10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

or

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2004

Commission File Number 0-22660

TRIQUINT SEMICONDUCTOR, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-3654013
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2300 N.E. Brookwood Parkway,
Hillsboro, Oregon 97124
(503) 615- 9000

(Address, including zip code, and telephone number, including area code, of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value per share(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x   No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes  x   No  o

The aggregate market value of the voting common stock held by non-affiliates of the registrant, based upon the closing sale price of the common stock on July 2, 2004, the last day of our second fiscal quarter reported on the Nasdaq Stock Market’s National Market, was approximately $692,054,747. Shares of common stock held by each executive officer and director and by each person who owns 5% or more of the outstanding common stock have been excluded from this computation. The determination of affiliate status for this purpose is not necessarily a conclusive determination for other purposes. The registrant does not have any non-voting common equities.

As of February 28, 2005, there were 138,785,145 shares of the Registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates certain information by reference from the Registrant’s Definitive Proxy Statement to be filed with the Commission pursuant to Regulation 14A in connection with the Registrant’s 2005 Annual Meeting of Stockholders, which is scheduled to be held on May 12, 2005. Such Definitive Proxy Statement will be filed with the Commission not later than 120 days after the conclusion of the Registrant’s fiscal year ended December 31, 2004.

Important Notice to Investors:

This Annual Report on Form 10-K contains both historical information and forward-looking statements about TriQuint Semiconductor, Inc. (“TriQuint”, “we”, “us”, “our” or “our company”). A number of factors affect our operating results and could cause our actual future results to differ materially from any forward-looking results, including, but not limited to, those related to our product strategy; demand for wireless phones and our product offerings in this market; our competitive product offerings in the infrastructure networks market and our outlook for this market; our revenue outlook for our defense business; our outlook for the optical networks market; our expectations regarding certain customer-specific products; our competitive advantages in design and process; our ability to manufacture and sell in international markets; our plans for our manufacturing facilities; risks associated with manufacturing yields, costs and subcontractor services; risks associated with our production outside of the U.S.; our reliance on certain suppliers; risks associated with our backlog; our expectations regarding research and development expenses; our ability to improve our products and processes and develop new products; our expectations regarding the selling prices for our optoelectronic products; our expectations regarding our competitors and pricing levels; our goal to reduce production costs and improve performance value for our products; risks associated in protecting our intellectual property interests; impact of environmental regulations on our business; and other comments that involve risks and uncertainties. In some cases, you can identify forward-looking statements by terminology such as “anticipates”, “appears”, “believes”, “continue”, “estimates”, “expects”, “hope”, “intends”, “may”, “our future success depends”, “plans”, “potential”, “predicts”, “reasonably”, “seek to continue”, “should”, thinks”, “will” or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In addition, historical information should not be considered an indicator of future performance. Factors that could cause or contribute to these differences include, but are not limited to, the risks discussed in the section of this report titled “Factors that May Affect Future Results.” These factors may cause our actual results to differ materially from any forward-looking statement.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these statements. We are under no duty to update any of the forward-looking statements after the date of this Annual Report on Form 10-K to conform these statements to actual results. These forward-looking statements are made in reliance upon the safe harbor provision of The Private Securities Litigation Reform Act of 1995.

TRIQUINT SEMICONDUCTOR, INC.
INDEX

PART I
Item 1.	Business	1
Item 2.	Properties	18
Item 3.	Legal Proceedings	19
Item 4.	Submission of Matters to a Vote of Security Holders	19
PART II
Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	20
Item 6.	Selected Financial Data	20
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	63
Item 8.	Financial Statements and Supplementary Data	64
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	64
Item 9A.	Controls and Procedures	64
Item 9B.	Other Information	67
PART III
Item 10.	Directors and Executive Officers of the Registrant	68
Item 11.	Executive Compensation	68
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	68
Item 13.	Certain Relationships and Related Transactions	68
Item 14.	Principal Accounting Fees and Services	68
PART IV
Item 15.	Exhibits and Financial Statement Schedules	69
SIGNATURES
	Signatures	73

PART I

Item 1.Business

Overview

TriQuint Semiconductor, Inc. (“TriQuint,” “we,” us,” “our,” or “our company”) is a supplier of high performance components and modules for communications applications. Our focus is on the specialized expertise, materials and know-how for radio frequency (“RF”), intermediate frequency (“IF”) and optical applications. We were incorporated in California in 1991 and reincorporated in Delaware on September 26, 1996. We have the following wholly-owned operating subsidiaries, TriQuint Optoelectronics, Inc., TriQuint Semiconductor GMBH, TriQuint Semiconductor Texas LP, Sawtek, Inc. and Sawtek SRL.

We provide customers with standard and custom product solutions as well as foundry services in the wireless phones, wireless infrastructure networks, optical networks, and defense markets. Our products are designed on various wafer substrates including compound semiconductor materials such as gallium arsenide (“GaAs”) and indium phosphate (“InP”), lithium niobate (“LiNbO3”), lithium tantalate (“LiTaO3”) and quartz, using a variety of device technologies, including pseudomorphic high electron mobility transistor (“pHEMT”), metamorphic high electron mobility transistor (“mHEMT”), heterojunction bipolar transistor (“HBT”), heterostructure field effect transistor (“HFET”), metal semiconductor field effect transistor (“MESFET”), surface acoustic wave (“SAW”) and bulk acoustic wave (“BAW”). Using these materials, devices and our proprietary technology, our products can overcome the performance barriers of competing devices in a variety of applications and offer other key advantages such as steeper selectivity, lower distortion, reduced size and weight and more precise frequency control. For example, GaAs has inherent physical properties that allow its electrons to move up to five times faster than those of silicon. This higher electron mobility permits the manufacture of GaAs integrated circuits that operate at higher levels of performance than silicon devices. We sell our products to companies worldwide with our top ten customers in 2004 as follows (in alphabetical order): Curitel Communications, Inc., Ericsson, Kyocera Corporation, LG Group, Motorola, Inc., Nokia Corporation, Nortel Networks Corporation, Northrop Grumman Corporation, Raytheon Company, and Samsung Electronics Company.

In the U.S., we have design and manufacturing facilities in Oregon, Texas, Florida and Pennsylvania and design facilities in New England. We also have production plants in Costa Rica and Mexico, a design facility in Germany and application sales support offices in Taiwan, Korea and China. We own and operate our own wafer fabrication and product test facilities and use our proprietary processes to produce RF, analog and mixed-signal components, lasers, detectors, and modules cost-effectively in high volumes. We believe that control of these manufacturing processes provides us with a reliable source of supply and greater opportunities to enhance quality, reliability and manufacturing efficiency. In addition, control of our manufacturing process and our combined research and design capabilities assists us in developing new processes and products and in being more responsive to customer requirements. We have also established a strategic foundry business serving leading communications companies.

Our principal executive offices are located at 2300 N.E. Brookwood Parkway, Hillsboro, Oregon 97124 and our telephone number at that location is (503) 615-9000. Information about our company is also available at our website at www.triquint.com, which includes links free of charge to reports and amendments to those reports we have filed with the Securities and Exchange Commission (“SEC”). The contents of our website are not incorporated by reference in this Annual Report on Form 10-K. The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

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Industry Background

Market demands for higher levels of performance with reduced cost in electronic communications systems have produced an increasing number of varied, complex applications. The increased capabilities of these new systems, in turn, are spawning new markets and a further proliferation of new, sophisticated applications. Many of these new applications have emerged in the wireless communications, telecommunications, data communications and microwave and millimeter wave communications industries.

The wireless communications industry is constantly changing with the advent of new applications such as digital wireless telephones, personal communication systems (“PCS”), handheld navigation products based on the global positioning satellite (“GPS”) standard, satellite communications, wireless local area networks (“WLANs”) and wireless internet. Wireless communications systems can offer the functional advantages of wired systems without the costly and time-consuming development of an extensive wired infrastructure, which is of particular importance in developing parts of the world. In addition, many of these new applications require battery-powered portability. The proliferation of some of these new applications, combined with a demand for higher data rates, have led to increased communication traffic resulting in congestion of the existing assigned frequency bands. As a consequence, wireless communications are moving to higher, less congested frequency bands and are implementing new, advanced communication standards. The advantages of wireless communications systems as well as the increasing demand for wireless communications at higher frequencies continue to drive worldwide growth in existing systems and continue to drive the emergence of new markets and applications.

The telecommunications and data communications industries are encountering increasing demand for higher transmission rates and increased capacity to accommodate traditional voice traffic as well as higher levels of traffic arising from widely used internet service applications. Today’s advanced telecommunications systems employ high speed switching networks and fiber optic cable operating in accordance with high frequency standards such as synchronous optical network (“SONET”), synchronous digital hierarchy (“SDH”), integrated services digital network (“ISDN”) and fiber to the premise (“FTTP”). For example, high performance SONET telecommunications systems can operate at frequencies of 10 gigabits per second (“Gbits/sec”) per optical wavelength and can multiplex 80 wavelengths optically to provide data capacity to 800 Gbits/sec per individual fiber. The advent of video communications and multimedia services, which combine voice, video and data, are placing further demands on these systems for even higher data transmission capacity. This is especially true in the local and end user arenas, which are often referred to as the metropolitan area networks (“MANs”) and last mile networks, respectively.

The microwave and millimeter wave communications industry utilizes advanced monolithic microwave integrated circuits (“MMIC”) and SAW filter products for aerospace, defense and commercial applications. Aerospace and defense applications include high power amplifiers, low noise amplifiers, switches, voltage controlled oscillators (“VCOs”) and attenuators for use in a variety of advanced systems such as active array radar, missiles, electronic warfare and space communications systems. Commercial applications for products and services in this frequency range include wireless telephone applications, optical fiber links and switching networks, millimeter wave (“mmW”) radios for point-to-point and point to multipoint systems, phased-array radar and satellite links both on the orbiting payload and for earth station transmitters.

