
in respect thereof, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Selling Stockholder on
the one hand and the Underwriters on the other with respect to such offering
shall be deemed to be in the same proportion as the total net proceeds from
the offering of the Stock purchased under this Agreement (before deducting
expenses) received by the Company and the Selling Stockholder bear to the
total underwriting discounts and commissions received by the Underwriters
with respect to the Stock purchased under this Agreement, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company the Selling Stockholder on the one hand or the Underwriters on the
other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission; provided that the parties hereto agree that the written information
furnished to the Company through the Underwriters by or on behalf of the
Underwriters for use in any Preliminary Prospectus, either of the
Registration Statements or the Prospectus consists solely of the
Underwriter's Information. The Company, the Selling Stockholder and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section 8(f) were to be determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by
any other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 8(f) shall be
deemed to include, for purposes of this Section 8(f), any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8(f), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Stock underwritten by it and distributed to the public were offered
to the public less the amount of any damages which such Underwriter has
otherwise paid or become liable to pay by reason of any untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
The Underwriters' obligations to contribute as provided in this
Section 8(f) are several in proportion to their respective underwriting
obligations and not joint.
10. TERMINATION. The obligations of the Underwriters hereunder may be
terminated by SG Cowen, in its absolute discretion by notice given to and
received by the Company prior to
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delivery of and payment for the Firm Stock if, prior to that time, any of the
events described in Sections 8(l), 8(m), 8(n) or 8(o) have occurred or if the
Underwriters shall decline to purchase the Stock for any reason permitted
under this Agreement.
11. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If (a) this Agreement
shall have been terminated pursuant to Section 9 or 11, (b) the Company or
the Selling Stockholder shall fail to tender the Stock for delivery to the
Underwriters for any reason permitted under this Agreement, or (c) the
Underwriters shall decline to purchase the Stock for any reason permitted
under this Agreement the Company and the Selling Stockholder shall reimburse
the Underwriters for the fees and expenses of their counsel and for such
other out-of-pocket expenses as shall have been reasonably incurred by them
in connection with this Agreement and the proposed purchase of the Stock, and
upon demand the Company and the Selling Stockholder shall pay the full amount
thereof to the SG Cowen. If this Agreement is terminated pursuant to Section
11 by reason of the default of one or more Underwriters, neither the Company
nor the Selling Stockholder shall be obligated to reimburse any defaulting
Underwriter on account of those expenses.
12. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters
shall default in its or their obligations to purchase shares of Stock hereunder
and the aggregate number of shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase does not exceed ten percent (10%) of
the total number of shares underwritten, the other Underwriters shall be
obligated severally, in proportion to their respective commitments hereunder, to
purchase the shares which such defaulting Underwriter or Underwriters agreed but
failed to purchase. If any Underwriter or Underwriters shall so default and the
aggregate number of shares with respect to which such default or defaults occur
is more than ten percent (10%) of the total number of shares underwritten and
arrangements satisfactory to the Underwriters and the Company for the purchase
of such shares by other persons are not made within forty-eight (48) hours after
such default, this Agreement shall terminate.
If the remaining Underwriters or substituted Underwriters are required
hereby or agree to take up all or part of the shares of Stock of a defaulting
Underwriter or Underwriters as provided in this Section 11, (i) the Company and
the Selling Stockholder shall have the right to postpone the Closing Dates for a
period of not more than five (5) full business days in order that the Company
and the Selling Stockholder may effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus which
may thereby be made necessary, and (ii) the respective numbers of shares to be
purchased by the remaining Underwriters or substituted Underwriters shall be
taken as the basis of their underwriting obligation for all purposes of this
Agreement. Nothing herein contained shall relieve any defaulting Underwriter of
its liability to the Company, the Selling Stockholder or the other Underwriters
for damages occasioned by its default hereunder. Any termination of this
Agreement pursuant to this Section 11 shall be without liability on the part of
any non-defaulting Underwriter, the Selling Stockholder or the Company, except
expenses to be paid or reimbursed pursuant to Sections 5 and 10 and except the
provisions of Section 8 shall not terminate and shall remain in effect.
