UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
TRIQUINT SEMICONDUCTOR, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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TRIQUINT SEMICONDUCTOR, INC.
2300 N.E. BROOKWOOD PARKWAY
HILLSBORO, OREGON 97124
April 21, 1999
Dear Stockholders:
Our Annual Meeting of Stockholders will be held on Wednesday May 26, 1999,
at 2:00 p.m., local time, at the Company's principal executive offices, located
at 2300 N.E. Brookwood Parkway, Hillsboro, Oregon 97124. You are invited to
attend this meeting to give us an opportunity to meet you personally, to allow
us to introduce to you the key management and Directors of your Company and to
answer any questions you may have.
The formal Notice of Meeting, the Proxy Statement, the proxy card and a copy
of the Annual Report to Stockholders for the year ended December 31, 1998 are
enclosed.
I hope that you will be able to attend the meeting in person. Whether or not
you plan to attend the meeting, please sign and return the enclosed proxy card
promptly. A prepaid return envelope is provided for this purpose. Your shares
will be voted at the meeting in accordance with your proxy.
If you have shares in more than one name, or if your stock is registered in
more than one way, you may receive multiple copies of the proxy materials. If
so, please sign and return each proxy card you receive so that all of your
shares may be voted. I look forward to meeting you at the Annual Meeting.
Very truly yours,
TRIQUINT SEMICONDUCTOR, INC.
/s/ Steven J. Sharp
STEVEN J. SHARP
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
TRIQUINT SEMICONDUCTOR, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 1999
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of TRIQUINT
SEMICONDUCTOR, INC., a Delaware corporation (the "Company"), will be held on
Wednesday, May 26, 1999 at 2:00 p.m., local time, at the Company's principal
executive offices, located at 2300 N.E. Brookwood Parkway, Hillsboro, Oregon
97124, for the following purposes:
1. To elect five Directors to serve until the next Annual Meeting of
Stockholders or until their successors are duly elected and qualified
(Proposal No. 1);
2. To ratify the appointment of KPMG Peat Marwick LLP as independent
accountants of the Company for the fiscal year ending December 31, 1999
(Proposal No. 2);
3. To approve an amendment to the TriQuint Semiconductor, Inc. 1996 Stock
Incentive Program to increase the aggregate number of shares of Common
Stock that may be issued thereunder by 475,000 shares to a total of
1,725,000 shares as summarized in the attached proxy statement (Proposal
No. 3);
4. To approve an amendment to the 1996 Stock Incentive Program to add an
automatic initial option grant to new Outside Directors at the time of
election or appointment to purchase 18,000 shares of Common Stock to
(Proposal No. 4);
5. To approve an amendment to the 1996 Stock Incentive Program to award an
additional option grant to the existing Outside Directors to purchase
12,000 shares of Common Stock (Proposal No. 5);
6. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close of
business on April 5, 1999 are entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has returned a Proxy.
By Order of the Board of Directors:
[LOGO]
Edward C.V. Winn
EXECUTIVE VICE PRESIDENT, FINANCE AND
ADMINISTRATION,
CHIEF FINANCIAL OFFICER AND SECRETARY
Hillsboro, Oregon
April 21, 1999
YOUR VOTE IS IMPORTANT.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING,
YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY
AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE.
TRIQUINT SEMICONDUCTOR, INC.
2300 N.E. BROOKWOOD PARKWAY
HILLSBORO, OREGON 97124
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PROXY STATEMENT FOR 1999
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 1999
SOLICITATION AND REVOCATION OF PROXIES
The enclosed Proxy is solicited on behalf of the Board of Directors of
TRIQUINT SEMICONDUCTOR, INC., a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders to be held Wednesday, May 26, 1999 at 2:00
p.m., local time, or at any adjournment thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at the Company's principal executive offices,
located at 2300 N.E. Brookwood Parkway, Hillsboro, Oregon 97124. The Company's
telephone number at that location is (503) 615-9000. All expenses of the Company
associated with this solicitation will be borne by the Company. In addition, the
Company may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and other employees, without additional compensation,
personally or by telephone or telegram. The Company may also retain an outside
proxy solicitation firm for which the Company would pay not more than $10,000.
The two persons named as proxies on the enclosed proxy card, Steven J. Sharp
and Edward C.V. Winn, were designated by the Board of Directors. All properly
executed proxies will be voted (except to the extent that authority to vote has
been withheld) and where a choice has been specified by the stockholder as
provided in the proxy card, it will be voted in accordance with the
specification so made. Proxies submitted without specification will be voted FOR
Proposal No. 1 to elect the nominees for Directors proposed by the Board of
Directors, FOR Proposal No. 2 to ratify the appointment of KPMG Peat Marwick LLP
as independent accountants for the Company, FOR Proposal No. 3 to approve an
amendment to the TriQuint Semiconductor, Inc. 1996 Stock Incentive Program to
increase the aggregate number of shares of Common Stock that may be issued
thereunder by 475,000 shares to a total of 1,725,000 shares as described in the
"1996 Stock Incentive Program Summary" below, FOR Proposal No. 4 to approve an
amendment to the 1996 Stock Incentive Program to add an automatic initial option
grant to purchase 18,000 shares of Common Stock to new Outside Directors at the
time of election or appointment and FOR Proposal No. 5 to approve an amendment
to the 1996 Stock Incentive Program to award an additional option grant to the
existing Outside Directors to purchase 12,000 shares of Common Stock.
A proxy may be revoked by a stockholder prior to its exercise by written
notice to the Secretary of the Company, by submission of another proxy bearing a
later date or by voting in person at the Annual Meeting of Stockholders. Such
notice or later proxy will not affect a vote on any matter taken prior to the
receipt thereof by the Company.
These proxy solicitation materials and the Company's Annual Report to
Stockholders for the year ended December 31, 1998, including financial
statements, were first mailed on or about April 21, 1999 to all stockholders
entitled to vote at the meeting.
VOTING AT THE MEETING
Stockholders of record at the close of business on April 5, 1999 are
entitled to notice of, and to vote at, the Annual Meeting. The Company has one
series of Common Stock outstanding, designated Common Stock, $.001 par value. At
the record date, 9,569,926 shares of the Company's Common Stock were issued
1
and outstanding and held by 231 stockholders of record. The closing price of the
Company's Common Stock on the record date was $20.25. No shares of the Company's
Preferred Stock were outstanding.
Every stockholder voting for the election of Directors (Proposal No. 1) may
cumulate such stockholder's votes and give one candidate a number of votes equal
to the number of Directors to be elected multiplied by the number of shares that
such stockholder is entitled to vote, or distribute such stockholder's votes on
the same principle among as many candidates as the stockholder may select,
provided that votes cannot be cast for more than five candidates. However, no
stockholder shall be entitled to cumulate votes unless the candidate's name has
been placed in nomination prior to the voting and the stockholder, or any other
stockholder, has given notice at the meeting, prior to the voting, of the
intention to cumulate the stockholder's votes.
On all other matters, each share of Common Stock outstanding on the record
date is entitled to one vote per share at the Annual Meeting. If a quorum is
present at the Annual Meeting: (i) the five nominees for election as Directors
who receive the greatest number of votes cast for the election of Directors
shall be elected Directors (ii) Proposal No. 2 to ratify the appointment of KPMG
Peat Marwick LLP as independent accountants for the Company, (iii) Proposal No.
3 to approve an amendment to the TriQuint Semiconductor, Inc. 1996 Stock
Incentive Program to increase the aggregate number of shares of Common Stock
that may be issued thereunder by 475,000 shares to a total of 1,725,000 shares
as described in the "1996 Stock Incentive Program Summary" below, (iv) Proposal
No. 4 to approve the amendment to the 1996 Stock Incentive Program to add an
automatic initial option grant to purchase 18,000 shares of Common Stock to new
Outside Directors at the time of election or appointment and, (v) Proposal No. 5
to approve an amendment to the 1996 Stock Incentive Program to award an
additional option grant to the existing Outside Directors to purchase 12,000
shares of Common Stock will be approved if the proposal receives the affirmative
vote of the holders of a majority of shares of Common Stock present in person or
represented by proxy at the Annual Meeting and entitled to vote.
With respect to the election of Directors, Directors are elected by a
plurality of the votes cast and only votes cast in favor of a nominee will have
an effect on the outcome. Therefore, abstention from voting or nonvoting by
brokers will have no effect thereon. With respect to voting on Proposal No. 2,
abstention from voting or nonvoting by brokers will have no effect thereon. With
respect to voting on Proposals No. 3, No. 4, and No. 5, abstention from voting
will have the same effect as voting against the proposal and nonvoting by
brokers will have no effect thereon.
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ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
NOMINEES
A board of five Directors is to be elected at the Annual Meeting of
Stockholders. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE NOMINEES NAMED BELOW. Unless otherwise instructed, the
proxy holders will vote the proxies received by them for the Company's five
nominees named below, all of whom are presently Directors of the Company. In the
event that any nominee of the Company is unable or declines to serve as a
Director at the time of the Annual Meeting of Stockholders, the proxies will be
voted for any nominee who shall be designated by the present Board of Directors
to fill the vacancy. Mr. E. Floyd Kvamme, a current Director, has chosen not to
seek reelection to the Board of Directors. The Board of Directors has no current
plans to replace Mr. Kvamme. In the event that additional persons are nominated
for election as Directors, the proxy holders intend to vote all proxies received
by them in such a manner (in accordance with cumulative voting) as will assure
the election of as many of the nominees listed below as possible, and, in such
event, the specific nominees to be voted for will be determined by the proxy
holders. The term of office for each person elected as a Director will continue
until the next Annual Meeting of Stockholders or until a successor has been
elected and qualified. The following table lists the persons nominated by the
Board of Directors to be elected as Directors along with certain information:
NAME OF NOMINEE AGE POSITION WITH THE COMPANY SINCE
- --------------------------------------- --- -------------------------------------- ---------
Steven J. Sharp 57 President, Chief Executive Officer 1991
and Chairman of the Board
Dr. Paul A. Gary 58 Director 1996
Charles Scott Gibson 46 Director 1992
Dr. Walden C. Rhines 52 Director 1995
Edward F. Tuck 67 Director 1994
There is no family relationship between any director or executive officer of
the Company.
Mr. Sharp joined the Company in September 1991 as President, Chief Executive
Officer and Director. In May 1992 he became Chairman of the Board of Directors.
For the prior eight years he had served in various roles associated with venture
capital financed semiconductor companies. From April 1988 to June 1989, Mr.