To address the market demands for higher levels of performance, electronic communications systems manufacturers have relied heavily on advances in high performance components and modules such as those we produce. Until recently, the predominant semiconductor technologies used in advanced electronic systems have been silicon based complementary metal oxide semiconductor (“CMOS”), bipolar complementary metal oxide semiconductor (“BiCMOS”) and emitter coupled logic (“ECL”) process

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technologies. In addition, traditional signal processing technologies included lumped element filters, ceramic filters, crystal filters, resonators and oscillators. However, today’s high performance electronic systems require performance beyond that achievable with these technologies.

One way to improve performance is to combine analog and digital circuitry on the same device. This combination, known as mixed signal technology, can provide higher levels of integration (smaller size and increased functionality), reduced power consumption and higher operating frequencies. Higher levels of integration can result in smaller devices with increased functionality. Notwithstanding the benefits of mixed signal technology, the performance requirements of certain critical system functions generally cannot be achieved using silicon based semiconductors or filters, resonators and oscillators based on traditional technologies. As a result, systems manufacturers are seeking components and modules which can overcome these performance limitations. GaAs and InP semiconductor technology has become an effective alternative or complement to silicon solutions in many high performance applications. The higher electron mobility of GaAs permits GaAs integrated circuits to operate at higher speeds than silicon devices or at the same speeds with lower power consumption. In addition, SAW technology offers a number of advantages over traditional filter technologies, including precise frequency control and selectivity, reduced size and weight, high reliability, environmental stability and the ability to pass RF signals with minimal distortion.

In many new applications, GaAs integrated circuits and SAW filters enable high performance systems to process signals and information more quickly and more precisely. In addition, the use of these components in high performance communications systems can reduce system power requirements and the physical size and weight of the system, important elements in battery powered or portable applications. These characteristics, combined with the systems requirements of the communications industry, have led to the use of our components in high volumes to complement silicon devices in a wide range of commercial and aerospace systems.

Electronic communications systems manufacturers, particularly wireless handset manufacturers, are also moving increasingly toward designing integrated radio modules into their phones, rather than the individual components comprising these modules. By doing this, the handset manufacturers can continue to achieve cost reductions, optimization of design and increasingly smaller size of their phones while accelerating design cycles and improving time to market. Our high performance GaAs integrated circuits and our SAW filters, duplexers and oscillators comprise some of the primary components in these radio modules. Further, during the first quarter of 2005 we completed the acquisition of TFR Technologies, Inc. (“TFR”), which provides us with BAW technology. We believe that BAW is critical to developing higher frequency filters for next generation wireless communication products and is a natural complement to our SAW filters. Because of these factors, we believe we are well positioned to continue to support the growth and performance level demands of the electronic communications system industry.

TriQuint Strategy

We are a global supplier to the communications industry with a focus on media interface applications of RF and optical communications systems. Our mission is, “Connecting the Digital World to the Global Network”, and we accomplish this through a diversified product portfolio. We strive to be a premier supplier of solutions based on complex materials such as GaAs, InP and other compound semiconductor materials and SAW and BAW based products. The key elements of our strategy include:

Diversification of Business Models, Market Applications, Technologies and Customers.

We offer a broad range of standard and customer-specific products, as well as manufacturing, design and foundry services, which address numerous end-user applications in a variety of communications markets. We provide a balanced product offering ranging from foundry services to die level products,

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packaged components, and integrated modules. Our primary application areas are wireless phones, infrastructure networks, optical networks and defense. Our products are designed on various wafer substrates using a variety of technologies. We delivered products and services to over 430 customers during 2004. In addition, we had 42 customers that each contributed $1.0 million or more to our revenues in 2004.

Focusing on RF Power, Filtering and Switching Design Excellence.

We have made substantial investments in our RF power, filtering and switching design capabilities. Our design teams have specialized expertise to address the needs of each of our target markets. The foundation of our design resources is an extensive library of cells and associated software tools and databases necessary to develop new products rapidly and cost-effectively. We believe that our RF power filtering and switching design capabilities provide us with a competitive advantage in designing and developing integrated circuit modules and SAW-based products for standard or customer-specific products in our target markets.

Targeting High-Growth Markets with High Performance Solutions.

We plan to continue to develop and produce high performance RF, optical, analog and mixed-signal electronic components and modules. In 2001, we added SAW filters to our portfolio of high performance solutions by merging with Sawtek, which enabled us to offer a complete array of RF products for wireless phones. Our new products are focused on modules for both GSM/GPRS/EDGE (global system for mobile communications/general packet radio service/enhanced data rates for global evolution), CDMA (code division multiple access) and WDCMA (wide band code division multiple access) wireless phones, WLANs, new SAW filter applications and new applications for broadband and microwave equipment. In January 2005, we completed the acquisition of TFR, which brings BAW filtering expertise to TriQuint.

Create the smallest, highest performance and lowest cost components and modules for the front-end of various communication systems.

We have introduced a series of new products focused on the RF front-end of wireless applications. One of these new products is the world’s smallest GSM transition module for wireless phones in production which eliminates all surface mounted devices to lower cost and improve performance for our customers. Another new product is a switch for GSM/EDGE wireless phones that frees up space on circuit boards and reduces costs to our customers.

Capitalizing on Partnerships with Industry Leaders in our Target Markets.

We plan to continue to establish and maintain close working relationships with industry leaders in our target markets. We also intend to establish strategic relationships with companies that provide access to new technologies, products and markets. These relationships are critical to providing us with insights into future customer requirements, which facilitates the timely development of new products and services to meet the changing needs of our target markets.

Markets and Applications

We focus on four end markets in the electronic communications system industry: wireless phones, infrastructure networks, optical networks and defense applications.

Wireless Phones.

This business accounted for approximately 40% of our total revenues in 2004, 41% of revenues in 2003 and 45% of revenues in 2002. The demand for wireless phones has evolved over the past several years as a result of increased demand for portable voice and data communication capabilities. Implementation of

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new standards such as CDMA, 1xRTT (single carrier radio transmission technology), GSM, and GPRS are taking advantage of all allocated frequency bands around the world and supporting the growing demand for wireless data communications. In addition to portability, there has also been increasing demand for wireless phones to provide signal quality similar to wired communication systems, be smaller and lighter, accommodate longer talk time and standby time and contain complex functionality such as digital cameras, color displays, GPS, Bluetooth and internet access. In addition, this increase in wireless phone communication traffic has resulted in congestion of the assigned frequency bands, creating capacity issues for network operators. As a consequence, wireless communications standards are evolving to more efficiently utilize the available spectrum and demand has increased for handsets that work across multiple standards and frequency bands. Phones of this complexity provide new technical challenges that our products are well suited to address. The wireless phone market grew to industry estimates of over 680 million unit sales in 2004 and industry projections are for approximately 730 million units in 2005 according to Strategy Analytics. The mobile phone market has experienced growth in each of the past 15 years, except for 2001 due to a slowdown in the overall economy. In 2004, demand for these products strengthened particularly in the first nine months of the year due to growth in both Asia and India as well as the increase in demand for new phones with new features. We expect to see continued strengthening during 2005.

Our use of various wafer substrates and a variety of technologies provides us with the ability to satisfy these market demands. In many wireless phone applications, a specific substrate material and device design can provide key performance advantages over silicon, such as higher frequency operation, improved signal reception and transmission, better signal processing in congested bands and greater power efficiency for longer battery life. Access to varied technologies enables us to combine them in applications to optimize both product performance and cost.

We believe that we provide not only the broadest product offering for the RF front-end portion of wireless phones, but also the capability to integrate many of the functions into module form. We offer a full range of duplexers, RF and IF SAW filters and pHEMT switches that can be sold independentlyor integrated into modules along with our various receiver and power amplifier products. During 2004, we introduced many new products for this market, including a family of GSM power amplifier modules, our first GSM transmit module and quad band filter bank, as well as duplexers and power amplifier modules (“PAMs”) for CDMA phones.

We experience seasonal fluctuations in our business, primarily in the wireless phone market. Our revenues are historically, but not always, the strongest in the fourth quarter of each year in response to the holiday selling season. The first quarter of each year is historically, but not always, the weakest quarter for revenues, due to reduced consumer demand subsequent to the holiday selling season.

Infrastructure Networks.

This business accounted for approximately 33% of our total revenues in 2004, as compared to 29% of our total revenues in 2003 and 31% in 2002. Infrastructure networks include a variety of applications and products such as base stations, point-to-point radio, WLANs, satellite communication, cable and other products. The largest portion of the infrastructure end market for us is the base station market. Base stations are necessary to operate wireless phone networks. The demand for base station equipment is related to network build-out plans of network operators and is highly dependent upon the capital equipment budgets of those operators. In 2004, demand in the base station market was up substantially due to increased capital spending by network operators, including EDGE rollouts in the U.S., WCDMA rollouts in Europe and initial network build outs in Asia and India.

We believe we are the leading supplier of SAW filters for both GSM/GPRS/EDGE, CDMA and WCDMA base stations. We believe that our long relationships with the major base station equipment

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providers and our design and manufacturing capabilities put us in a unique position to continue to support this market with innovative SAW solutions. In addition, we are utilizing our GaAs expertise to expand our product portfolio for this market.

Looking forward, we believe there are three major drivers to the base station equipment market. The first is the continued deployment of base stations in China and other emerging markets such as India. The second is the build-out of GSM/EDGE networks for the U.S. and Latin America to upgrade and expand existing networks, however this projected growth could offset, in part, by the consolidation of network operators which could reduce the demand of infrastructure build out in the future. The third is the build-out of WCDMA systems.

We participate in the satellite communications market in both orbiting payload and ground station uplinks for satellite communication systems. Demand in this market was largely flat in 2004. We believe that the VSAT (very small aperture terminal) ground station market will grow as home based satellite systems, similar to satellite television, evolve for the internet. Other broadband products include products for cable and wireless high-speed internet services and wireless distribution of phone, video and interactive cable television services. The fastest growing products in this end market are products for WLAN applications. Our sales of products for WLANs nearly doubled in 2004 and we continued to be a supplier of foundry services for GaAs-based power amplifiers for this application.

Less than 2% of our total revenues stem from sales of our products through our stocking distributor. Substantially all of these distributor sales are grouped into the infrastructure networks end market.

Defense.