13. SUCCESSORS; PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This
Agreement shall inure to the benefit of and be binding upon the several
Underwriters, the Company and the
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<PAGE>
Selling Stockholder and their respective successors. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person other than the persons mentioned in the preceding sentence any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person; except that
the representations, warranties, covenants, agreements and indemnities of the
Company and the Selling Stockholder contained in this Agreement shall also be
for the benefit of the Underwriter Indemnified Parties, and the indemnities
of the several Underwriters shall also be for the benefit of the Company
Indemnified Parties and the Selling Stockholder Indemnified Parties.
14. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC. The
respective indemnities, covenants, agreements, representations, warranties and
other statements of the Company, the Selling Stockholder and the several
Underwriters, as set forth in this Agreement or made by them respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation made by or on behalf of any Underwriter, the Selling
Stockholder, the Company or any person controlling any of them and shall survive
delivery of and payment for the Stock.
15. NOTICES. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail, telex
or facsimile transmission to SG Cowen Securities Corporation, 4 Embarcadero
Center, San Francisco, California 94111, Attention: Ken Rivera (Fax:
(415) 646-7352);
(b) if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to TriQuint Semiconductor, Inc., 2300 NE Brookwood
Parkway, Hillsboro, Oregon 97124, Attention: Steven J. Sharp; (Fax:
(503) 615-8901);
(c) if to the Selling Stockholder, shall be delivered or sent by mail,
telex or facsimile transmission to such Selling Stockholder at the address set
forth on Schedule B hereto; PROVIDED, HOWEVER, that any notice to an Underwriter
pursuant to Section 8 shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its acceptance
telex to the Underwriters, which address will be supplied to any other party
hereto by the Underwriters upon request. Any such statements, requests, notices
or agreements shall take effect at the time of receipt thereof.
16. DEFINITION OF CERTAIN TERMS. For purposes of this Agreement,
(a) "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading and (b) "subsidiary" has the meaning set forth in Rule 405 of
the Rules and Regulations.
17. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
18. UNDERWRITERS' INFORMATION. The parties hereto acknowledge and
agree that, for all purposes of this Agreement, the Underwriters' Information
consists solely of the following information in the Prospectus: (i) the last
two paragraphs on the front cover page concerning the
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<PAGE>
terms of the offering by the Underwriters; and (ii) the statements concerning
the Underwriters contained in the first, third and seventh paragraphs under
the heading "Underwriting."
19. AUTHORITY OF THE UNDERWRITERS. In connection with this Agreement,
you will act for and on behalf of the several Underwriters, and any action taken
under this Agreement by the Underwriters, will be binding on all the
Underwriters; and any action taken under this Agreement by any of the
Attorneys-in-fact will be binding on all the Selling Stockholder.
20. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of
any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
21. GENERAL. This Agreement constitutes the entire agreement of the
parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. In this Agreement, the masculine, feminine and
neuter genders and the singular and the plural include one another. The section
headings in this Agreement are for the convenience of the parties only and will
not affect the construction or interpretation of this Agreement. This Agreement
may be amended or modified, and the observance of any term of this Agreement may
be waived, only by a writing signed by the Company, the Selling Stockholder and
the Underwriters.
22. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
Any person executing and delivering this Agreement as Attorney-in-fact
for the Selling Stockholder represents by so doing that he or she has been duly
appointed as Attorney-in-fact by such Selling Stockholder pursuant to a validly
existing and binding Power of Attorney which authorizes such Attorney-in-fact to
take such action.
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<PAGE>
If the foregoing is in accordance with your understanding of the
agreement between the Company, the Selling Stockholder and the several
Underwriters, kindly indicate your acceptance in the space provided for that
purpose below.
Very truly yours,
TRIQUINT SEMICONDUCTOR, INC.