Sharp was the founder and served as Chief Executive Officer of Power
Integrations, Inc., a semiconductor manufacturing company. Previously, Mr. Sharp
was employed for 14 years by Signetics Corporation, a semiconductor
manufacturer, and for nine years by Texas Instruments, a semiconductor
manufacturer. Mr. Sharp also serves as a director of Power Integrations. He
received a BS degree in Mechanical Engineering from Southern Methodist
University, an MS degree in Engineering Science from California Institute of
Technology and an MBA from Stanford University.
Dr. Gary has been a director of the Company since May 1996. From 1967 until
1996, Dr. Gary served in various capacities for Bell Laboratories, Western
Electric, and AT&T Microelectronics (now Lucent Microelectronics), with his last
position being Vice President of the Netcom IC Business Unit. Dr. Gary retired
from Lucent in June 1996. Dr. Gary also serves as a director of Data I-O and IMS
Corp. Dr. Gary holds a BS degree in Electrical Engineering from Lafayette
College, an MS degree in Electrical Engineering from Stanford University and a
PhD in Electrical Engineering from Stanford University.
Mr. Gibson has been a director of the Company since September 1992. Since
March 1992, Mr. Gibson has been a director and consultant to high technology
companies. He co-founded Sequent Computer Systems Inc., a computer systems
company, in 1983 and served as President from January 1988 to February 1992.
From 1976 to 1983, Mr. Gibson was employed at Intel Corporation as General
Manager, Memory Components Operations. Mr. Gibson also serves as a director of
RadiSys Corporation, Inference Software, Integrated Measurement Systems
Corporation, and Egghead.com. Mr. Gibson is also the
3
Chairman of the Board of the Oregon Graduate Institute of Science and
Technology. He received a B.S. in Electrical Engineering and an MBA from the
University of Illinois.
Dr. Rhines has been a director of the Company since May 1995. Dr. Rhines has
been the President, Chief Executive Officer and a director of Mentor Graphics
Corporation ("Mentor"), an electronic design automation company, since 1993.
Prior to joining Mentor, Dr. Rhines spent twenty-one years at Texas Instruments,
Inc. ("TI"), with his most recent position having responsibility for directing
TI's worldwide semiconductor business as the Executive Vice President of TI's
Semiconductor Group. Dr. Rhines also serves as a director of Cirrus Logic. Dr.
Rhines holds a BS degree in Metallurgical Engineering from the University of
Michigan, an MS and PhD in Materials Science and Engineering from Stanford
University and an MBA from Southern Methodist University.
Mr. Tuck has been a director of the Company since November 1994. He is a
Managing Director of Kinship Venture Management LLP, which is the general
partner of Kinship Partners II, a venture capital firm. From January 1986 to May
1995, he was also a Managing Director of Boundary LLP, which is the general
partner of the Boundary Fund III, a venture capital fund. Mr. Tuck is Chairman
of Endgate Technology Corporation, Chairman of High Tower Software, Inc., a
director of Oz Interactive, Angel Technologies, Teledesic Corporation, and Qual
Corporation. Mr. Tuck holds a BS degree in Electrical Engineering from the
University of Missouri at Rolla and serves on its Board of Trustees.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held a total of six (6) meetings
during fiscal 1998. No director attended fewer than 75 percent of the meetings
of the Board of Directors and committees thereof, if any, during the period that
he was a member of the Board of Directors. The Board of Directors has an Audit
Committee and a Compensation Committee. The Board of Directors has no Nominating
Committee or any committee performing such functions.
The Audit Committee consisted of Directors Tuck (Chairman), Kvamme and Gary.
The Audit Committee is responsible for overseeing actions taken by the Company's
independent accountants and reviews the Company's internal financial controls.
The Audit Committee met twice during 1998, with all then current members present
at each meeting.
The Compensation Committee, which consisted of Directors Kvamme (Chairman),
Gibson and Rhines during 1998, is responsible for determining salaries,
incentives and other forms of compensation for the executive officers of the
Company as well as overseeing the administration of various incentive
compensation and benefit plans, including the 1996 Stock Incentive Program. The
Compensation Committee met three times during 1998, with all members present at
each meeting.
4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(PROPOSAL NO. 2)
The Board of Directors has selected KPMG Peat Marwick LLP, independent
accountants, to audit the financial statements of the Company for the fiscal
year ending December 31, 1999, subject to ratification by the stockholders of
the Company. In the absence of contrary specifications, the shares represented
by the proxies will be voted FOR the following resolution ratifying the
appointment of KPMG Peat Marwick LLP as the Company's independent accountants
for the fiscal year ending December 31, 1999.
RESOLVED, that the stockholders of TriQuint Semiconductor, Inc. hereby
ratify the appointment of KPMG Peat Marwick LLP as the Company's independent
accountants for the fiscal year ending December 31, 1999.
KPMG Peat Marwick LLP has audited the Company's financial statements
annually since 1991. Representatives of KPMG Peat Marwick LLP are expected to be
present at the meeting with the opportunity to make a statement if they desire
to do so and are expected to be available to respond to appropriate questions.
In the event of a negative vote on ratification, the Board of Directors will
reconsider its selection.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT ACCOUNTANTS
OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
5
AMENDMENT TO THE TRIQUINT SEMICONDUCTOR, INC.
1996 STOCK INCENTIVE PROGRAM
(PROPOSAL NO. 3)
The Board of Directors has approved an amendment to the TriQuint
Semiconductor, Inc. 1996 Stock Incentive Program (the "Program") to increase the
aggregate number of shares of Common Stock that may be issued thereunder by
475,000 shares to a total of 1,725,000 shares. For a description of the Program
see "1996 Stock Incentive Program Summary" below.
The amendment to the Program was adopted by the Board in order to provide
additional long-term incentives to all employees of the Company as well as to
maintain competitive compensation packages for key employees of the Company. As
of April 5, 1999, options to purchase 1,096,885 shares of the Company's Common
Stock have been granted pursuant to the Program, 180,386 of which were vested.
This proposal increases the number of shares authorized for issuance under the
Program to provide sufficient shares for anticipated grants to be issued to both
new and existing employees through May 2000. The Company intends to utilize the
options available for grant to attract and retain both executive and other key
employees.
In the absence of contrary specifications, the shares represented by proxies
will be voted FOR the following resolution approving the above:
RESOLVED, that the stockholders of TriQuint Semiconductor, Inc. hereby
approve the amendment to the 1996 Stock Incentive Program to increase the
aggregate number of shares of Common Stock that may be issued thereunder by
475,000 shares to a total of 1,725,000 shares.
The affirmative vote of the holders of at least a majority of the shares of
Common Stock present in person or represented by proxy and entitled to vote at
the Annual Meeting is required to adopt the foregoing resolution. The award of
options under the Program is at the discretion of the Compensation Committee of
the Board of Directors. See "Executive Compensation-Stock Incentive Program"
below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL
OF THE AMENDMENT TO THE TRIQUINT SEMICONDUCTOR, INC.
1996 STOCK INCENTIVE PROGRAM.
6
APPROVAL OF AMENDMENT TO THE 1996 STOCK INCENTIVE PROGRAM
TO ADD AN AUTOMATIC INITIAL GRANT
(PROPOSAL NO. 4)
The Board of Directors of the Company adopted an amendment to the 1996 Stock
Incentive Program (the "Program") subject to stockholder approval to provide for
an automatic one-time initial grant (the "Automatic Initial Grant") of an option
to purchase 18,000 shares of the Company's Common Stock to all non-employee
Directors ("Outside Directors"). The Automatic Initial Grant would be available
to all Outside Directors who join the board on or after February 3, 1999 and
would be granted at the time such Outside Director joins the Board. Thereafter,
all Outside Directors would receive the existing automatic grant to purchase
6,000 shares on the date of each Annual Meeting of Stockholders (the "Automatic
Option Grants") based on a provision that is already a part of the Program and
has been approved by the stockholders. The Automatic Initial Grant will be made
at an exercise price per share equal to fair market value on the grant date and
subject to vesting over four years provided that no shares shall vest until the
first anniversary of the grant, on which date 28% shall vest with the remaining
shares vesting at the rate of 2% per month thereafter and with an option term of
10 years from the date of grant.
For a further description of the Program, see "1996 Stock Incentive Program"
below.
The amendment to the Program was adopted for the purposes of attracting the
best available people to serve as Outside Directors, providing additional
incentive to the Outside Directors, and encouraging their continued service on
the Board of Directors.
In absence of contrary specification, the shares represented by proxies will
be voted FOR the following resolution approving the above:
RESOLVED, that the stockholders of TriQuint Semiconductor, Inc. hereby
approve the amendment to the 1996 Stock Incentive Program and to add an
Automatic Initial Grant of 18,000 shares to Outside Directors who join the Board
of Directors on or after February 3, 1999.
The affirmative vote of the holders of at least a majority of the shares of
Common Stock present in person or represented by proxy and entitled to vote at
the Annual Meeting is required to adopt the foregoing resolution. Abstention
from voting will have the same effect as voting against the proposal and
nonvoting by brokers will have no effect thereon.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
AMENDMENT TO THE 1996 STOCK INCENTIVE PROGRAM
TO ADD AN AUTOMATIC INTITIAL GRANT
7
APPROVAL OF AMENDMENT TO THE 1996 STOCK INCENTIVE PROGRAM
TO AWARD AN ADDITIONAL GRANT TO ALL OUTSIDE DIRECTORS CURRENTLY SERVING
ON THE BOARD OF DIRECTORS
(PROPOSAL NO. 5)
The Board of Directors of the Company adopted an amendment to the 1996 Stock
Incentive Program (the "Program") subject to stockholder approval to provide
that all Outside Directors currently serving on the Board of Directors,
specifically, Messrs. Gibson, Rhines and Tuck, would receive a one-time grant
(an "Additional Grant") equal to 12,000 shares, or the difference between
existing annual Automatic Option Grants to Outside Directors of 6,000 shares and
the Automatic Initial Grant proposed for new Outside Directors of 18,000 shares.
The Additional Grant will be made at an exercise price per share equal to fair
market value on the grant date and subject to vesting over four years provided
that no shares shall vest until the first anniversary of the grant, on which
date 28% shall vest with the remaining shares vesting at the rate of 2% per
month thereafter and with an option term of 10 years from the date of grant. The
amendment was adopted for the purpose of equalizing the treatment of current
Outside Directors with future Outside Directors well as encouraging the
continued service of the existing Outside Directors on the Board of Directors.
For a further description of the Program, see "1996 Stock Incentive Program"
below.
In absence of contrary specification, the shares represented by proxies will
be voted FOR the following resolution approving the above:
RESOLVED, that the stockholders of TriQuint Semiconductor, Inc. hereby
approve the amendment to the 1996 Stock Incentive Program to award an Additional
Grant of 12,000 shares to all Outside Directors currently serving on the Board
of Directors.