Our defense business accounted for approximately 13% of our total revenues in 2004, as compared to approximately 16% in 2003 and 19% in 2002. Our largest customers in this market are defense subcontractors to the U.S. government. These subcontractors use our products in phased-array radar to identify, track and target aircraft and threats of unknown origin. The capability to track multiple targets simultaneously is one of the key enhancements found on the new generation of fighters such as the F-22 Raptor and Joint Strike Fighter (“JSF”). We are teamed with the prime contractors on both of these programs. Our microwave power amplifiers (“PAs”) will provide the capability to transmit the microwave power that is at the heart of the radar’s operation. These radars are comprised of large arrays of elements, each with its own PA. This is a very stable business and our products are used in long lead-time, large-scale programs. We do not expect our revenues to increase materially as a result of any near-term conflicts with foreign nations. The current conflict in Iraq is consuming a significant portion of the military budget that may have otherwise been available for advanced aircraft upgrades and deployments and there is some risk that programs such as the F-22 Raptor and JSF could be delayed.

Optical Networks.

This business accounted for approximately 14% of our total revenues in 2004 and 2003 and 5% in 2002. The optical networking market grew significantly in the late 1990’s with increased demand for the transmission and manipulation of large amounts of information at high speeds and with high integrity. In 2001, as a result of overbuilt capacity, the optical networking market fell sharply. Fiber optic network demand continues to occur for both the telecommunications and data communications markets, with the majority of bandwidth demand coming from data communications markets. The overall expansion has been driven by increasing internet usage, e-commerce, email, business networking, video conferencing and voice traffic, as well as the ongoing upgrade of existing systems to fiber optics.

Fiber optic cables can transmit data at rates far greater than copper lines. A single fiber can cost-effectively replace hundreds or thousands of copper lines. Optical networks operate in accordance with high frequency standards such as SONET, SDH, Gigabit Ethernet (“GbE”), and FibreChannel (“FC”).

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For example, high performance SONET telecommunications systems can operate at frequencies of 10 Gb/s or higher per wavelength. Dense Wave Division Multiplexing (“DWDM”) can then be used to combine 80 or more of these 10 Gb/s signals to be carried down a single fiber, for a total of 800 Gb/s capacity. During the previously high levels of this market, most capital spending went to long haul/long distance networks. To increase the capacity of these networks, technologies used in long haul systems will migrate to metropolitan network equipment. An example of this is the trend to using DWDM technology in MANs.

To fully utilize the benefits of fiber optic cable, the electronic processors and modules in these networks must be able to operate at speeds from 155 Mb/s to 40 Gb/s cost-effectively and efficiently and still meet established signal quality and data integrity standards. Our optical networking products specifically target the need for these high performance, integrated devices and support all major optical network standards such as SONET, SDH, GbE and FC. We offer a variety of products that include multiplexers and demultiplexers, laser/modulator drivers, photo detectors, transimpedance amplifiers, high performance lasers, electroabsorption modulated lasers (“EMLs”), receivers and transceivers. Our overall revenue in this end market was relatively flat in 2004 as compared to 2003.

Products

We offer a broad array of RF, analog and mixed-signal integrated circuits, lasers, detectors, optical transceivers and SAW products to address the needs of our target markets. We utilize high-frequency substrate materials and high performance technologies such as pHEMT, HBT, HFET, MESFET and SAW to design and manufacture products which overcome the performance barriers of silicon devices. Our products offer other key advantages such as steeper selectivity, lower distortion, higher power and power added efficiency, reduced size and weight and more precise frequency control. We believe efficient manufacturing facilities and processes result in products that provide our customers a favorable price/performance trade-off. Our broad range of standard and customer-specific integrated circuits, optical components and modules, and SAW duplexers and filters, combined with our manufacturing and design services, allow customers to select the specific product solution which best fulfills their technical and time-to-market requirements.

Standard Products

We offer families of standard products for the following target market application areas. These include:

Wireless Phones.

Our products include receivers, power amplifier modules, filter banks, switches, low-loss transversal filters, reflective low-loss filters, duplexers, triplexers, resonator filters and front-end modules. These products address the needs of system designers for low noise, power efficient amplification, low loss switching and efficient and accurate frequency conversion.

Infrastructure Networks.

Our products include bi-directional transversal filters, low-loss transversal filters, LNA’s, mixers, reflective low-loss filters and oscillators. We believe that we are the leading supplier of SAW filters for base stations. Our products support GSM, EDGE, CDMA and 3G networks. We also provide products that serve as the high data rate backhaul paths for base stations. These include integrated circuits for millimeter wave (“mmW”) radios and optical components for optical communication links. Our products also include high power amplifiers, low noise amplifiers, switches, attenuators and discrete integrated

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circuits. We support numerous additional applications in this market including WLAN, radar systems, satellite, point-to-point radios, point to multipoint and cable.

Defense.

Our products for this market include PAs for phased-array antenna and similar applications for airborne systems allowing them the capability to track multiple targets simultaneously. These programs normally have long lead times.

Optical Networks.

Our products include laser/modulator drivers, photo detectors and transimpedance amplifiers along with lasers, EMLs, detectors and transceivers. For some of our products, we are compliant to industry Multi-Source Agreements (“MSA”). These optical products also support the high performance system standards such as SONET, SDH, DWDM, GbE and FC.

Customer-Specific Products and Services

We offer our customers a variety of product options and services for the development of customer-specific products. Our services include design, wafer fabrication, test engineering, package engineering, assembly and test. We generally receive revenues from customer-specific products and services at two stages: when the design is developed and engineered and when we manufacture and deliver the device. We focus the development of our customer-specific products on applications involving volume production requirements. As is typical in the semiconductor industry, customer-specific products are developed for specific applications. As a result, we expect to generate production revenues only from those customer-specific products that are subsequently produced in high volume. A substantial portion of our products are designed to address the needs of individual customers. Frequent product introductions by systems manufacturers make our future success dependent on our ability to select customer-specific development projects which will result in sufficient production volume to enable us to achieve manufacturing efficiencies. Because customer-specific products are developed for unique applications, we expect that some of our current and future customer-specific products may never be produced in high volume. In addition, in the event of significant delays in completing designs or our failure to obtain development contracts from customers whose systems achieve and sustain commercial market success, our results of operations could be materially adversely affected.

Customer-specific designs are generally implemented by one of two methods. Under the first method, the customer supplies us with detailed performance specifications and we design, develop and manufacture the integrated circuits. These designs are generated using either our in-house design engineering group or independent third-party design organizations which have been qualified by us. Under the second method, we supply circuit design and process rules to our customer and the customer’s internal engineering staff designs and develops the product, which we then manufacture.

Design and Process Technology

In order to rapidly develop and cost-effectively introduce new products which address the needs of our customers, we have made substantial investments in building our capabilities in RF, analog and mixed-signal circuit design, and optical component process technologies. We have developed an extensive library of digital and analog cells and associated software tools and databases which we use to facilitate the design of our integrated circuits and optical components. We have developed techniques for material design as well. The advancement of both our electrical and optical components is highly dependent on our ability to quickly and accurately produce the proper material structure to meet the targeted end device performance. We have also developed and documented process and design rules which allow customers to design

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proprietary integrated circuits themselves. Mixed-signal and optical products, which generally involve varied and complex functions operating at high frequencies, generally present the most complex design and testing challenges. We believe that our extensive cell library, device simulation models, optimized mixed-signal process technology and design and test engineering expertise in high performance mixed-signal integrated circuits and optical components address these challenges and provide a competitive advantage.

Our manufacturing strategy is to use high volume process technologies when possible to enable us to provide cost-effective, stable, uniform and repeatable solutions for our customers. We provide advanced wafer manufacturing processes and we have pursued core process technologies that are cost-effective for RF, analog and mixed-signal electronic applications as well as for lasers and detectors in the optical component market. As a result, we are able to enjoy the cost advantages associated with standard high volume semiconductor manufacturing practices. The core process technology in our Oregon wafer fabrication operation employs both implanted and epitaxial structures, 4 micron metal pitch, typically 0.5 or greater micron geometries, involves 10 to 18 mask steps, has a cutoff frequency of up to 21 GHz and is scalable. This scalability facilitates further cost reduction and performance improvement. The process technology employed in our Texas wafer fabrication operation includes eight advanced performance production processes: 0.5 micron gate length MESFET for amplifier applications; two 0.15, a 0.25 and a 0.5 micron gate length pHEMT for high power and high frequency applications; a 0.15 micron gate length mHEMT process for ultra-high frequency and low noise applications; HBT for high voltage, high linearity and high power density; 0.5 micron gate length HFET for high voltage, high power amplifiers and switches and Vertical P-I-N diode (VPIN) for signal control devices such as switches, limiters and attenuators. In our Florida wafer fabrication operation, we use manufacturing techniques to produce our SAW devices that are very similar to those for integrated circuits. Our Pennsylvania optical components wafer fabrication operation uses multi-wafer low pressure Metal Organic Chemical Vapor Deposition (“MOCVD”) growth technologies and low K dielectrics with planar selective area growth of material for high performance Fabry Perot (“FP”), Distributed Feedback (“DFB”), and EML lasers, along with PIN and Avalanche Photo Diode (“APD”) detectors.

Customers

We have a broad customer base of leading systems manufacturers. In 2004, we shipped products or provided manufacturing services to over 430 end-user customers. Our top customers include Motorola, which accounted for 10%, 14% and 16% of our revenues in 2004, 2003 and 2002, respectively. Additionally in 2002, Nokia accounted for approximately 10% of our revenue. No other single customer accounted for greater than 10% of our revenues during these periods, an indication of our strong and diverse customer base.

Our sales to customers outside the U.S. accounted for approximately 56%, 61% and 56% of revenues in 2004, 2003 and 2002, respectively. Sales to customers in Korea represent the largest portion of our international sales in 2004. Customers in Korea accounted for approximately 10%, 16% and 13% of our revenues in 2004, 2003 and 2002, respectively. No other country represented 10% or more of our revenues in any of those periods.

Some of our sales to overseas customers are made under export licenses that must be obtained from the U.S. Department of Commerce. Protectionist trade legislation in either the U.S. or other countries, such as a change in the current tariff structures, export compliance laws, trade restrictions resulting from war or terrorism, or other trade policies could adversely affect our ability to sell or to manufacture in international markets. Furthermore, revenues from outside the U.S. are subject to inherent risks, including the general economic and political conditions in each country.