By
------------------------------------
Name
----------------------------------
Title
---------------------------------
LUCENT TECHNOLOGIES, INC.
By [Attorney-in-fact]
By
------------------------------------
Attorney-in-fact Acting on his own
behalf and on behalf of the Selling
Stockholder listed in Schedule B
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<PAGE>
Accepted as of the date first above written:
SG COWEN SECURITIES CORPORATION
Donaldson, Lufkin & Jenrette Securities Corporation
Banc of America Securities LLC
CIBC World Markets Corp.
Dain Rauscher Wessels, a division of
Dain Rauscher Incorporated
U.S. Bancorp Piper Jaffray Inc.
By SG COWEN SECURITIES CORPORATION
By
---------------------------------
Name
-------------------------------
Title
------------------------------
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<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of Firm Number of Optional
Shares to be Shares to be
Name Purchased Purchased
- --------------------------------------- -------------- ------------------
<S> <C> <C>
SG Cowen Securities Corporation
Donaldson, Lufkin & Jenrette Securities
Corporation
Banc of America Securities LLC
CIBC world Markets Corp.
Dain Rauscher Wessels, a Division of
Dain Rauscher Incorporated
U.S. Bancorp Piper Jaffray Inc.
TOTAL
</TABLE>
A-1
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
Number of Firm Number of Optional
Selling Stockholder Shares to be Sold Shares to be Sold
- ------------------------------- ----------------- ------------------
<S> <C> <C>
Lucent Technologies, Inc. 858,254 ________
600 Mountain Avenue
Murray Hill, New Jersey 07974
TOTAL
</TABLE>
B-1
<PAGE>
SCHEDULE C
LIST OF STOCKHOLDERS SUBJECT TO SECTION 4(h)
Steven J. Sharp
Edward C.V. Winn
Charles Scott Gibson
Bruce Fournier
Walden Rhines
J. David Pye
Edward F. Tuck
Thomas V. Gardner
Paul A. Gary
C-1
<PAGE>
EXHIBIT 5.1
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
TELEPHONE 650-493-9300 FACSIMILE 650-493-6811
WWW.WSGR.COM
June 28, 1999
TriQuint Semiconductor, Inc.
2300 N.E. Brookwood Parkway
Hillsboro, Oregon 97124
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 (File No. 333-81245)
to be filed by you with the Securities and Exchange Commission on or about June
28, 1999 (the "Registration Statement") in connection with the registration
under the Securities Act of 1933, as amended, of 4,444,750 shares (including
579,750 shares issuable upon exercise of the underwriters' over-allotment
option) of Common Stock of TriQuint Semiconductor, Inc. (the "Shares"). Of the
Shares, 3,586,496 shares (including all shares subject to the above-referenced
over-allotment option) are authorized but heretofore unissued, and 858,254
shares are or will be issued and outstanding and held by the selling stockholder
referred to in the Registration Statement. As your counsel in connection with
this transaction, we have examined the proceedings proposed to be taken in
connection with said sale and issuance of the Shares.
It is our opinion that, upon completion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
various states, where required, the Shares, when issued and sold in the manner
referred to in the Registration Statement, will be legally and validly issued,
fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
TriQuint Semiconductor, Inc.:
We consent to the use of our "Form of Independent Auditors' Report," dated
February 11, 1999, except as to note 13 which is as of February 26, 1999 and
note 6(a) which is as of July , 1999, relating to the consolidated balance
sheets of TriQuint Semiconductor, Inc. as of December 31, 1997 and 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three year period ended December 31, 1998,
and to the use of our "Form of Independent Auditors' Report," dated February 11,
1999 on the related consolidated financial statement schedule which form of
reports are included in Amendment No. 1 to the Registration Statement on Form
S-3, dated June 28, 1999, of TriQuint Semiconductor, Inc., and to the reference
to our firm under the heading "Experts" in the Registration Statement.
/s/ KPMG Peat Marwick LLP
Portland, Oregon
June 25, 1999