The affirmative vote of the holders of at least a majority of the shares of
Common Stock present in person or represented by proxy and entitled to vote at
the Annual Meeting is required to adopt the foregoing resolution. Abstention
from voting will have the same effect as voting against the proposal and
nonvoting by brokers will have no effect thereon.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
AMENDMENT TO AWARD AN ADDITIONAL GRANT TO THE EXISTING OUTSIDE DIRECTORS
8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock of the Company as of April 5, 1999 as to (i) each
person who is known by the Company to own beneficially 5% or more of the
outstanding shares of Common Stock, (ii) each Director of the Company, (iii) the
Chief Executive Officer and the next four most highly compensated executive
officers as of December 31, 1998 (the "Named Executive Officers") and (iv) the
Directors and the executive officers as a group.
COMMON STOCK APPROXIMATE
FIVE PERCENT STOCKHOLDERS, DIRECTORS BENEFICIALLY PERCENTAGE
AND CERTAIN EXECUTIVE OFFICERS OWNED OWNED(1)
- ------------------------------------------------------------------------------------ -------------- ---------------
Raytheon TI Systems, Inc.(2)........................................................ 794,613 8.30%
13510 N. Central Expressway
Dallas, Texas 75243
Lucent Technologies, Inc. (3)....................................................... 661,059 6.91%
600 Mountain Avenue
Murray Hill, NJ 07974
Steven J. Sharp (4)................................................................. 179,641 1.88%
E. Floyd Kvamme (5)................................................................. 147,968 1.55%
Edward C. V. Winn (6)............................................................... 52,130 *
Charles Scott Gibson (7)............................................................ 44,475 *
Bruce Fournier (8).................................................................. 41,903 *
Walden Rhines (9)................................................................... 36,000 *
J. David Pye (10)................................................................... 33,700 *
Edward Tuck (11).................................................................... 29,000 *
Thomas V. Cordner (12).............................................................. 16,388 *
Paul A. Gary (13)................................................................... 3,350 *
All Directors and executive officers as a group (14 persons) (14)................... 689,022 7.29%
- ------------------------
* Less than 1%
(1) Applicable percentage of ownership is based on 9,569,926 shares of Common
Stock outstanding as of April 5, 1999 together with applicable options for
such stockholders. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission the ("SEC"), and includes
voting and investment power with respect to shares. Shares of Common Stock
subject to options or warrants currently exercisable or exercisable within
60 days after April 5, 1999 are deemed outstanding for computing the
percentage ownership of the person holding such options or warrants, but are
not deemed outstanding for computing the percentage of any other person.
(2) The Company has been advised in a Schedule 13-G filed with the SEC on
January 22, 1998 by Raytheon TI Systems, Inc., ("RTIS") that on January 13,
1998 the Company issued 844,613 shares of TriQuint Common Stock (the
"Shares") to RTIS as partial consideration for the purchase of the
Monolithic Microwave Integrated Circuit ("MMIC") operations of the former
Texas Instruments' Defense Systems & Electronics Group from RTIS. Pursuant
to a requirement for approval of the transaction by the Department of
Justice, RTIS entered into a Voting Trust Agreement with State Street Bank
and Trust Company on January 13, 1998 with respect to the Shares, which
TriQuint issued
9
in the name of "State Street Bank and Trust Company, as Trustee" and
delivered to State Street to be held pursuant to the terms of the Voting
Trust Agreement. Under the terms of the Voting Trust Agreement, State Street
has sole voting power with respect to the Shares. Pursuant to Rule
13d-3(a)(2) promulgated under the Securities Exchange Act of 1934, RTIS may
be deemed to have sole dispositive power with respect to the Shares.
(3) The Company has been advised in a Schedule 13-D filed with the SEC on
December 11, 1996 by Lucent Technologies, Inc. ("Lucent") as follows: Lucent
acquired sole voting and dispositive power over 661,059 shares of the
Company's Common Stock from AT&T Corp. ("AT&T") on September 27, 1996. The
interest in the Company's Common Stock was transferred to Lucent from AT&T
pursuant to the 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 661,059 shares includes
200,000 shares issuable pursuant to a presently exercisable warrant.
(4) Represents 169,417 shares issuable pursuant to options exercisable within 60
days of April 5, 1999.
(5) Represents 13,500 shares issuable pursuant to options exercisable within 60
days of April 5 1999.
(6) Represents 48,625 shares issuable pursuant to options exercisable within 60
days of April 5, 1999.
(7) Represents 5,000 shares held by Mr. Gibson's wife, 1,985 held in Trust for
Mr. Gibson's minor sons, 19,990 held in Trust by Mr. Gibson, and 16,000
shares issuable pursuant to options exercisable within 60 days of April 5,
1999.
(8) Represents 38,200 shares issuable pursuant to options exercisable within 60
days of April 5, 1999.
(9) Represents 2,000 shares held by Mr. Rhines' wife and daughter and 21,000
shares issuable pursuant to options exercisable within 60 days of April 5,
1999.
(10) Represents 33,700 shares issuable pursuant to options exercisable within 60
days of April 5 1999.
(11) Represents 15,000 shares issuable pursuant to options exercisable within 60
days of April 5, 1999.
(12) Represents 16,388 shares issuable pursuant to options exercisable within 60
days of April 5, 1999.
(13) Mr. Gary is a former employee of the predecessor of Lucent Technologies,
Inc., AT&T. Mr. Gary has no shared voting or investment control over the
shares of the Company's Common Stock held by Lucent Technologies, Inc.
(14) Represents 473,390 shares issuable pursuant to options exercisable within
60 days of April 5, 1999.
10
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of the Company's current executive officers
are as follows:
POSITION
NAME AGE CURRENT POSITION(S) WITH COMPANY HELD SINCE
- --------------------------------------------- --- ------------------------------------------------ -------------
Steven J. Sharp.............................. 57 Chairman of the Board of Directors, 1992
President and Chief Executive Officer
Thomas Cordner............................... 54 Vice President and General Manager, 1998
Millimeter Wave Communications
Bruce R. Fournier............................ 42 Vice President and General Manager, Foundry 1998
Services
Paul Kollar.................................. 54 Vice President, Sales 1998
Donald H. Mohn............................... 46 Vice President and General Manager, 1995
Telecommunications and Computing
J. David Pye................................. 49 Vice President, Manufacturing 1996
E.K. Ranjit.................................. 49 Vice President, Finance, Treasurer and Assistant 1996
Secretary
Ronald R. Ruebusch........................... 49 Vice President and General Manager, Wireless 1996
Communications
Edward C.V. Winn............................. 60 Executive Vice President, Finance and 1996
Administration, Chief Financial Officer and
Secretary
For information on the business background of Mr. Sharp, see "Nominees for
Director" above.
Mr. Cordner joined the Company as a result of the January 1998 acquisition
of the MMIC Business from Raytheon TI Systems as Vice President and General
Manager of Millimeter Wave Communications. Mr. Cordner was an employee of TI for
32 years before joining TriQuint. He held various management positions at TI
engineering and manufacturing. He managed the GaAs Operations Group at TI since
the technology was transferred from research to production in 1982. Mr. Cordner
graduated from the University of Texas at Arlington in 1969 with a BS degree in
Mathematics.
Mr. Fournier has held the position of Vice President and General Manager,
Foundry Services since the group was formed in June 1998. From September 1994 to
June 1998 he held the position of Vice President, Sales. Mr. Fournier joined the
Company in June 1987 as the Eastern Area Sales Manager. In July 1991, Mr.
Fournier was promoted to National Sales Manager, Wireless Products and in
January 1994 was promoted to Director of World Wide Sales. Prior to joining the
Company, Mr. Fournier held various Marketing and Sales positions with Fairchild
Semiconductor and Honeywell. Mr. Fournier received an AS degree in Electrical
Engineering from the University of Maine in 1977, a BS degree in Business
Administration from the University of Maine in 1979 and an MBA from the
University of Southern Maine in 1982.
Mr. Kollar joined the Company in June 1998 as Vice President, Sales. From
November 1985 until March 1998, Mr. Kollar was Vice President, Sales for Lattice
Semiconductor, Inc. where he was responsible for worldwide sales. From March
1969 to November 1985, Mr. Kollar was employed by Signetics Corp in a variety of
Sales and Marketing roles. Mr. Kollar received a BS degree in Engineering from
Harvey Mudd College and an MSEE degree from the University of Southern
California.
11
Mr. Mohn joined the Company in June 1995 as Vice President and General
Manager, Telecommunications and Computing. From July 1993 until June 1995, Mr.
Mohn was Vice President, Marketing for IC Works, Inc. where he was responsible
for product strategy development, tactical marketing, marketing communications
and public relations. From 1989 until July 1993, Mr. Mohn held various positions
at AT&T Microelectronics, with his last position there being Director/General
Manager of the Application Specific Standard Products Group, which he started in
1989 and grew to $100 million in revenue by 1993. Mr. Mohn received a BS degree
in electrical engineering from the University of Minnesota and an MBA from the
University of Dallas, Texas.
Mr. Pye joined the Company in June 1996 as Vice President, Manufacturing.
Prior to joining the Company, Mr. Pye was Vice President and General Manager at
VLSI Technology from 1983 to 1996, where he served in various capacities. From
1973 to 1983, Mr. Pye worked at Texas Instruments, Inc., involved in process
engineering and process development. Mr. Pye holds a BA degree from Napier
College of Science and Technology in Edinburgh, Scotland
Mr. Ranjit joined the Company in May 1991 and from that date until June
1996, served as Corporate Controller and Treasurer. In June 1996, Mr. Ranjit was
promoted to Vice President, Finance, Treasurer and Assistant Secretary. From
1986 until May 1991, Mr. Ranjit held various positions at GigaBit Logic, a
predecessor of the Company, including Controller, Director of Finance and
Corporate Secretary. Previously, Mr. Ranjit spent nine years in various
management positions in finance and administration at Mostek Semiconductor and
Controltronics, Inc. Mr. Ranjit received a BS in Business Administration from
the University of Texas, and an MBA from Pepperdine University, and is a
Certified Public Accountant.
Mr. Ruebusch joined the Company in May 1996 as Vice President and General
Manager, Wireless Communications. From 1993 to 1996, Mr. Ruebusch was Vice
President, Semiconductor Product Development at Celeritek, Inc. From 1991 to
1993, Mr. Ruebusch held management positions at Pacific Monolithics. Prior to
that, Mr. Ruebusch spent thirteen years in various management positions at
Advanced Micro Devices and Signetics Corp. Mr. Ruebusch holds BSEE, MSEE and MBA
degrees from the University of Santa Clara.