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Manufacturing

We currently have six manufacturing centers located in Oregon, Texas, Florida, Pennsylvania, Mexico, and Costa Rica. Our executive, administrative, test and technical offices are located in a 254,000 square foot facility in Hillsboro, Oregon on approximately 52 acres. Included in this facility is a wafer fabrication facility consisting of 76,000 square feet, of which 21,000 is operated as a Class 10 performance clean room.

Our Texas facility is located in Richardson. It comprises approximately 540,000 square feet, of which 48,000 is a Class 1 performance clean room. We currently operate that clean room as a Class 10 performance clean room. In July 2002, we successfully moved our manufacturing operations from our former Dallas facility, which we leased from Raytheon under a sublease, solely to the Richardson facility. We no longer lease any portion of our former Dallas facility.

Our Florida facility is a wafer fabrication and assembly and test facility located in Apopka. The Apopka wafer fabrication facility includes 16,000 square feet of clean room, of which 2,300 square feet is Class 10 performance clean room.

Our San Jose, Costa Rica facility is an assembly and test facility for the production of SAW filters. It is a 61,300 square foot facility with over 19,000 square feet of clean room space, located in the Metro Free Trade Zone. We use our Costa Rica facility to assemble, package, test and ship final product to customers. We began operations at this facility in 1996.

In connection with our acquisition of the Agere optoelectronics business, we acquired facilities in Breinigsville, Pennsylvania and Matamoros, Mexico. The Breinigsville, Pennsylvania facility contains approximately 849,000 square feet of manufacturing and office space located on 139 acres. Pennsylvania is the headquarters and wafer fabrication operation for our optoelectronics operations. We intended to reduce capacity at this site shortly after acquiring it and subsequently listed the Pennsylvania facility for sale in the second quarter of 2003 (see Notes 4 and 10 to our Consolidated Financial Statements for further discussion). During 2003 and 2004 we had been in negotiations to sell the Pennsylvania facility to an agency of the Commonwealth of Pennsylvania. On October 18, 2004, we were informed that this agency was not going to purchase the facility. At December 31, 2004, we classified the facility as held for sale, and in the first quarter of 2005 entered into an agreement to sell the facility to a real estate investment firm and lease back approximately 80,000 square feet of the facility for continuing operations (see Note 21 to our Consolidated Financial Statements). The Matamoros, Mexico facility is approximately 81,750 square feet and is responsible for the final assembly and test of both optical component and module products. The operating entity in Matamoros, Mexico is a Maquiladora entity, which qualifies it for duty-free trade. We are continuing the process of scaling and integrating designated manufacturing assets from the Pennsylvania facility into Mexico. We should complete the move in the first half of 2005 to further improve our manufacturing efficiencies and recognize additional cost savings.

The fabrication of integrated circuits and SAW filter products is highly complex and sensitive to particles and other contaminants and requires production in a highly controlled, clean environment. Minute impurities, difficulties in the fabrication process or defects in the masks used to print circuits on the wafers can cause a substantial percentage of the wafers to be rejected or numerous die on each wafer to be nonfunctional. As compared to silicon technology, the less mature stage of the technology of GaAs substrate material leads to somewhat greater difficulty in circuit design and in controlling parametric variations, thereby yielding fewer good die per wafer. The more brittle nature of GaAs wafers can also lead to higher processing losses than experienced with silicon wafers. To maximize wafer yield and quality, we test our products in various stages in the fabrication process, maintain continuous reliability monitoring and conduct numerous quality control inspections throughout the entire production flow. A sustained failure to maintain acceptable yields would have a material adverse effect on our operating results.

We incur a high level of fixed costs to operate our own manufacturing facilities. These fixed costs consist primarily of facility occupancy costs, investment in manufacturing equipment, repair, maintenance

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and depreciation costs related to equipment and fixed labor costs related to manufacturing and process engineering. Our manufacturing yields vary significantly among our products, depending upon a given product’s complexity and our experience in manufacturing it. We have in the past and may in the future experience substantial delays in product shipments due to lower than expected production yields. In addition, during periods of low demand, high fixed wafer fabrication costs and/or assembly costs could have a material adverse effect on our operating results.

For integrated circuit products made by our Oregon facility, we assemble our products using outside assembly contractors. Our Texas facility manufactures and sells packaged products, which are also assembled by outside contractors. Our Pennsylvania operation has also used outside contract assembly facilities as well as the facility in Matamoros, Mexico. We are in the process of consolidating these assembly needs as we evaluate ongoing product offerings. Outside assembly services are contracted to 19 vendors, nine of which are located in the U.S. In addition, we have moved some of our assembly and test operations to a vendor in Malaysia. We perform some of our own tape and reel operations internally; however, we have four vendors, three of which are located in the U.S., qualified for this service should we need to use them. A reduction or interruption in the performance of assembly services by subcontractors or a significant increase in the price charged for such services could adversely affect our operating results.

Production Outside of the U.S.

Because of the significant fixed costs associated with the manufacture of our products and components and our industry’s history of declining prices, we must continue to produce and sell our integrated circuits, optical components and SAW components in significant volume, continue to lower manufacturing costs and carefully monitor inventory levels. We continually evaluate our integrated circuit and SAW components manufacturing processes as well as the desirability of transferring volume production of those products between facilities, including transfer overseas to countries where labor costs and other manufacturing costs are significantly lower than in the U.S., principally Costa Rica and Matamoros, Mexico. The functional currency for both our Costa Rican and Mexican subsidiaries is the U.S. dollar since sales and most material cost and equipment are U.S. dollar denominated. The effects of currency fluctuations of the local currencies are not considered significant and are not hedged.

Frequently, transfer of production of a product to a different facility requires qualification of such new facility by certain of our customers. There can be no certainty that such changes and transfers will be implemented on a cost-effective basis without delays or disruption in our production and without adversely affecting our results of operations. Offshore operations are subject to certain inherent risks, including delays in transportation, changes in governmental policies, tariffs, import/export regulations and fluctuations in currency exchange rates in addition to geographic limitations on management controls and reporting. There can be no assurance that the inherent risks of offshore operations will not adversely affect our future operating results.

Raw Materials and Sources of Supply

We generally maintain alternative sources for our principal raw materials to reduce the risk of supply interruptions or price increases. We purchase these materials on a purchase order basis. The raw materials used are available from several suppliers for our integrated circuit, SAW filter and optical components/modules manufacturing operations. For our GaAs integrated circuit manufacturing operations, we currently have approximately 23 fully qualified wafer vendors, at least nine of which are located in the U.S., and five fully qualified mask set vendors, all of which are located in the U.S. We purchase high performance, multilayer ceramic packages from two vendors, both of which are located in the U.S. We currently purchase plastic packaging from approximately 15 suppliers, three of which are located in the U.S. We also utilize nonqualified vendors for these and other materials for use in nonproduction research and test activities.

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For our SAW filter manufacturing operations, we use several raw materials, including wafers made from quartz, LiNbO3 or LiTaO3 and ceramic or metal packages. Relatively few companies produce these piezoelectric wafers and metal and ceramic packages. Our most significant suppliers of ceramic surface mount packages are three companies based in Japan. For our SAW operations, we also utilize three qualified wafer vendors, one of which are located outside the U.S., and two qualified mask set vendors, both of which are domestic companies.

For our optical components products, we depend upon a large number of suppliers for raw materials and components that make up the bill of materials (“BOMs”) for its product offerings such as lasers, detectors and transceivers. The success of these products is critical to the overall success of our business. For this business, we utilize three qualified wafer vendors and three qualified ceramic package vendors, all of which are located outside of the U.S. For mask sets and plastic packages, we have three qualified vendors for each and all are located in the U.S.

Our reliance on a limited number of suppliers for certain raw materials and parts may impair our ability to produce our products on time and achieve acceptable yields. At times in the past, we have experienced difficulties in obtaining ceramic packages used in the production of certain SAW filters. The acquisition of relatively simple devices, such as capacitors, has been problematic at times because of the large demand swings that can occur in the cellular handset market for such components. This risk will spread across a larger percentage of our total business as a greater portion of our revenues results from our integrated product offerings. In an attempt to minimize this problem, we have qualified multiple sources of supply when possible, negotiated long-term agreements when possible and intend to maintain a safety stock of raw material inventories of these items.

Marketing, Sales and Distribution

We sell our products through independent manufacturers’ representatives, our distributor and our direct sales staff. As of December 31, 2004, we had 29 independent manufacturers’ representative firms and one distributor worldwide. Of the independent manufacturers’ representative firms, 17 are based in the U.S. and 12 are located in Europe, the Pacific Rim and South America. Our direct sales staff provides sales direction and support to the manufacturers’ representatives and our distributor, which is based in the U.S. We have domestic sales management offices in the metropolitan areas of Los Angeles, California; San Diego, California; San Jose, California; Boston, Massachusetts; Portland, Oregon; Chicago, Illinois; Breinigsville, Pennsylvania; and Raleigh, North Carolina. We have also established foreign sales and marketing offices in Finland, Germany, Japan, Korea, Sweden and Taiwan.

Backlog

As of December 31, 2004, our backlog was approximately $60.7 million compared to approximately $77.0 million as of December 31, 2003. We include in our backlog all purchase orders and contracts for products requested by the customer for delivery within approximately 12 months. We expect to ship nearly all of our backlog by December 31, 2005. The backlog is not necessarily indicative of future product sales, and a delay or cancellation of a small number of purchase orders may materially adversely affect us.

We do not have long-term agreements with any of our customers, except for certain defense-related contracts. Customers generally purchase our products pursuant to cancelable short-term purchase orders. Our customers have canceled these purchase orders or rescheduled delivery dates in the past, and we expect that these events may also occur in the future. If there is any work in process at the time of cancellation, the customer may be required to pay customary termination charges. If customers over-order to secure delivery dates and eventually cancel orders, the customer may be subject to price renegotiations as a result of lower quantity of units taken.