Mr. Winn was a consultant to the Company and Acting Vice President,
Computing and Networking from March 1992 to January 1993. In January 1993 he
joined the Company as Vice President and General Manager, Computing and
Networking and in September 1994 was promoted to Executive Vice President and
Chief Operating Officer. In May 1996, Mr. Winn was promoted to Executive Vice
President, Finance and Administration and Chief Financial Officer and in
December 1996, became the Company's Secretary. From 1985 until December 1991, he
served in various capacities with Avantek, Inc., a microwave semiconductor
company, most recently as Product Group Vice President. Mr. Winn's prior
experience includes 14 years with Signetics Corporation, a manufacturer of
integrated circuits, where he held various marketing and operations management
positions. He received a BS in Physics from Rensselaer Polytechnic Institute and
an MBA from Harvard University.
12
EXECUTIVE COMPENSATION AND OTHER MATTERS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information for fiscal years
1998, 1997 and 1996 concerning compensation awarded to, earned by or paid to the
Company's Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company determined as of the end of the
last fiscal year (hereafter referred to as the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
------------------------------------------------- SECURITIES ALL OTHER
OTHER ANNUAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION ($) OPTIONS (#) ($)(2)
- ---------------------------------- ---- ------------ ------------- ---------------- ------------ ------------
Steven J. Sharp................... 1998 278,229 2,616 -- 28,750 3,899
Chairman of the Board, 1997 268,000 17,818 30,000(3) 107,000 4,232
President and Chief 1996 265,000 2,938 31,704(3) -- 4,239
Executive Officer
Edward C. V. Winn................. 1998 220,479 2,075 -- 9,000 5,148
Executive Vice President, 1997 216,949 14,386 -- 24,000 3,339
Finance and Administration, 1996 206,042 2,297 -- -- 3,244
Chief Financial Officer
and Secretary
Bruce Fournier.................... 1998 182,683(4) 1,626 -- 20,000 446
Vice President, Sales 1997 201,165(4) 3,010 -- 16,000 362
1996 187,267(4) 1,828 -- -- 340
J. David Pye...................... 1998 192,803 1,772 -- 10,000 1,128
Vice President, 1997 187,134 12,849 23,424(6) 9,000 1,117
Manufacturing 1996 81,827(5) 785 28,949(6) 55,000 516
Thomas V. Cordner................. 1998 173,573 1,653 179,320(7) 42,807 1,580
Vice President & General 1997 -- -- -- -- --
Manager, Millimeter Wave 1996 -- -- -- -- --
Communications
- ------------------------
(1) Represents payments under the Key Employee Incentive Plan and the
Company-wide profit sharing program.
(2) Represents premiums for group term life insurance.
(3) Represents forgiveness of Mr. Sharp's relocation loan and associated
interest charges (see "Employment Contracts and Change-in-Control
Arrangements").
(4) Includes sales commissions of $36,513, $74,816 and $67,709 earned in 1998,
1997, and 1996, respectively.
(5) Includes compensation earned from June 1996 when Mr. Pye joined the Company
through the end of fiscal 1996.
(6) Represents reimbursement of relocation expenses.
(7) Represents bonus paid pursuant to a retention agreement between Mr. Cordner
and RTIS in connection with the Company's acquisition of the MMIC business
from RTIS in January 1998. The Company was reimbursed for such bonus by RTIS
as a condition of the acquisition.
13
STOCK OPTION GRANTS
The following table contains information concerning the grant of stock
options under the Company's 1996 Stock Incentive Program (the "Program") to the
Named Executive Officers in 1998. The Percentage of Total Options Granted to
Employees in Fiscal Year is measured according to all option grants made under
the Program and the 1998 Non Statutory Stock Option Plan (the "Plan"), although
the Named Executive Officers are not eligible to participate in the Plan.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS (1) VALUE AT ASSUMED
----------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR ($/SH.) DATE 5% ($) 10% ($)
- ---------------------------------------------- ----------- ------------- ------------ ----------- --------- ----------
Steven J. Sharp (3)........................... 28,750 3.15% $18.25 12/02/08 329,973 836,217
Edward C. V. Winn (4)......................... 9,000 0.99% $18.25 12/02/08 103,296 261,772
Bruce Fournier (5)............................ 15,000 1.65% $21.5625 4/16/08 203,408 515,476
Bruce Fournier (5)............................ 5,000 0.55% $18.25 12/2/08 57,387 145,429
J. David Pye (6).............................. 10,000 1.10% $18.25 12/02/08 114,773 290,858
Thomas V. Cordner (7)......................... 624 0.07% $11.438 1/13/08 17,511 32,111
Thomas V. Cordner (7)......................... 1,091 0.12% $12.62 1/13/08 29,327 54,854
Thomas V. Cordner (7)......................... 1,092 0.12% $18.63 1/13/08 22,791 48,341
Thomas V. Cordner (7)......................... 40,000 4.39% $24.625 1/27/08 619,461 1,569,836
- ------------------------
(1) The grant of options under the Program to executive officers, including the
officers named in the Summary Compensation Table above, is subject to the
discretion of the Compensation Committee of the Board of Directors.
(2) These calculations are based on certain assumed annual rates of appreciation
as required by rules adopted by the SEC requiring additional disclosure
regarding executive compensation. Under these rules, an assumption is made
that the shares underlying the stock options shown in this table could
appreciate at rates of 5% and 10% per annum on a compounded basis over the
ten-year term of the stock options. Actual gains, if any, on stock option
exercises are dependent on the future performance of the Company's Common
Stock and overall stock market conditions. There can be no assurance that
amounts reflected in this table will be achieved.
(3) Option vests in equal monthly installments from 6/1/2001 through 5/31/2002.
(4) Option vests in equal monthly installments from 6/1/2001 through 5/31/2002.
(5) Options vest per the following schedules: The 15,000 share grant vests 4,200
shares on 4/16/1999 and 300 shares monthly thereafter with full vesting on
4/16/2002. The 5,000 share grant vests in equal monthly installments from
6/1/2001 through 5/31/2002.
(6) Option vests in equal monthly installments from 6/1/2001 through 5/31/2002.
(7) The 624 grant vests on 1/25/98. The 1,091 grant vests 545 shares on
1/17/1998, 273 shares on 1/17/1999, and 273 shares on 1/17/2000. The 1,092
grant vests over four years at a rate of 273 shares per year from 1/15/98
through 1/15/2001. The 40,000 share grant vests 11,200 shares on 1/27/1999
and 800 shares monthly thereafter with full vesting on 1/27/2002.
14
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information with respect to the
exercise of stock options and the value of stock options held by each of the
Named Executive Officers at December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE AT FY-END (#) AT FY-END($)(2)
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) (1) UNEXERCISABLE UNEXERCISABLE
- ---------------------------------------- --------------- ---------- -------------------- -----------------------
Steven J. Sharp......................... 40,000 $ 741,500 164,417 100,750 $ 1,812,593 $ 28,750
Edward C.V. Winn........................ -- -- 45,576 31,049 $ 610,206 $ 9,000
Bruce R. Fournier....................... -- -- 31,950 34,250 $ 404,762 $ 5,000
J. David Pye............................ -- -- 28,200 38,800 $ 0 $ 10,000
Thomas V. Cordner....................... -- -- 1,442 41,365 $ 8,657 $ 4,127
- ------------------------
(1) Market value of the underlying securities at exercise date, minus the
exercise price of the options.
(2) Based on the closing price of $19.25 of the Company's Common Stock on
December 31, 1998 as reported by The NASDAQ National Market, minus the
exercise price of the unexercised options.
15
DIRECTOR COMPENSATION
Each non-employee Director receives, in addition to reimbursement for
out-of-pocket expenses, (i) $1,500 per Board meeting attended in person, (ii)
$500 per Board meeting attended via telephone, (iii) $500 per Committee meeting
not held in conjunction with a Board Meeting, and (iv) an annual retainer of
$9,000 payable in four equal quarterly installments beginning January 1, 1999.
The Company's 1996 Stock Incentive Program provides that options may not be
granted to non-employee Directors who represent stockholders holding more than
1% of the outstanding shares. Options may be granted to non-employee Directors
who do not represent such stockholders ("Outside Directors") only pursuant to a
nondiscretionary, automatic grant mechanism, whereby each Outside Director is
automatically granted an option to purchase 6,000 shares on the date of each
Annual Meeting of Stockholders. Each new Outside Director who joins the Board on
a date other than the date of an Annual Meeting of Stockholders is entitled to
automatically receive an option to purchase a pro rata number of shares of the
Company's Common Stock based upon the remaining period between the Annual
Meeting of Stockholders. Options granted to Outside Directors have an exercise
price equal to the fair market value of the Company's Common Stock as of the
date of grant and vest at a rate of 12.5% per calendar quarter following the
date of grant so long as the optionee remains a Director of the Company.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
EDWARD C.V. WINN. In February 1995, Edward C.V. Winn, the Company's Chief
Financial Officer, Executive Vice President, Finance and Administration and
Secretary, entered into a letter agreement with the Company pursuant to which he
was to receive an annual base salary of $190,000. The agreement provides that,
with certain exceptions, in the event that Mr. Winn's employment is terminated
by the Company for other than just cause, he will receive severance pay equal to
nine months salary at his then current salary (not less than $190,000 per year)
paid every two weeks and fully paid Company insurance benefits for nine months.
Should the Company experience a change in control and Mr. Winn elects to leave
the Company for good reason, Mr. Winn will become vested in the last eight
months of his unvested stock options (see "Change-in-Control Arrangements"
below) and receive a lump-sum payment equal to six months pay at his then
current salary (not less than $190,000 per year) plus fully paid Company
insurance benefits for six months.
STEVEN J. SHARP. In September 1991, under the terms of his acceptance of
employment with the Company, Steven J. Sharp, President, Chief Executive Officer
and Chairman of the Board of Directors, entered into a letter agreement with the
Company pursuant to which he was to receive an annual base salary of $225,000,
subject to annual review, and a quarterly bonus of $18,750 if the Company
achieved its operating income goals in the relevant quarter. The Company also
granted Mr. Sharp an option to purchase 178,571 shares of Common Stock with an
exercise price of $1.40 per share which option vested at a rate of 2% per month
over a 50-month period. Upon the closing of the Company's initial public
offering in December 1993, that portion of Mr. Sharp's option which would
otherwise have vested over the final 12 months of the 50 month vesting period
(42,857 shares) vested immediately.
In the event that the Company desires to terminate Mr. Sharp's employment
for any reason, it must provide Mr. Sharp with one year's advance notice or, in
lieu of such notice, a payment equal to one year's compensation at the
then-current rate. In conjunction with his acceptance of employment, Mr. Sharp
also received a loan from the Company in the amount of $150,000 in lieu of
relocation assistance. The loan agreement provided that the loan would be
forgiven in the amount of $30,000 (and any accrued interest) on each of January
1, 1993, 1994, 1995, 1996 and 1997. The agreement also provided that if Mr.