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Frequently, we can ship our standard products from inventory shortly after receipt of an order, referred to as “turns business”, and these orders may not be reflected in backlog. Accordingly, backlog as of any particular date may not necessarily be representative of actual sales for any future period.

Research and Development

Our research and development efforts are directed towards developing integrated circuits, SAW devices and optoelectronics products. We are also focused on improvement of our existing products’ performance, development of new processes, reductions of manufacturing process costs and improvements in device packaging.

In 2004, we introduced many new key products, such as our family of GSM PAMs, our filter bank and family of GSM SAW filters, a number of discrete filters for base stations and handsets including a family for GPS, a GSM/GPRS transmit module CDMA PAMs and a CDMA switch, a family of WLAN products, and other products.

Our research, development and engineering expenses in 2004, 2003 and 2002 were approximately $60.8 million, $65.0 million and $58.5 million, respectively. As of December 31, 2004, approximately 642 of our employees were engaged in activities related to process and product research and development. We expect that we will continue to spend substantial funds on research and development.

We are continually designing new and improved products to maintain our competitive position. While we have patented a number of aspects of our process technology, the market for our products is characterized by rapid changes in technologies. Because of continual improvements in these technologies, we believe that our future success will depend on our ability to continue to improve our products and processes and develop new technologies in order to remain competitive. Additionally, our future success will depend on our ability to develop and introduce new products for our target markets in a timely manner. The success of new product introductions is dependent upon several factors, including timely completion and introduction of new product designs, achievement of acceptable fabrication yields and market acceptance. The development of new products by us and their design into customers’ systems can take as long as three years, depending upon the complexity of the device and the application. Accordingly, new product development requires a long-term forecast of market trends and customer needs. Furthermore, the successful introduction of our ongoing products may be adversely affected by competing products or technologies. In addition, new product introductions frequently depend on our development and implementation of new process technologies. If we are unable to design, develop, manufacture and market new products successfully, our future operating results will be adversely affected. We cannot assure you that our product and process development efforts will be successful or that our new products will be available on a timely basis or achieve market acceptance.

As is characteristic of the integrated circuit and SAW filter component industries, the average selling prices of our products have historically decreased over the products’ life cycles and we expect this pattern to continue. We also expect the same pattern to continue with our optoelectronics products. To offset these decreasing selling prices, we rely primarily on obtaining yield improvements and corresponding cost reductions in the manufacture of existing products and on introducing new products which incorporate advanced features and can be sold at higher average selling prices. We also work closely with our suppliers to obtain continual improvement on pricing of key raw materials and components. As more of our product offerings migrate toward integrated assemblies requiring the acquisition of outside manufactured components, we will have to effectively work with our suppliers to reduce the total cost of the respective BOMs. To the extent that our cost reduction efforts or new product introductions do not occur in a timely manner or our or our customers’ products do not achieve market acceptance, our operating results could be adversely affected.

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Competition

The markets for our products are characterized by price competition, rapid technological change, short product life cycles, and heightened global competition. Many of our competitors have significantly greater financial, technical, manufacturing and marketing resources. Due to the increasing requirements for high-speed, high-frequency components, we expect intensified competition from existing integrated circuit and SAW device suppliers, as well as from the entry of new competitors to our target markets and from the internal operations of some companies producing products similar to ours for their internal requirements. Several key customers in our optoelectronics operations have either captive internal suppliers or long-term contractual relationships with suppliers based on factors other than cost and quality.

For products in depressed or flat markets, such as for optical components, competition can be even more intense as companies attempt to maximize their revenues to cover as much of their fixed cost base as possible, even if it means selling products at a loss. There is no guarantee that pricing will stay at a level where we can sell our products on a profitable basis.

For our integrated circuit devices, we compete primarily with manufacturers of GaAs integrated circuits. Our GaAs-based competitors include companies such as Anadigics Inc., Eudyna, Inc., Freescale Semiconductor, Inc., Raytheon, RF Micro Devices, Skyworks Solutions, Inc., Renesas Technology Corp. and others. For our SAW devices our competitors include companies such as ICS, Phonon, RF Monolithics, Vectron International, EPCOS AG, Temex, TST, Fujitsu Microelectronics, Inc., Murata, Panasonic and others. Our major competitors across the optical markets include JDS Uniphase, Bookham Technologies, Avanex, Eudyna, OpNext, Mitsubishi, Sumitomo and others. Competition could also come from companies ahead of us in developing alternative technologies such as silicon germanium (“SiGe”) and InP integrated circuits and digital filtering and direct conversion devices.

Our prospective customers are typically systems designers and manufacturers that are considering the use of GaAs integrated circuits, optoelectronics devices, or SAW filters, as the case may be, for their high performance systems. Competition is primarily based on performance elements such as speed, complexity and power dissipation, as well as price, product quality and ability to deliver products in a timely fashion. We believe that we currently compete favorably with respect to these factors. Due to the proprietary nature of our products, competition occurs almost exclusively at the system design stage. As a result, a design win by our competitors or by us often limits further competition with respect to manufacturing a given design. While our GaAs integrated circuit products have inherent speed advantages over silicon devices, the speed of products based upon silicon processes is continually improving and may displace some of our GaAs products in the future. Our products are often sole sourced to our customers and our operating results could be adversely affected if our customers were to develop other sources for our products.

The production of GaAs integrated circuits has been and continues to be more costly than the production of silicon devices. This cost differential relates primarily to higher costs of the raw wafer material and higher unit costs associated with lower production volumes. Although we have reduced production costs through decreasing raw wafer costs, increasing fabrication yields and achieving higher volumes, there can be no assurance that we will be able to continue to decrease production costs. Due to the current weakness in some of our target markets, we have underutilized capacity in some of our plants. However, we believe that we are well positioned to meet the demands of these markets when they strengthen. In addition, we believe our costs of producing GaAs integrated circuits will continue to exceed the costs associated with the production of silicon devices. As a result, we must offer devices which provide superior performance to that of silicon such that the perceived price/performance of our products is competitive with silicon devices. There can be no assurance that we can continue to identify markets which require performance superior to that offered by silicon solutions or that we will continue to offer products which provide sufficiently superior performance to offset the cost differentials.

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Intellectual Property Matters

We rely on a combination of patents, trademarks, trade secret laws, confidentiality procedures and licensing arrangements to protect our intellectual property rights. We currently have patents granted and pending in the U.S. and elsewhere and intend to seek further international and U.S. patents on our technology. In addition to our own inventions, we have acquired a substantial portfolio of U.S. and foreign patent applications in the optoelectronics area of technology. Many of these patent applications have issued as patents and will have lives that will extend 20 years from their respective filing dates, while others are still pending. We cannot be certain that patents will be issued from any of our pending applications or that patents will be issued in all countries where our products can be sold or that any claims allowed from pending applications or will be of sufficient scope or strength to provide meaningful protection or any commercial advantage. Our competitors may also be able to design around our patents. The laws of some countries in which our products are or may be developed, manufactured or sold, may not protect our products or intellectual property rights to the same extent as do the laws of the U.S., increasing the possibility of piracy of our technology and products. Although we intend to vigorously defend our intellectual property rights, we may not be able to prevent misappropriation of our technology. Our competitors may also independently develop technologies that are substantially equivalent or superior to our technology.

Our involvement in any patent dispute or other intellectual property dispute or action to protect trade secrets and know-how could have a material adverse effect on our business. Adverse determinations in any litigation could subject us to significant liabilities to third parties, require us to seek licenses from third parties and prevent us from manufacturing and selling our products. Any of these situations could have a material adverse effect on our business.

We have approximately 130 patents that expire from 2005 to 2023, with most expiring between 2015 and 2023. We currently do not have any significant revenue related to a patent that will soon expire.

Environmental Matters

Federal, state and local regulations impose various environmental controls on the storage, handling, discharge and disposal of chemicals and gases used in our manufacturing processes. We believe that our activities conform to present environmental regulations. Increasing public attention has, however, been focused on the environmental impact of semiconductor operations. While we have not experienced any materially adverse effects on our operations from environmental regulations, there can be no assurance that changes in such regulations will not impose the need for additional capital equipment or other requirements. Any failure by us to adequately restrict the discharge of hazardous substances could subject us to future liabilities or could cause our manufacturing operations to be suspended.

Employees

As of December 31, 2004, we employed a total of approximately 2,072 persons, including 1,120 in manufacturing and support related positions, 46 in quality and reliability, 642 in process, product and development engineering, 113 in marketing and sales and 151 in general and administration functions. Included in these figures are approximately 119 employees located at our optoelectronics facilities that have been given a 60 day notice of termination under the Federal WARN Act due to our announced restructuring of our optoelectronics product strategy (see Note 4 to our Consolidated Financial Statements). These employees will be terminated in the first and second quarters of 2005. As of December 31, 2004, none of our domestic employees were represented by a collective bargaining agreement. At our German operation, approximately 28 of our employees are represented by a collective bargaining agreement and at our Mexico operations, approximately 78 of our employees work under a union contract. We consider our relations with employees to be good and we have not experienced a work stoppage due to labor issues.

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Executive Officers

Biographical information concerning our executive officers as of March 15, 2005 is set forth below:

Name	Age	Current Position(s) with Company	Position Held  Since
Steven J. Sharp	63	Chairman of the Board of Directors	1992
Ralph G. Quinsey	49	President and Chief Executive Officer	2002
Raymond A. Link	50	Vice President, Finance and Administration, Chief Financial Officer and Secretary	2001
Brian P. Balut	39	Vice President, Sawtek Inc.	2004
Thomas V. Cordner	60	Vice President, TriQuint Texas	1998
Todd A. Debonis	40	Vice President, Sales	2004
Bruce R. Fournier	48	Vice President, TriQuint Oregon	2002
J. David Pye	54	Vice President, TriQuint Oregon	2002
Glen A. Riley	42	Vice President, TriQuint Optoelectronics	2003
J. Michael Sanna	52	Vice President, TriQuint Texas	2002
Azhar Waseem	51	Vice President, Sawtek Inc.	2002
Stephanie J. Welty	49	Vice President, Finance, Controller and Assistant Secretary	1999

Steven J. Sharp joined TriQuint in September 1991 as Director, President and Chief Executive Officer. In May 1992 he became Chairman of TriQuint’s Board of Directors. In July 2002, Mr. Sharp stepped down as President and Chief Executive Officer and remains as Chairman of the Board. Previously, Mr. Sharp was the founder and served as Chief Executive Officer of Power Integrations, Inc., a semiconductor manufacturing company. Prior to that time, Mr. Sharp was employed for 14 years by Signetics Corporation (since acquired by Philips Electronics N.V.), a semiconductor manufacturer and for nine years by Texas Instruments, Incorporated, a semiconductor manufacturer. Mr. Sharp also serves as a director of Power Integrations and Pixelworks, Inc. He received a B.S. degree in Mechanical Engineering from Southern Methodist University, a M.S. degree in Engineering Science from California Institute of Technology and a M.B.A. from Stanford University.

Ralph G. Quinsey joined TriQuint in July 2002 as President and Chief Executive Officer. From September 1999 to January 2002, Mr. Quinsey was with ON Semiconductor, a manufacturer of semiconductors for a wide array of applications, as Vice President and General Manager of the Analog Division. Prior to that, Mr. Quinsey was with Motorola, a manufacturer of semiconductors and communications equipment, from 1979 to September 1999, holding various positions including Vice President and General Manager of the RF/IF Circuits Division, which developed both silicon and gallium aresnide technologies for wireless phone applications. Mr. Quinsey received a B.S. degree in Electrical Engineering from Marquette University.

Raymond A. Link joined TriQuint in July 2001 as Vice President, Finance and Administration, Chief Financial Officer and Secretary as a result of TriQuint’s merger with Sawtek. Mr. Link joined Sawtek in September 1995 as Vice President, Finance and Chief Financial Officer and was promoted to Senior Vice President and Chief Financial Officer in October 1999. From 1987 to September 1995, Mr. Link was Vice President, Finance and Chief Financial Officer of Hubbard Construction Company, a heavy/highway construction company. From 1980 to 1987, he was with Harris Corporation, a manufacturer of electronic communication equipment, in various financial capacities. Mr. Link also serves as a director of Cascade Microtech, Inc., a manufacturer of wafer probing solutions. Mr. Link received a B.S. degree from the State University of New York at Buffalo and a M.B.A. from the Wharton School at the University of Pennsylvania. He is a Certified Public Accountant.

Brian P. Balut joined TriQuint in July 2001 as Vice President, Sales and Marketing, Sawtek Inc. as a result of TriQuint’s merger with Sawtek and was promoted to Vice President, Sales and Marketing of

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TriQuint from 2002 to May 2004. In May 2004, Mr. Balut was promoted to Vice President of Sawtek. Mr. Balut joined Sawtek in October 1994 as Sales Manager. He was promoted to Director of Sales and Marketing in November 1996 and to Vice President Sales and Marketing in September 1998 and assumed overall corporate responsibility for this function in July 2002. From 1987 to 1994, Mr. Balut held various positions in sales, marketing and engineering with REMEC, a manufacturer of electronic components. Mr. Balut received a B.S. degree in Electrical Engineering from the Massachusetts Institute of Technology and a M.B.A. from Rollins College.

Thomas V. Cordner joined TriQuint in January 1998 as Vice President and General Manager, Millimeter Wave Communications as a result of TriQuint’s acquisition of Raytheon’s MMIC operations and was promoted to Vice President, TriQuint Texas in May 2002. From July 1997 to January 1998, Mr. Cordner served as Operations Manager for Raytheon, heading its GaAs MMIC operations. Prior to that time, Mr. Cordner was an employee of Texas Instruments, a semiconductor and communications equipment manufacturer, for 32 years, most recently as the Operations Manager for its GaAs Operations Group from January 1991 to July 1997. Mr. Cordner received a B.S. degree in Mathematics from the University of Texas at Arlington.

Todd A. DeBonis joined TriQuint in April 2004 as Vice President, Sales. Prior to joining TriQuint, Mr. DeBonis held the position of Vice President, Worldwide Sales and Marketing at Centillium Communications. Mr. DeBonis also served in other sales and management positions at ISHONI Networks and Infineon Technologies. Mr. DeBonis has a B.S degree in electrical engineering from the University of Nevada.

Bruce R. Fournier joined TriQuint in June 1987 as Area Sales Manager. Since that time, he has held a variety of positions including National Sales Manager, Wireless Products from 1991 to 1994, Director of Worldwide Sales from early 1994 to September 1994 and Vice President, Worldwide Sales from September 1994 to June 1998. From June 1998 until May 2002, Mr. Fournier held the position of Vice President and General Manager, Foundry Services. He currently holds the position of Vice President, TriQuint Oregon. Prior to joining TriQuint, Mr. Fournier held engineering, sales and marketing management positions with Fairchild Semiconductor, Weitek Corporation and Honeywell, Inc. Mr. Fournier received an A.S. degree in Electrical Engineering and a B.S. degree in Business Administration from the University of Maine and a M.B.A. from the University of Southern Maine.

J. David Pye joined TriQuint in May 1996 as Vice President, Manufacturing and in May 2002 was named Vice President, TriQuint Oregon. From 1983 until 1996, Mr. Pye was Vice President and General Manager at VLSI Technology, Inc., a semiconductor company, where he served in various capacities. From 1973 to 1983, Mr. Pye served in various roles in process engineering and process development at Texas Instruments. Mr. Pye received a B.A. degree from Napier College of Science and Technology, Edinburgh, Scotland.

Glen A. Riley joined TriQuint in January 2003 as Vice President, TriQuint Optoelectronics. From December 2001 to August 2002, he was President and CEO of Opticalis, a venture-funded start-up company developing optical communication sub-systems. Prior to that, he spent six years with Agere Systems, a semiconductor and optical component manufacturer, as Vice President of Optical Core Networks, Vice President of Sales for the Asia-Pacific region, and as General Manager of the Storage Products group. Before Agere, he worked in various management, marketing and sales roles at Philips Semiconductors, AT&T Microelectronics and Texas Instruments. Mr. Riley holds a B.S. degree in Electrical Engineering from the University of Maine and has completed the General Manager Program at Harvard Business School.

J. Michael Sanna joined TriQuint in January 1998 as Director of Business Development for the Texas operation as a result of TriQuint’s acquisition of Raytheon’s MMIC operations. In May 2002 he was promoted to Vice President, TriQuint Texas. From July 1997 to January 1998, Mr. Sanna served as the

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Wafer Fabrication Operations Manager for Raytheon, heading its GaAs MMIC manufacturing operations. Prior to that time, Mr. Sanna was an employee of Texas Instruments for 17 years, most recently as the Wafer Fabrication Operations manager for its GaAs Operations Group from January 1994 to July 1997. Mr. Sanna received B.S. and M.S. degrees in Electrical Engineering from the University of Wisconsin and Southern Methodist University, respectively, and a Masters Degree in Administrative Studies from Southeastern Oklahoma State University.

Azhar Waseem joined TriQuint in July 2001 as Vice President, Sawtek Inc. as a result of TriQuint’s merger with Sawtek. Mr. Waseem joined Sawtek in March 1995 as Director of Wafer Fabrication and was promoted to Vice President of Manufacturing in April 1998 and to Vice President of Operations in October 1999. In May 2002 he was promoted to Vice President, Sawtek, Inc. From 1989 to 1994, Mr. Waseem held various operations and engineering positions with Siliconix, Inc., a microelectronics manufacturer based in Santa Clara, California. From 1986 to 1989, Mr. Waseem held various engineering positions with General Electric. Mr. Waseem received B.S. and M.S. degrees in Electrical Engineering and a M.B.A., all from the University of Minnesota.

Stephanie J. Welty joined TriQuint in 1994. Since September 1999, Ms. Welty has been TriQuint’s Vice President, Finance and in 2004 she was given the additional responsibility of Controller. Ms. Welty served as Accounting Manager from 1994 to 1996 and served as Director of Information Systems from 1996 to September 1999. Prior to joining TriQuint, Ms. Welty held accounting and controller positions at other high technology firms. Ms. Welty holds a B.S. degree from the University of Washington and she is a Certified Public Accountant.

Item 2.Properties

Location	Purpose	Approximate Building Size in Square Feet		Approximate Land in Acres		Leased or Owned
Breinigsville, Pennsylvania(1)	Wafer fabrication, engineering, administration, test, technical		849,000		139		Owned
Hillsboro, Oregon	Headquarters, administration, test, technical, wafer fabrication, engineering		254,000		52		Owned
Richardson, Texas	Wafer fabrication, engineering, administration, test, technical		540,000		38		Owned
Apopka, Florida	Wafer fabrication, engineering, administration, test, technical		92,100		16		Owned
San Jose, Costa Rica	Test and assembly		61,300		2		Owned
Matamoros, Mexico	Test and assembly		81,750		—		Leased
Munich, Germany	Engineering, marketing		21,054		—		Leased
Taipei, Taiwan	Engineering, marketing		11,000		—		Leased
Lowell, Massachusetts	Engineering		9,141		—		Leased
Seoul, Korea	Engineering, marketing		5,307		—		Leased
Nashua, New Hampshire	Engineering		5,035		—		Leased
Various field offices each less than 1,000 sq ft

⁽¹⁾On March 7, 2005, we entered into an agreement to sell the facility and lease back approximately 80,000 square feet of the facility for continuing operations. The transaction is expected to be completed within 90 days of signing the agreement and is subject to customary closing procedures. See Note 21 to our Consolidated Financial Statements for further discussion.

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Except for the facility in Breinigsville, Pennsylvania, we believe these properties are suitable for our current operations. We are running below capacity in our Texas and Oregon facilities and are exploring ways to increase capacity, reduce costs and utilize excess space. At December 31, 2004, we had listed the Breinigsville, Pennsylvania property for sale and recorded an impairment on the carrying value in the fourth quarter of 2004 to reduce its book value to estimated market value (see Note 15 to our Consolidated Financial Statements). On March 7, 2005, we entered into an agreement to sell the facility to a real estate investment firm and lease back approximately 80,000 square feet of the facility for continuing operations. The sale is subject to customary closing procedures and is expected to be completed with 90 days of signing the agreement (see Note 21 to our Consolidated Financial Statements).