Sharp's employment with the Company was terminated for any reason, the entire
principal amount remaining, and
16
any accrued interest, would be forgiven as of the date of termination. The final
debt forgiveness was recorded on January 1, 1997 in the amount of $31,704.
CHANGE-IN-CONTROL ARRANGEMENTS
In January 1995, the Board approved an amendment to the option agreements
held by each current and future executive officer (an "Executive Officer") of
the Company, as determined from time to time by the Board of Directors or
committee thereof, to provide that, in the event of a change of control of the
Company, certain outstanding options held by each Executive Officer listed on
page 11 of this Proxy Statement to purchase Common Stock of the Company granted
pursuant to the Company's incentive stock programs, regardless of whether such
stock options are then exercisable in accordance with their terms, shall become
vested and exercisable as follows:
1. The Chief Executive Officer shall become immediately vested for those
shares that would have otherwise become vested over the last twelve months of
the options' vesting schedules.
2. The Chief Financial Officer shall become immediately vested for those
shares that would otherwise have become vested over the last eight months of the
options' vesting schedules.
3. All other Executive Officers shall become immediately vested for those
shares that would have otherwise become vested over the last four months of the
options' vesting schedules.
However, the amendment prohibits such acceleration if the Board of Directors
determines, based on written opinion of the Company's independent public
accountants, that the enforcement of the foregoing amendments to the option
agreements of the Executive Officers, which require the acceleration of vesting
of options to purchase shares of the Company's Common Stock under certain
circumstances upon a change of control, would preclude accounting for any
proposed business combination of the Company as a "pooling of interests," and
the Board of Directors otherwise desires to approve a proposed business
combination, a condition to the closing of which is that it be accounted for as
a "pooling of interests," then the foregoing amendments to the option agreements
of the Executive Officers shall be null and void.
The reincorporation of the Company from California to Delaware on February
18, 1997 was not a change in control and no acceleration of option vesting
occurred as a result.
1996 STOCK INCENTIVE PROGRAM SUMMARY
BACKGROUND. The 1996 Stock Incentive Program (the "1996 Program"), which
was approved by the Company's Board of Directors in February 1996 replaced the
1987 Stock Incentive Program (the "1987 Program") when, pursuant to its terms,
the 1987 Program terminated. The Program provides for the grant of incentive
stock options ("ISOs") to officers and other employees of the Company or any
parent or subsidiary, and non-qualified stock options ("NQSOs") to officers and
other employees of the Company, Directors, and consultants of the Company. As of
March 31, 1999 the persons eligible to participate in the Program included 9
Officers, 4 Directors and 694 non-executive officer employees of the Company.
During the year ended December 31, 1998, options to purchase 522,500 shares of
Common Stock were granted under the Program at an average exercise price of
approximately $20.378 per share. As of April 5, 1999, options to purchase
1,096,885 shares of Common Stock (180,386 of which were vested) were outstanding
under the Program at an average exercise price of approximately $19.379 per
share and 4,453 shares of Common Stock had been issued upon exercise of options
under the Program. At April 5, 1999, 148,662 shares were available under the
Program.
ADMINISTRATION. The Board of Directors has vested the Compensation
Committee with full authority to administer the Program in accordance with its
terms and to determine all questions arising in connection with the
interpretation and application of the Program. Currently, a Compensation
Committee consisting of Outside Directors Gibson, Kvamme and Rhines, all
Disinterested Persons, are administering the Programs. In any calendar year, no
person may be granted options under the Programs exercisable for
17
more than 125,000 shares, except the Chief Executive Officer who may not receive
options under the Program exercisable for more than 250,000 shares.
MINIMUM OPTION PRICE. The exercise price of ISOs granted under the Program
must equal or exceed the fair market value of the Common Stock on the date of
grant (110% of the fair market value in the case of employees who holds 10% or
more of the voting power of the Common Stock (a "10 percent stockholder")), and
the exercise price of NQSOs must equal or exceed 50% of the fair market value of
Common Stock on the date of grant. As defined in the Program, "fair market
value" means the last reported sales price of the Common Stock on The NASDAQ
National Market System on the date of grant.
DURATION OF OPTIONS. Subject to earlier termination of the option as a
result of termination of employment, death or disability, each option granted
under the Program expires on the date specified by the Compensation Committee,
but in no event more than (i) ten years and one day from the date of grant in
the case of NQSOs, (ii) ten years from the date of grant in the case of ISOs
generally, and (iii) five years from the date of grant in the case of ISOs
granted to a 10% Stockholder.
MEANS OF EXERCISING OPTIONS. The Board of Directors, or the Compensation
Committee, as the case may be, may determine the consideration to be paid for
the shares to be issued upon exercise of an Option, including the method of
payment, and may consist entirely of: (i) cash, (ii) check, (iii) promissory
note, (iv) other shares of the Company's Common Stock which (i) either have been
owned by the Optionee for more than six (6) months on the date of surrender or
were not acquired, directly or indirectly, from the Company, and (ii) have a
fair market value on the date of surrender equal to the aggregate exercise price
of the shares as to which said option shall be exercised, (v) delivery of a
properly executed exercise notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to effect an exercise
of the option and delivery to the Company of the sale or loan proceeds required
to pay the exercise price, or (vi) any combination of such methods of payment,
or such other consideration and method of payment for the issuance of shares to
the extent permitted under federal and state law.
TERM AND AMENDMENT OF THE PROGRAM. The Program became effective when
adopted by the Board of Directors. The 1996 Program will continue in effect
until February 1, 2006 unless earlier terminated, and the 1987 Program
terminated on March 26, 1997, in accordance with its terms. The Board of
Directors may terminate or amend the Program at any time, provided, however,
that the Company must obtain stockholder approval of any amendment to the extent
necessary and desirable to comply with Rule 16b-3 or with Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any successor rule,
regulation or statute. Such stockholder approval, if required, must be obtained
in such a manner and to such a degree as is required by the applicable law, rule
or regulation.
ASSIGNABILITY. Unless otherwise indicated, no option granted under the
Program is assignable or transferable by the optionee except by will or by the
laws of descent and distribution.
FEDERAL TAX EFFECTS OF ISOS. The Company intends that ISOs granted under
the Program will qualify as incentive stock options under Section 422 of the
Code. An optionee acquiring stock pursuant to an ISO receives favorable tax
treatment in that the optionee does not recognize any taxable income at the time
of the grant of the ISO or upon exercise. The tax treatment of the disposition
of ISO stock depends upon whether the stock is disposed of within the holding
period, which is the later of two years from the date the ISO is granted or one
year from the date the ISO is exercised. If the optionee disposes of ISO stock
after completion of the holding period, the optionee will recognize as capital
gains income the difference between the amount received in such disposition and
the basis in the ISO stock, i.e. the option's exercise price. If the optionee
disposes of ISO stock before the holding period expires, it is considered a
disqualifying disposition and the optionee must recognize the gain on the
disposition as ordinary income in the year of the disqualifying disposition.
Generally, the gain is equal to the difference between the option's exercise
price and the stock's fair market value at the time the option is exercised and
sold (the "bargain purchase element"). While the exercise of an ISO does not
result in taxable income, there are implications
18
with regard to the alternative minimum tax ("AMT"). When calculating income for
AMT purposes, the favorable tax treatment granted ISOs is disregarded and the
bargain purchase element of the ISO will be considered as part of AMT income.
Just as the optionee does not recognize any taxable income on the grant or
exercise of an ISO, the Company is not entitled to a deduction on the grant or
exercise of an ISO. Upon a disqualifying disposition of ISO stock, the Company
may deduct from taxable income in the year of the disqualifying disposition an
amount generally equal to the amount that the optionee recognizes as ordinary
income due to the disqualifying disposition.
FEDERAL TAX EFFECTS OF NQSOS. If an option does not meet the statutory
requirements of Section 422 of the Code and therefore does not qualify as an
ISO, the difference, if any, between the option's exercise price and the fair
market value of the stock on the date the option is exercised is considered
compensation and is taxable as ordinary income to the optionee in the year the
option is exercised. The Company may deduct the amount of expense recognized by
an employee as compensation expense. Although an optionee will generally realize
ordinary income at the time the NQSO is exercised, if the stock issued upon
exercise of the option is considered subject to a "substantial risk of
forfeiture" and the employee has not filed a "Section 83 Election," then the
optionee is not taxed when the option is exercised, but rather when the
forfeiture restriction lapses. At that time, the optionee will realize ordinary
income in an amount equal to the difference between the option's exercise price
and the fair market value of the stock on the date the forfeiture restriction
lapses.
The foregoing summary of federal income tax consequences of stock options
does not purport to be complete, nor does it discuss the provisions of the
income tax laws of any state or foreign country in which the optionee resides.
PARTICIPATION IN THE PROGRAM. The grant of options under the Program to
executive officers is subject to the discretion of the Board of Directors and
the recommendation of the Board's Compensation Committee. On January 13, 1998
Mr. Cordner received grants as follows: 624 shares at $11.4380, 1,091 shares at
$12.62 and 1,092 shares at $18.63. On January 27, 1998, Mr. Cordner received a
grant for 40,000 shares at a price of $24.625, the fair market value of the
Company's Common Stock on the date of grant. On April 16, 1998 Mr. Fournier
received a grant for 15,000 shares at a price of $21.5625 per share, the fair
market value of the Company's Common Stock on the date of grant. On December 2,
1998 the following executive officers of the Company received grants covering
the following number of shares at $18.25, the fair market value of the Company's
Common Stock on the date of grant: Mr. Fournier--5,000 shares; Mr. Mohn--10,000
shares; Mr. Pye--10,000 shares; Mr. Ranjit--4,500 shares; Mr. Ruebusch--10,000
shares; Mr. Winn--9,000 shares; and Mr. Sharp--28,750 shares. The table of
option grants under "Executive Compensation and Other Matters--Option Grants in
Last Fiscal Year" provides information concerning the grant of options to the
Named Executive Officers during fiscal 1998. Information regarding the
automatic, nondiscretionary options granted to non-employee Directors during
fiscal 1998 is set forth under the heading "Executive Compensation and Other
matters--Compensation of Directors." During fiscal 1998, all current officers
and Directors, as a group, and all non-officer employees, as a group received
options to purchase 159,057 shares and 363,443 shares, respectively under the
Programs. In fiscal 1999, the Outside Directors will each receive an option to
purchase 6,000 shares of the Company's Common Stock, or an aggregate of 18,000
shares (contingent upon shareholder approval of Proposal No. 5), at fair market
value on the date of grant, pursuant to the nondiscretionary grant mechanism in
place for such Directors.
1998 NONSTATUTORY STOCK OPTION PLAN
The 1998 Nonstatutory Stock Option Plan (the "Plan"), was adopted by the
Company's Board of Directors in January 1998. A total of 500,000 shares of
Common Stock were reserved for the issuance under the Plan. The Plan provides
for grants of nonstatutory stock options to employees or consultants, but not
Officers or Directors, of the Company. The purpose of the Plan is to attract and
retain the best available personnel for positions of substantial responsibility
and to provide additional incentive to
19
employees and consultants to promote the success of the Company's business. The
Plan is administered by the Board of Directors, which determines the optionees
and the terms of options granted, including the exercise price, number of shares
subject to the option and the exercisability thereof.
The term of options granted under the Plan is stated in the option
agreement. Options granted under the Plan vest and become exercisable as set
forth in each option agreement. In general, no option may be transferred by the
optionee other than by will or the laws of descent or distribution and each
option may be exercised, during the lifetime of the optionee, only by such
optionee. An optionee whose relationship with the Company or any related
corporation ceases for any reason (other than by death or total and permanent
disability) may exercise options in the three-month period following such
cessation, unless such options terminate or expire sooner. The three-month
period is extended to six months for terminations due to permanent total
disability or twelve months in the event of death. In the event of a merger of
the Company with or into another corporation, all outstanding options may either
be assumed or an equivalent option may be substituted by the surviving entity
or, if such options are not assumed or substituted, such options shall become
exercisable, subject to Board of Directors approval, as to all of the shares
subject to the options, including shares as to which they would not otherwise be
exercisable. In the event that options become exercisable in lieu of assumption
or substitution, the Board of Directors shall notify optionees that all options
shall be fully exercisable for a period of 30 days, after which such options
shall terminate. The consideration for exercising any nonstatutory stock option
may consist of cash, check, promissory note, delivery of already-owned shares of
the Company's Common Stock subject to certain conditions, authorization to the
Company to retain from the total number of shares for which the option is
exercised that number of shares having a fair market value on the date of
exercise equal to the exercise price for the total number of shares as to which
the option is exercised, or any combination of the foregoing methods of payment
or such other consideration or method of payment to the extent permitted under
applicable law. The Plan shall continue in effect for a term of ten (10) years
unless sooner terminated by the Board of Directors.
As of April 5, 1999, options to purchase 368,122 shares of Common Stock
(7,013 of which were vested) were outstanding under the Program at an average
exercise price of approximately $16.6282 per share. No options granted under the
Plan have been exercised as of April 5, 1999. At April 5, 1999, 131,878 shares
were available under the Plan.
1998 EMPLOYEE STOCK PURCHASE PLAN SUMMARY
BACKGROUND. The 1998 Employee stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in December 1997. As of April 5, 1999, 29,030
shares had been issued pursuant to the 1998 Purchase Plan. The Purchase Plan
replaced the Company's 1992 Employee Stock Purchase Plan. As of April 5, 1999,
an aggregate of 370,970 shares were available for issuance under the 1998
Purchase Plan. The Purchase Plan initially had 400,000 shares of Common Stock
reserved for issuance thereunder, and includes a Renewal Feature which allows
for an annual increase to be added on May 1 of each year beginning in 1999 equal
to the lesser of: (i) the number of shares of Common Stock needed to restore the
number of shares available for purchase to 400,000 or (ii) a lesser amount
determined by the Board.
The Company believes that the Purchase Plan is a key component of its
strategy to attract and retain skilled employees and quality management. The
Board of Directors believes it is in the Company's best interests so that the
Company may continue to provide eligible employees the opportunity to purchase
the Company's Common Stock through payroll deductions, thereby aligning their
individual financial interest more closely with those of the stockholders.
ADMINISTRATION. The Purchase plan is intended to qualify as an "Employee
Stock Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"). The provisions of the Plan, accordingly, shall be
construed so as to extend and limit participation in a manner consistent with
the requirement of that section of the Code. The Purchase Plan shall be
administered by the Board of
20
Directors or a committee thereof (the "Administrator"). Every finding, decision
and determination by the Administrator shall, to the full extent permitted by
law, be final and binding upon all parties.
ELIGIBILITY. All persons who are employed by the Company on a given
enrollment date and who are customarily employed by the Company for at least
twenty hours per week and more than five months per calendar year are eligible
to participate in the Purchase Plan. Participation in the Purchase Plan ends
automatically on termination of employment with the Company. An eligible
employee may become a participant by completing a subscription agreement
authorizing payroll deductions and filing it with the Company's payroll office
at least 5 business days prior to the applicable enrollment date.
OFFERING AND EXERCISE PERIODS. The Purchase Plan is implemented by
overlapping offering periods of 24 months each ("Offering Periods"). Offering
Periods commence every six months, beginning on the first trading day on or
after December 1 and June 1 of each year, and consist of four exercise periods
of six months each ("Exercise Periods"). The Board may change the duration of
the Exercise Periods or the length or date of commencement of an Offering
Period. To the extent the fair market value of the Common Stock on any exercise
date in an Offering Period is lower than the fair market value of the Common
Stock on the first day of the Offering Period, then all participants in such
Offering Periods will be automatically withdrawn from such Offering Period
immediately after the exercise of their options on such exercise date and
automatically re-enrolled in the immediately following Offering Period as of the
first day thereof.
GRANT OF OPTION; PURCHASE PRICE. On the first day of each Offering Period
(the "Offering Date"), each eligible employee participating in the Purchase Plan
is granted an option to purchase on the last day of each Exercise Period in such
Offering Period (the "Exercise Date") a number of shares of Common Stock of the
company determined by dividing such employee's accumulated payroll deductions by
the lower of: (i) 85% of the fair market value of one share of the Company's
Common Stock on the Offering Date or (ii) 85% of the fair market value of one
share of the company's Common Stock on the applicable Exercise Date. Unless a
participating employee withdraws from the Purchase Plan, his or her option is
automatically exercised on each Exercise Date of the Offering Period; provided
that in no event will an employee be permitted to purchase during an Exercise
Period more than 7,500 shares.
In addition, no employee will be permitted to subscribe for shares under the
purchase Plan if, immediately after such subscription, the employee would own 5%
or more of the voting power or value of all classes of stock of the Company or
of any of its subsidiaries (including stock which may be purchased under the
Purchase Plan or pursuant to any other options), nor will any employee be
permitted to participate in the Purchase Plan to the extent such employee could
buy under all employee stock purchase plans of the Company more than $25,000
worth of stock (determined at the fair market value of the shares at the time
the option is granted) in any one calendar year. The fair market value of the
Common Stock on a given date is the closing sale price of the Common Stock for
such date as quoted on the NASDAQ National Market.
PAYROLL DEDUCTIONS. The purchase price for the shares is accumulated by
payroll deductions during the Offering Period. The deductions may not exceed 15%
of a participant's eligible compensation, which is defined in the Purchase Plan
to include all base straight time gross earnings, exclusive of payment for
overtime, shift premium incentive compensation, incentive payments, bonuses,
commissions and other compensation. A participant may discontinue his or her
participation in the Purchase Plan at any time during the Offering Period.
Payroll deductions commence on the first payday following the Offering Date, and
continue at the same rate with automatic enrollment in subsequent Offering
Periods, unless sooner terminated, increased or decreased by the participant.
WITHDRAWAL; TERMINATION OF EMPLOYMENT. Employees may end their
participation in an offering at any time during the Offering Period, and
participation ends automatically on termination of employment with the Company
or failure of the participant to remain in the continuous scheduled employment
of the
21
Company for at least 20 hours per week. Once a participant withdraws from a
particular offering, that participant may withdraw all, but not less than all,
of the payroll deductions credited to such participant's account by giving
written notice to the Company.
TRANSFERABILITY. No rights or accumulated payroll deductions of a
participant under the Purchase Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or pursuant to the Purchase Plan), and any such attempt may be
treated by the Company as an election to withdraw from the Purchase Plan.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER, ASSET SALE
OR CHANGE OF CONTROL. The shares reserved under the Purchase Plan, as well as
the price per share of Common Stock covered by each option under the Purchase
Plan which has not yet been exercised, will be proportionately adjusted for any
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common stock, or any other increase or decrease in the
number of shares of Common Stock effected without receipt of consideration by
the Company. In the event of the proposed dissolution or liquidation of the
Company, the pending Offering Periods will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the Board. In
the event of a proposed sale of all or substantially all the assets of the
Company or a merger of the Company with or into another corporation, the
Purchase Plan provides that each option under the purchase Plan will be assumed
or an equivalent option will be substituted by the successor or purchaser
corporation, unless the Board determines, in its sole discretion, to shorten the
Exercise Periods and Offering Periods then in progress or to cancel each
outstanding right to purchase and refund all sums collected from participants
during the Offering Periods then in progress.
AMENDMENT AND TERMINATION. The Board of Directors of the Company may at any
time and for any reason terminate or amend the Purchase Plan. Except as provided
in the Purchase Plan, no termination can affect options previously granted, nor
may any amendment make any change in any option already granted which adversely
affects the rights of any participant. Shareholder approval may be required for
certain amendments in order to comply with the federal securities or tax laws,
or any other applicable law or regulation. Unless terminated sooner, the
Purchase Plan will terminate 10 years from its effective date.
FEDERAL TAX INFORMATION. The Purchase Plan, and the right of participants
to make purchases thereunder, is intended to qualify under the provisions of
Section 423 of the Code. Under these provisions, no income will be taxable to a
participant until the shares purchased under the Purchase Plan are sold or
otherwise disposed of. Upon sale or other disposition of the shares the
participant will generally be subject to tax and the amount of the tax will
depend upon the holding period. If the shares are sold or otherwise disposed of
more than two years from the first day of the Offering Period and one year from
the date the shares are purchased, the participant will recognize ordinary
income measured as the lesser of (a) the excess of the fair market value of the
shares at the time of such sale or disposition over the purchase price, or (b)
an amount equal to fifteen percent (15%) of the fair market value of the shares
as of the first day of the Offering Period. Any additional gain will be treated
as long-term capital gain. If the shares are sold or otherwise disposed of
before the expiration of these holding periods, the participant will recognize
ordinary income generally measured as the excess of the fair market value of the
shares on the date the shares are purchased over the purchase price. Any
additional gain or loss on such sale or disposition will be long-term or
short-term capital gain or loss, depending on the holding period. The Company is
not entitled to a deduction for amounts taxed as ordinary income or capital gain
to a participant except to the extent of ordinary income recognized by
participants upon a sale or disposition of shares prior to the expiration of the
holding periods described above.
The foregoing is only a summary of the effect of federal income taxation
upon the participant and the company with respect to the shares purchased under
the Purchase plan. Reference should be made to the applicable provisions of the
Code. In addition, the summary does not discuss the tax consequences of
participant's death or the income tax laws of any state or foreign country in
which the participant may reside.