Item 3.Legal Proceedings

In February 2003, several nearly identical putative civil class action lawsuits were filed in the U.S. District Court for the Middle District of Florida against Sawtek, Inc., our wholly owned subsidiary since July 2001. The lawsuits also named as defendants current and former officers of Sawtek and our company. The cases were consolidated into one action, and an amended complaint was filed in this action on July 21, 2003. The amended class action complaint is purportedly filed on behalf of purchasers of Sawtek’s stock between January 2000 and May 24, 2001, and alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act, as well as Securities and Exchange Commission Rule 10b-5, by making false and misleading statements and/or omissions to inflate Sawtek’s stock price and conceal the downward trend in revenues disclosed in Sawtek’s May 23, 2001 press release. The complaint does not specify the amount of monetary damages sought. Sawtek and the individual defendants filed their motion to dismiss on September 3, 2003, and briefing on the motion was completed on November 19, 2003. The court heard oral argument on November 21, 2003, and issued an order partially denying the motion to dismiss on December 19, 2003. Specifically, the court found that the complaint was not barred by the statute of limitations, but reserved ruling on the other aspects of the motion to dismiss. Because the statute of limitations issue is a novel question of law, the court stayed the proceedings in this case to allow the defendants to file an interlocutory appeal to the Eleventh Circuit Court of Appeals. Defendants duly filed for interlocutory appeal on January 22, 2004. Because the Court of Appeals is considering the identical issue in another matter, the appeal process has been stayed, pending the Court of Appeals’ decision in the other matter. We deny the allegations contained in the complaint and intend to continue our vigorous defense against these claims.

On February 16, 2005, we received notice that a summons of civil action was filed in the Court of Common Pleas of Lehigh County, Pennsylvania by Preferred Real Estate Investments, Inc. against our subsidiary, TriQuint Optoelectronics, Inc. relating to negotiations for the sale of our facility in Breinigsville, Pennsylvania. We deny any wrongdoing and intend to vigorously defend ourselves against this action.

In addition, from time to time we are involved in judicial and administrative proceedings incidental to our business. Although occasional adverse decisions (or settlements) may occur, we believe that the final disposition of such matters will not have a material adverse effect on our financial position or results of operations.

Item 4.Submission of Matters to a Vote of Security Holders

None.

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PART II

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed on the Nasdaq National Market under the symbol “TQNT”. As of February 28, 2005, there were 138,785,145 shares of common stock outstanding held by approximately 530 stockholders of record. Many stockholders hold their shares in street name. We believe that there are more than 63,000 beneficial owners of our common stock. The following table sets forth the high and low price per share of our common stock for the periods indicated as reported on the Nasdaq National Market:

	Years Ended December 31,
	2004				2003
Period:	High		Low		High		Low
First Quarter	$	9.93	$	6.52	$	4.79	$	2.70
Second Quarter	$	7.91	$	4.96	$	5.50	$	2.80
Third Quarter	$	5.07	$	3.20	$	6.90	$	3.96
Fourth Quarter	$	4.71	$	3.43	$	8.74	$	5.57

The closing price of our common stock on the Nasdaq National Market on December 31, 2004 was $4.45 per share.

We have never declared or paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. We have subordinated convertible debt which contains restrictive covenants which could limit our ability to pay cash dividends or make stock repurchases. Any future determination to pay cash dividends will also be at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements, general business conditions and other such factors as our Board of Directors deems relevant.

The information required by this item regarding equity compensation plans is incorporated by reference under the section entitled Executive Compensation and Other Matters contained in our Proxy Statement for our 2005 Annual Meeting of Stockholders.

Item 6.Selected Financial Data

The following statements of operations data and balance sheet data for the five years ended December 31, 2004 were derived from our audited consolidated financial statements. Consolidated balance sheets at December 31, 2004 and 2003 and the related consolidated statements of operations and of cash flows for each of the three years in the period ended December 31, 2004 and notes thereto appear elsewhere in this Annual Report on Form 10-K. The historical selected consolidated financial data has been derived from the audited historical financial statements for 2000 of TriQuint and Sawtek, which were audited by KPMG LLP and Ernst & Young, LLP, respectively. The 2004, 2003, 2002 and 2001 selected consolidated financial data has been derived from the audited historical financial statements which were audited by KPMG LLP. The data should be read in conjunction with the annual consolidated financial

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statements, related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K.

(In thousands, except per share data)	Years Ended December 31,
	2004			2003			2002			2001			2000
Statement of Operations Data:
Revenue	$	347,005		$	312,272		$	267,313		$	334,972		$	460,590
Cost of goods sold	246,576			225,264			172,197			198,537			203,971
Gross profit	100,429			87,008			95,116			136,435			256,619
Research, development and engineering	60,779			65,033			58,547			51,685			39,753
Selling, general and administrative	53,261			51,415			42,889			46,718			45,980
In-process research and development	—			500			8,575			7,546			—
Reduction in workforce	2,005			2,484			1,011			1,077			—
Impairment of long-lived assets and goodwill	15,533			—			94,740			76,933			—
Gain on disposal of equipment	(4,492		)	—			—			—			—
Lease termination costs	—			41,962			—			—			—
Income (loss) from operations	(26,657		)	(74,386		)	(110,646		)	(47,524		)	170,886
Interest income (expense), net	(3,604		)	(5,874		)	(815		)	12,792			25,474
Foreign currency gain (loss)	2,121			(250		)	(37		)	—			—
Impairment charge—investments in other companies	(1,189		)	(2,387		)	(23,778		)	(15,057		)	—
Gain on recovery of previously impaired investment	—			8,450			—			—			—
Gain on retirement of debt	539			—			6,009			9,401			—
Other, net	161			(75		)	4,948			(155		)	118
Income (loss) before income tax	(28,629		)	(74,522		)	(124,319		)	(40,543		)	196,478
Income tax expense (benefit)	425			(1,544		)	34,241			(14,332		)	45,785
Net income (loss)	$	(29,054	)	$	(72,978	)	$	(158,560	)	$	(26,211	)	$	150,693
Earnings (loss) per common share data:
Basic	$	(0.21	)	$	(0.54	)	$	(1.20	)	$	(0.20	)	$	1.19
Diluted	$	(0.21	)	$	(0.54	)	$	(1.20	)	$	(0.20	)	$	1.10

(In thousands)	As of December 31,
	2004		2003		2002		2001		2000
Balance Sheet Data:
Cash, cash equivalents and marketable securities	$	388,337	$	400,264	$	467,040	$	581,531	$	604,972
Accounts receivable, net	$	40,131	$	41,911	$	34,977	$	34,532	$	76,398
Inventories, net	$	59,746	$	65,286	$	36,283	$	34,836	$	52,325
Total assets	$	722,400	$	792,800	$	840,666	$	1,020,873	$	1,084,904
Working capital	$	271,320	$	362,515	$	370,555	$	560,613	$	690,125
Long-term liabilities	$	224,371	$	269,355	$	268,755	$	296,859	$	346,991
Total stockholders’ equity	$	441,387	$	460,121	$	525,672	$	682,774	$	674,123

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Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Consolidated Financial Statements, the related notes and the “Important Notice to Investors” that appear elsewhere in this report.

Overview

We are a supplier of high performance components and modules for communications applications. Our focus is on the specialized expertise, materials and know-how for radio frequency (“RF”), intermediate frequency (“IF”) and optical applications. We enjoy diversity in our markets, applications, products, technology and customer base. Our markets include wireless phones, wireless infrastructure networks, optical networks, and defense. We provide customers with standard and custom product solutions as well as foundry services. Our products are designed on various wafer substrates including compound semiconductor materials such as gallium arsenide (“GaAs”) and indium phosphate (“InP”) and other materials such as quartz, as well as using a variety of semiconductor device process technologies and surface acoustic wave (“SAW”) technology. Using these materials, devices and our proprietary technology, our products can overcome the performance barriers of competing devices in a variety of applications and offer other key advantages such as steeper selectivity, lower distortion, reduced size and weight and more precise frequency control. For example, GaAs has inherent physical properties that allow its electrons to move up to five times faster than those of silicon. This higher electron mobility permits the manufacture of GaAs integrated circuits that operate at higher levels of performance than silicon devices. Our customers include major communication companies worldwide.

Strategy and Industry Considerations

Our business strategy is to provide our customers with high performance, low-cost solutions to applications in the wireless phone, wireless infrastructure, optical network, and defense markets. Our goal is to build a strong and sustainable business by applying our core competencies and technologies to a diversified portfolio of markets within the communications industry. In wireless phones, we provide high performance RF filters, duplexers, receivers, small signal components, power amplifiers, switches, and integrated passive components. We have also been a developer of RF front-end modules with the goal of maximizing content and minimizing stacked margins. In wireless infrastructure networks, we are a supplier of active and passive components for RF communications and we are the dominant supplier of SAW filters to base stations. We estimate the global number of subscribers to wireless communications to grow from approximately 1.3 billion in 2002 to approximately 1.7 billion by 2006. In optical networks, we are a supplier of laser and detector components. In the defense market, we are a provider of phased-array antenna components to the U.S. military. This has been a stable business for us due to the long lead times and long product life cycles.

The semiconductor industry in general has been subject to slumping demand and excess capacity since 2001. This has been the case for our business as well. Wafer and semiconductor manufacturing facilities represent a very high level of fixed cost due to investments in plant and equipment, labor costs, and repair and maintenance costs. During periods of low demand, selling prices also tend to decrease which, when combined with high fixed manufacturing costs, can create a material adverse impact on operating results.

Wireless phone demand, however, generally strengthened during 2003, especially during the seasonally stronger second half of the year, and has continued during the first nine months of 2004, although we experienced a slowdown with our products for this market for the fourth quarter of 2004. The total global unit shipments for the whole market grew by more than 20%, resulting in projected shipments of over 680 million handsets in 2004. We also believe we are positioned for sustained demand in the wireless phone market for 2005 due to continued demand in China, India and other emerging countries, strong interest in camera phones and color displays worldwide, and increasing acceptance of non-voice

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applications such as text messaging. As the handset market expands, we expect this to also create increased demand in the wireless infrastructure market for our base station and point-to-point components.