22
PARTICIPATION IN THE PURCHASE PLAN. Eligible employees participate in the
Purchase Plan voluntarily and each such employee determines his or her level of
payroll deductions within the guidelines fixed by the Purchase Plan.
Accordingly, future purchases under the Purchase Plan are not determinable at
this time.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Gibson, Kvamme and Rhines.
Mr. Sharp who is President, Chief Executive Officer and Chairman of the Board of
Directors of the Company, participates in the discussions and decisions
regarding salaries and incentive compensation for all executive officers of the
Company, except that Mr. Sharp is excluded from discussions regarding his own
salary and incentive compensation.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors
reviews and approves the Company's executive compensation policies. The
following is the report of the Committee describing compensation policies and
rationale applicable to the Company's executive officers with respect to the
compensation paid to such executive officers for the fiscal year ended December
31, 1998. The information contained in such report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act or Exchange Act, except to the extent
that the Company specifically incorporates it by reference into such filing.
COMPENSATION PHILOSOPHY AND POLICIES FOR EXECUTIVE OFFICERS
The Company's executive compensation program was designed to align the
interests of executives with the interest of the stockholders by creating a
performance-oriented environment that rewards performance related to the goals
of the Company. The Company's executive compensation program was also designed
to attract and retain qualified executives in the highly competitive high
technology marketplace in which the Company competes. In this regard, the levels
of executive compensation established by the Committee were designed to be
consistent with those available to other executives in the industry. The
Company's executive compensation program consists primarily of the following
integrated components:
1. BASE SALARY--which was designed to compensate executives competitively
within the industry and the marketplace.
2. QUARTERLY PROFIT SHARING--which provided a direct link between executive
compensation and the quarterly performance of the Company.
3. KEY EMPLOYEE INCENTIVE PLAN--which provided for a direct link between
executive compensation and the quarterly and annual performance of the Company.
4. LONG TERM INCENTIVES--which consisted of stock options that link
management decision making with long-term Company performance and stockholder
interests.
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code on the compensation paid to the Company's executive
officers. Section 162(m) disallows a tax deduction for any publicly-held
corporation for individual compensation exceeding $1.0 million in any taxable
year for any of the named executive officers, unless compensation is
performance-based. In general it is the Committee's policy to qualify, to the
maximum extent possible, its executives' compensation for deductibility under
applicable tax laws.
23
BASE SALARIES
Base salary levels for the Chief Executive Officer (the "CEO") and other
executive officers of the Company are reviewed annually by the Compensation
Committee. The Committee's current policy is to maintain base salary levels in
the median range for the industry when compared with those of executives holding
similar positions with other companies in the high technology and semiconductor
industries that are similar in size to the Company. Certain companies included
in the peer group index of the stock performance graph are also included in
surveys reviewed by the Company in determining salary levels for the CEO and
other executive officers of the Company.
QUARTERLY PROFIT SHARING
All employees participate in the profit sharing program. Profit sharing is
paid quarterly and equals a percentage of the employees' quarterly W-2 income.
In 1998, the profit sharing pool was equal to 10 percent of operating income.
One half of the profit sharing amount is paid quarterly in cash, with the other
half paid as an employer contribution to employees' 401(k) account. Only
employees who are employees at the end of the fiscal year receive the 401(k)
portion of the profit sharing. No profit sharing was paid for the first quarter
of 1998. Profit sharing amounts, as a percentage of Base Salary, were .93
percent, 1.38 percent, and 1.24 percent for the second, third and fourth
quarters of 1998, respectively, for the CEO and the Named Executive Officers.
KEY EMPLOYEE INCENTIVE PLAN
The Company provides for bonuses for its key employees. Participants must be
employed full time by the company during the entire fiscal quarter to be
eligible for a bonus that quarter. The bonus is based on Actual vs. Budget
Operating Income after Profit Sharing and Bonus. The bonuses vary linearly with
the level of achievement of the budgeted Operating Income between 80% and 150%
of achievement. Individual bonuses will be reduced by the amount of Profit
Sharing (both cash and 401(k) contribution) earned by each participant. During
1998, no bonuses were paid to the CEO and the Named Executive Officers.
LONG TERM INCENTIVES
The Company provides long term incentives through the grant of stock options
under its 1996 Stock Incentive Program (the "Program"). The purpose of the
Program is to create a direct link between compensation and the long-term
performance of the Company. Stock options under this Program are generally
granted at an exercise price equaling 100% of fair market value, have a ten year
term and generally vest in installments over four years. Because the receipt of
value by an executive officer under a stock option is dependent upon an increase
in the price of the Company's Common Stock, this portion of the executives'
compensation is directly aligned with an increase in stockholder value. The
primary stock options granted to executive officers are generally in conjunction
with the executive officer's acceptance of employment with the Company, or upon
promotion to executive officer. When determining the number of stock options to
be awarded to an executive officer, the Compensation Committee considers (i) the
executive's current contribution to the Company's performance, (ii) the
executive's anticipated contribution in meeting the Company's long-term
strategic performance goals and (iii) comparisons to an internally generated
informal survey of executive stock option grants made by other high technology
and semiconductor companies at a similar stage of development as the Company.
Individual considerations, such as the executive's current and anticipated
contributions to the Company's performance may be more subjective and less
measurable by financial results at the corporate level. In this respect, the
Committee exercises significant judgment in measuring the contribution or
anticipated contribution to the Company's performance. The Compensation
Committee also periodically reviews the stock options granted to insure
equitable distribution of such options among the officers.
24
Under the guidelines stated above, the Compensation Committee did review and
grant on December 2, 1998 stock options to the CEO and Named Executive Officers
as detailed in the Executive Compensation and Other Matters--Stock Option
Grants.
OTHER
The Company's executive officers are also eligible to participate in
compensation and benefit programs generally available to other employees,
including the Company's Employee Stock Purchase Plan.
CEO COMPENSATION
The Committee reviews the Chief Executive Officer's compensation annually
using the same criteria and policies as are employed for the other executive
officers. The compensation of the Company's CEO is determined in part by the
terms of a letter agreement entered into with the CEO upon his acceptance of
employment with the Company in September 1991. See "Employment Contracts and
Change-In-Control Arrangements" above. However, the Committee retains the
discretion to increase the CEO's compensation to levels above those provided in
the letter agreement. The Committee raised Mr. Sharp's salary to $280,000 for
fiscal 1998. Mr. Sharp received an aggregate bonus of $2,616 during 1998 under
the Company's Profit Sharing Plan described above. Such amount reflected 0.0
percent, .93 percent, 1.38 percent and 1.24 percent of Mr. Sharp's Base Salary
for the first (no profit sharing paid for first quarter of 1998), second, third
and fourth quarter, respectively. Mr. Sharp received stock option grants
totaling 28,750 shares under the Company's 1996 Stock Incentive Program during
1998 (See Executive Compensation and Other Matters--Stock Option Grants).
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS:
E. Floyd Kvamme
Charles Scott Gibson
Dr. Walden C. Rhines
25
STOCK PERFORMANCE GRAPH
The SEC requires that registrants include in their proxy statement a
line-graph presentation comparing cumulative five-year stockholder returns on an
indexed basis, assuming a $100 initial investment and reinvestment of dividends,
of (a) the Company, (b) a broad-based equity market index and (c) an industry-
specific index or a registrant-constructed peer group index. Set forth below is
a line graph comparing the annual percentage change in the cumulative return to
the stockholders of the Company's Common Stock with the cumulative return of the
NASDAQ U.S. Index and of the SIC Code 3674--Electronic Components and
Accessories Index for the period commencing December 13, 1993 (the date of the
Company's initial public offering) and ending on December 31, 1998. The
information contained in such graph shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission, nor
shall such information be incorporated by reference into any future filing under
the Securities Act of 1933 or Securities Exchange Act of 1934, except to the
extent that the Company specifically incorporates it by reference into such
filing.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
DOLLARS YEARS ENDING DEC-93 DEC-94 DEC-95 DEC-96 DEC-97 DEC-98
TRIQUINT SEMICONDUCTOR INC 100.00 53.06 110.20 215.31 165.31 157.14
NASDAQ US INDEX 100.00 100.51 142.10 174.78 214.57 293.21
PEER GROUP 100.00 125.51 187.95 290.70 304.05 462.98
No dividends have been declared or paid on the Company's Common Stock.
Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
The peer group index used, SIC Code 3674--Electronic Components and
Accessories, utilizes the same the same methods of presentation and assumptions
for the total return calculation as the Company and the NASDAQ U.S. Index. All
companies in the peer group index are weighted in accordance with their market
capitalizations.
26
Companies included in the peer group index are as follows:
3D Labs Inc. Ltd
3DF Interactive Inc.
8X8 Inc.
Actel Corp.
Advanced Micro Devices
Advanced Photonix, Inc--CL A.
Aeroflex, Inc.
Alliance Semiconductor Corporation
Alpha Industries Inc
Altera Corporation
American Xtal Technology Inc
Anadigics, Inc.
Analog Devices
Applied Micro Circuits Corp.
ARM Holdings Ltd
Artisan Components Inc.
Aspec Technology Inc
Astropower Inc
Atmel Corporation
Aureal Semiconductor
Blue Wave Systems Inc
Broadcom Corp--CL A
Burr-Brown Corporation
Catalyst Semiconductor, Inc.
Celestica Inc
Conexant Systems Inc
Cree Research Inc.
Cypress Semiconductor Corporation
Dallas Semiconductor Corporation
Dense-Pac Microsystems, Inc.
Diodes, Inc.
Dionics, Inc.
Elantec Semiconductor, Inc.
ESS Technology, Inc.
Exar Corporation
Fairchild Semiconductor Corp.
Galileo Technology Ltd.
Gatefield Corporation
General Semiconductor, Inc.
Genesis Microchip Inc
Harman Industries, Inc.
HEI, Inc.
Hytek Microsystems, Inc.
IBIS Technology, Inc.
IMP, Inc.
Information Storage Devices
Integrated Circuit Systems
Integrated Device Technology, Inc.
Integrated Sensor Solutions
Integrated Silicon Solution
Intel Corporation
International Rectifier Corporation
Jetronic Industries, Inc.
Kopin Corp.
Kyocera Corporation--ADR
Lattice Semiconductor Corporation
Level One Communications, Inc.
Linear Technology Corporation
Logic Devices, Inc.
LSI Logic Corporation
Macronix International Ltd.--ADR
Maxim Integrated Products
MEMC Electronic Materials, Inc.
Micrel, Inc.
Micro Linear Corporation
Microchip Technology Inc.
Microelectronic Packaging
Micron Technology Inc.
Micropac Industries, Inc.
Microsemi Corp.
Mitsubishi Electronics Corporation--ADR
National Semiconductor Corporation
Neomagic Corp.
Nuwave Technologies, Inc.
Nvidia Corp
Oak Technology, Inc.
Optek Technology, Inc.
Opti, Inc.
Pericom Semiconductor Corp.
PMC-Sierra, Inc.
Power Integrations, Inc.
Qlogic Corporation
Quality Semiconductor, Inc.
Ramtron International Corporation
Remec, Inc.
RF Micro Devices, Inc.
Ross Technologies, Inc.
SDL Inc.
Semicon, Inc.
Semiconductor Laser Intl. Corporation
Semtech Corporation
Silicon Storage Technology
Siliconix Inc.
Simtek Corporation
Sipex Corporation
Smart Modular Technologies, Inc.
Solitron Devices, Inc.
Spectrum Signal Processing
Standard Microsystems Corp.
Stmicroelectronics N V
Supertex, Inc.
Taiwan Semiconductor--ADR
27
Tanisys Technology Inc
Telcom Semiconductor, Inc.
Texas Instruments, Inc.
Three-Five Systems, Inc.
Tower Semiconductor, Ltd.
Transwitch Corporation
Trident Microsystems, Inc.
TriQuint Semiconductor, Inc.
Uniphase Corporation
Unitrode Corporation
Universal Display Corp.
Vitesse Semiconductor Corporation
VLSI Technology, Inc.
White Electric Designs Corp
Xicor, Inc.
Xilinx Inc.
Zing Technologies, Inc.
Zoran Corporation
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Until June 1996, Paul Gary, a Director of the Company, was employed by AT&T,
a stockholder of the Company. Although Mr. Gary is no longer an employee of AT&T
or its successor Lucent Technologies, Inc. (collectively "Lucent"), his
nomination was proposed to the Board of Directors by Lucent. Mr. Gary serves as
a representative of Lucent on the Company's Board of Directors and he is
compensated for his services on the Company's Board of Directors by Lucent.
However, the Company reimburses Mr. Gary for any out-of-pocket expenses incurred
in connection with travel to meetings of the Company's Board of Directors. As a
result of his relationship with Lucent, Mr. Gary did not receive a stock option
grant in fiscal 1998 and will not receive such an automatic grant in fiscal
1999.
Lucent Technologies, Inc., a spin-off of AT&T, holds 661,059 shares of the
Company's Common Stock including a warrant to purchase 200,000 additional shares
of the Company's Common Stock at $24.00 per share (the "Warrant"). In
conjunction with Lucent's acquisition of the Company's Common Stock and the
Warrant in August 1993, Lucent entered into a series of agreements with the
Company, including an Asset Purchase Agreement, a Joint Development and
Technology Transfer Agreement, a Manufacturing Services Agreement, and a Patent
License Agreement. The Lucent agreements provide for the Company to work jointly
with Lucent to develop and market certain GaAs wafers and other products. The
agreements do not provide any minimum order or development requirements for
Lucent, and there can be no assurance that a substantial relationship with
Lucent will result. The sale of the Company's products to Lucent occurs at
prices no more favorable than those charged to other customers.
On January 13, 1998, the Company acquired substantially all of the assets of
the Monolithic Microwave Integrated Circuit ("MMIC") operations of the former
Texas Instruments' Defense Systems & Electronics Group from Raytheon TI Systems,
Inc., a Delaware corporation ("RTIS") and a wholly owned subsidiary of the
Raytheon Company ("Raytheon"). The MMIC operations include the Gallium Arsenide
("GaAs") foundry and MMIC business of the R/F Microwave Business Unit that RTIS
acquired on July 11 from Texas Instruments Incorporated, a Delaware corporation
("TI") which MMIC business includes without limitation, TI's GaAs Operations
Group, TI's Microwave GaAs Products Business Unit, the MMIC component of TI's
Microwave gas Products Business Unit, the MMIC component of It's Microwave
Integrated Circuits Center of Excellence and the MMIC research and development
component of TI's Systems Component Research Laboratory (collectively, the "MMIC
Business").
Pursuant to a Final Judgment entered on November 6, 1997 (the "FINAL
JUDGMENT") in the United States District Court for the District of Columbia in
Civil Case No. 97-1515 known as UNITED STATES OF AMERICA V. RAYTHEON COMPANY AND
TEXAS INSTRUMENTS, INC., a related Stipulation and Order entered in the same
case on July 2, 1997, and a related Hold Separate and Partition Plan Stipulation
and Order entered in the same case on July 2, 1997 (the "HOLD SEPARATE ORDER"),
Raytheon agreed to promptly divest the MMIC Business and, pending such
divestiture, to maintain the MMIC Business as an independent competitor held
separate from Raytheon. Pursuant to and in accordance with the Final Judgment,
the acquisition was accomplished pursuant to an Asset Purchase Agreement (the
"Agreement"), dated as of January 8, 1998, by and between the Company and RTIS.
The Company has assigned its rights under the Agreement to a
28
wholly owned subsidiary, TriQuint Semiconductor Texas, Inc., a Delaware
corporation, which will operate the MMIC Business, located primarily in Dallas,
Texas.
Under the terms of the Agreement, TriQuint acquired the MMIC Business for
approximately $19.5 million in cash and 844,613 shares of TriQuint Common Stock
(the "Shares") valued at approximately $19,500,000 for a total purchase
consideration of approximately $39 million. The Shares were redeemable at
TriQuint's option at any time within 360 days of January 13, 1998 at a price of
approximately $23.00 per share. TriQuint did not exercise its option to
repurchase the shares. The cash portion of the purchase price was financed
through an equipment leasing arrangement through General Electric Capital
Corporation involving certain assets acquired pursuant to the Agreement. The
terms of the Agreement were the result of arm's-length negotiations between the
parties.
In connection with its approval of the transaction, the Department of
Justice required that RTIS place all the Shares into a voting trust in order to
divest itself of voting power with respect to the Shares. Accordingly, on
January 13, 1998, RTIS entered into a Voting Trust Agreement with State Street
Bank and Trust Company, a Massachusetts trust company ("State Street"), under
which, for any matter for which any vote or consent is requested from holders of
TriQuint Common Stock, State Street will vote the Shares as practicable in the
same proportion as the other holders of TriQuint Common Stock.
All future transactions, including loans between the Company and its
officers, directors, principal stockholders and their affiliates, will be
approved by a majority of the Board of Directors, including a majority of the
independent and disinterested outside directors, and will be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and Directors, and persons who own
more than ten percent of a registered class of the Company's equity securities
to file reports of ownership and changes in ownership with the SEC and the
National Association of Securities Dealers, Inc. Executive officers, Directors
and greater than ten percent stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of such forms received by it, or written
representations from certain reporting persons, the Company believes that,
during fiscal 1998 all executive officers and other employees of the Company who
are subject to Section 16 of the Exchange Act, Directors and greater than 10%
stockholders complied with all applicable filing requirements.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 2000 Annual Meeting of Stockholders must
be received by the Company no later than December 22, 1999 in order that they
may be considered for inclusion in the proxy statement and form of proxy
relating to that meeting.
29
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
By Order of the Board of Directors:
/s/ Edward C.V. Winn
Edward C.V. Winn
EXECUTIVE VICE PRESIDENT,
FINANCE AND ADMINISTRATION,
CHIEF FINANCIAL OFFICER AND SECRETARY
Dated: April 21, 1999
30
Please mark your votes
as indicated in this example /X/
TRIQUINT SEMICONDUCTOR, INC.
Proxy for Annual Meeting of Shareholders to be Held on May 26, 1999
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement, each dated April 21, 1999 and
hereby names, constitutes and appoints Steven J. Sharp and Edward C. V. Winn,
or either of them acting in absence of the other, with full power of
substitution, my true and lawful attorneys and Proxies for me and in my place
and stead to attend the Annual Meeting of the Shareholders of TriQuint
Semiconductor, Inc. (the "Company") to be held at 2:00 p.m. on Wednesday, May
26, 1999, and at any adjournment thereof, and to vote all the shares of
Common Stock held of record in the name of the undersigned on April 5, 1999,
with all the powers that the undersigned would possess if he were personally
present.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY. IF NO
SPECIFIC DIRECTION IS GIVEN AS TO ANY OF THE ABOVE ITEMS, THIS PROXY WILL BE
VOTED FOR EACH OF THE NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3, 4,
AND 5.
_______________________________________________________________________________
FOLD AND DETACH HERE
1. PROPOSAL 1--Election / / FOR all nominees / / WITHHOLD AUTHORITY
of Directors listed below * to vote for all nominees
(except as marked to indicated below
the contrary below)
(Instructions: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
Steven J. Sharp Dr. Paul A. Gary Charles Scott Gibson
Dr. Walden C. Rhines Edward F. Tuck
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE
NOMINEES NAMED ABOVE.
2. PROPOSAL 2--To ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent accountants for the year ending December 31, 1999.
FOR PROPOSAL 2 / / AGAINST PROPOSAL 2 / / ABSTAIN ON PROPOSAL 2 / /
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
PROPOSAL 2
3. PROPOSAL 3--To approve an amendment to the TriQuint Semiconductor, Inc. 1996
Stock Incentive Program to increase the aggregate number of shares of Common
Stock that may be issued thereunder by 475,000 shares to a total of 1,725,000
shares, as summarized in the accompanying proxy statement.
FOR PROPOSAL 3 / / AGAINST PROPOSAL 3 / / ABSTAIN ON PROPOSAL 3 / /
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
PROPOSAL 3
4. PROPOSAL 4--To approve the amendment to the 1996 Stock Incentive
Program to add an automatic initial option grant to new Outside Directors
at the time of election or appointment to purchase 18,000 shares of Common
Stock
FOR PROPOSAL 4 / / AGAINST PROPOSAL 4 / / ABSTAIN ON PROPOSAL 4 / /
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
PROPOSAL 4
5. PROPOSAL 5--To approve the amendment to the 1996 Stock Incentive Program to
award an additional option grant to the existing Outside Directors to
purchase 12,000 shares of Common Stock
FOR PROPOSAL 5 / / AGAINST PROPOSAL 5 / / ABSTAIN ON PROPOSAL 5 / /
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
PROPOSAL 5
6. Upon such other matters as may properly come before, or incident to the
conduct of the Annual Meeting, the Proxy holders shall vote in such manner
as they determine to be in the best interests of the Company. The Company
is not presently aware of any such matters to be presented for action at the
meeting.
This Proxy should be marked, dated and signed by the shareholder(s) exactly
as his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenant or as community property, both should sign.
I (We) plan to attend the meeting [ ]
_______________________________________________________________________________
Shareholder (print name) Shareholder signature (sign name) Dated
________________________________________________________________________________
Shareholder (print name) Shareholder signature (sign name) Dated
_______________________________________________________________________________
FOLD AND DETACH HERE