As with the semiconductor industry, the optical communication industry has also suffered since 2001. As restructuring and consolidation in the optical network market continues, we believe strengthening long-term market demand may result. However, over the past year demand has been relatively stable and the near term outlook appears flat.

The defense market is stable and long-term. Revenues from this market decreased approximately 8% in 2004 from 2003 and accounted for approximately 13% of our revenues for fiscal year 2004 as compared to 16% of our revenues in fiscal year 2003. However, we are actively engaged with multiple defense industry contractors in the development of next-generation phased-array systems, have key design wins in major projects such as the Joint Strike Fighter and F-22, and expect to participate in other large projects such as the B-2 radar upgrade. We expect these programs to ramp up over 2005 and 2006, however, there remains uncertainty about long-term defense projects funding due to the negative impact that the war in Iraq continues to have on defense related spending for large scale programs in which we participate.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The following accounting policies involve a critical accounting estimate because they are particularly dependent on estimates and assumptions made by management about matters that are highly uncertain at the time the accounting estimates are made. In addition, while we have used our best estimates based on facts and circumstances available to us at the time, different estimates reasonably could have been used in the current period and changes in the accounting estimates we used are reasonably likely to occur from period to period, which may have a material impact on the presentation of our financial condition and results of operations.

Our most critical accounting estimates include revenue recognition, the valuation of inventory, which impacts gross margin; assessment of recoverability of long-lived assets, which primarily impacts operating expense when we impair assets or accelerate depreciation; valuation of investments in privately held companies, which impacts net income when we record impairments; deferred income tax assets and liabilities, which impacts our tax provision; reserve for warranty costs, which impacts gross margin; and stock-based compensation. We also have other policies that we consider to be key accounting policies, such as our policies for the valuation of accounts receivable, reserves for sales returns and allowances, and reserves for commitments and contingencies; however, these policies either do not meet the definition of critical accounting estimates described above or are not currently material items in our financial statements. We review our estimates, judgments, and assumptions periodically and reflect the effects of revisions in the period that they are deemed to be necessary. We believe that these estimates are reasonable; however, actual results could differ from these estimates.

Recognition of Revenue

We derive revenues primarily from the sale of standard and customer-specific products and services in the wireless phone, infrastructure network (such as base station, satellite, and point-to-point radios), defense and optical networks. We also receive revenues from foundry services, non-recurring engineering fees and cost-plus contracts for research and development work, which collectively are less than 5% of

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consolidated revenues for any period. Sales of our products are generally done through either our sales force and independent manufacturers’ representatives or through our stocking distributor. The majority of our shipments are made directly to our customers, with shipments to our manufacturing representatives and stocking distributor accounting for less than 10% of total revenues in 2004 and 2003, respectively.

Revenues from the sale of standard and customer-specific products are recognized when title to the products pass to the buyer. Revenues from foundry services and non-recurring engineering fees are recorded when the service is completed or upon certain milestones as provided for in the agreements. Revenues from cost plus contracts are recognized on the percentage of completion method based on the costs incurred to date and the total contract amount, plus the contractual fee. Revenues from our distributor are recognized when the product is sold to the distributor. Our distribution agreements provide for selling prices that are fixed at the date of sale, although we occasionally offer price concessions which are specific, of a fixed duration and are reserved for. Further, the distributor is obligated to pay the amount and it is not contingent on reselling the product; the distributor takes title to the product and bears substantially all of the risks of ownership; the distributor has economic substance; we have no significant obligations for future performance to bring about resale; and the amount of future returns can be reasonably estimated. We allow our distributor to return products for warranty reasons as well as exchange products, within certain limitations. Customers can only return product for warranty reasons. If we are unable to repair or replace products returned under warranty, we will issue a credit for a warranty return.

Inventories

We state our inventories at the lower of cost or market. We use a combination of standard cost and moving average cost methodologies to determine our cost basis for our inventories. This methodology approximates actual cost on a first-in, first-out basis. In addition to stating our inventory at a lower of cost or market valuation, we also evaluate it each period for excess quantities and obsolescence. This evaluation includes identifying those parts specifically identified as obsolete and reserving for them, analyzing forecasted demand versus quantities on hand and reserving for the excess, identifying and recording other specific reserves, and estimating and recording a general reserve based on historical experience and our judgment of economic conditions. If future demand or market conditions are less favorable than our projections and we fail to reduce manufacturing output accordingly, additional inventory reserves may be required and would have a negative impact on our gross margin in the period the adjustment is made.

Long-Lived Assets

We evaluate long-lived assets for impairment of their carrying value when events or circumstances indicate that the carrying value may not be recoverable. Factors we may consider in deciding when to perform an impairment review include significant negative industry or economic trends, significant changes or planned changes in our use of the assets, plant closure or production line discontinuance, technological obsolescence, or other changes in circumstances which indicate the carrying value of the assets may not be recoverable. If impairment appears probable, we evaluate whether the sum of the estimated undiscounted cash flows attributable to the assets in question is less than their carrying value. If this is the case, we recognize an impairment loss to the extent that carrying value exceeds fair value. Fair value is determined based on market prices or discounted cash flow analysis, depending on the nature of the asset. Any estimate of future cash flows is inherently uncertain. The factors we take into consideration in making estimates of future cash flows include product life cycles, pricing trends, future capital needs, cost trends, product development costs, competitive factors and technology trends as they each affect cash inflows and outflows. Technology markets are highly cyclical and are characterized by rapid shifts in demand that are difficult to predict in terms of direction and severity. If an asset is written down to fair value that becomes the asset’s new carrying value, which is depreciated over the remaining useful life of the asset.

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Investments in Privately Held Companies

We have made a number of investments in small, privately held technology companies in which we hold less than 20% of the capital stock or hold notes receivable. We account for these investments at their cost unless their value has been determined to be other than temporarily impaired, in which case we write the investment down to its impaired value. We review these investments periodically for impairment and make appropriate reductions in carrying value when an other-than-temporary decline is evident; however, for non-marketable equity securities, the impairment analysis requires significant judgment. We evaluate the financial condition of the investee, market conditions, and other factors providing an indication of the fair value of the investments. Adverse changes in market conditions or poor operating results of the investees could result in additional other-than-temporary losses in future periods.

See Note 15 of the accompanying Condensed Consolidated Financial Statements for a discussion of recent events regarding our investments in privately held companies.

Income Taxes

We are subject to taxation from federal, state and international jurisdictions. A significant amount of management judgment is involved with our annual provision for income taxes and the calculation of resulting deferred tax assets and liabilities. We evaluate liabilities for estimated tax exposures in jurisdictions of operation. These tax jurisdictions include federal, state and international tax jurisdictions. Significant income tax exposures include potential challenges on foreign entities, merger, acquisition and disposition transactions and intercompany pricing. Exposures are settled primarily through the completion of audits within these tax jurisdictions, but can also be affected by other factors. Changes could cause management to find a revision of past estimates appropriate. The liabilities are frequently reviewed by management for their adequacy and appropriateness. As of December 31, 2004, we were not currently under audit by the taxing authorities. We concluded federal income tax audits for the U.S. consolidated tax group on earlier years, most recently for the years 2000 and 2001. We are scheduled for an audit of our German subsidiary (TriQuint Semiconductor GmbH) in 2005. Tax periods within the statutory period of limitations not previously audited are potentially open for examination by the taxing authorities. Potential liabilities associated with these years will be resolved when an event occurs to warrant closure, primarily through the completion of audits by the taxing jurisdictions. To the extent audits or other events result in a material adjustment to the accrued estimates, the effect would be recognized during the period of the event. Management believes that an appropriate liability has been established for estimated exposures, though the potential exists for results to materially vary from these estimates.

We record a valuation allowance to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets may not be realized. We consider future taxable income and prudent and feasible tax planning strategies in determining the need for a valuation allowance. We evaluate the need for a valuation allowance on a regular basis and adjust as needed. These adjustments have an impact on our financial statements in the periods in which they are recorded. In 2002, we determined that a valuation allowance should be recorded against all of our deferred tax assets based on the criteria of Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes. As of December 31, 2004, this valuation allowance is still in place.

Warranty Costs

We sell our products with warranties that they will be free of faulty workmanship or defective materials and that they will conform to our published specifications or other specifications mutually agreed to with a customer. In some cases, we have assumed the existing warranties on products previously sold by businesses we have acquired, such as the Agere optoelectronics business. We have also established a reserve for potential catastrophic warranty claims for cases in which our obligation may extend beyond the

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repair and replacement of a faulty product. We estimate the potential liability associated with these warranties based on a combination of factors including historical product return experience, known product warranty issues with specific customers, and judgment of expected levels of returns based on economic and other factors. An accrual for expected warranty costs results in a charge to the financial results in the period recorded. This liability can be difficult to estimate and, if we experience warranty claims in excess of our projections, we may need to record additional accruals which would adversely affect our financial results.

We allow only our stocking distributor to exchange product for other than warranty reasons. If we are unable to repair or replace a product returned under warranty, we will issue a credit for a warranty return.

Stock-Based Compensation

We account for compensation cost related to employee stock options and other forms of employee stock-based compensation plans other than ESOP in accordance with the provisions of Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market prices of the underlying stock exceeded the exercise price. We apply Financial Accounting Standards Board (“FASB”) SFAS No. 123, Accounting for Stock-Based Compensation, which allows entities to continue to apply the provision of APB No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants as if the fair value based method defined in SFAS No. 123 had been applied.

The accounting for stock-based compensation involves a number of estimates about the expected lives of stock options, interest rates, stock volatility, and assumptions as well as the selection of a valuation model. We have selected to use the Black-Scholes option valuation model. A change in any of these estimates or a selection of a different option pricing model could have a material impact on our pro forma net income (loss) disclosures. Beginning in the third quarter of 2005, we will be required to account for stock-based compensation under SFAS No. 123(R), Share-Based Payment’, which will require us to recognize the estimate on our financial statements. See “Recent Accounting Pronouncements” below for a further discussion.

2003 Acquisitions

Agere’s Optoelectronics Business

On January 2, 2003, we completed an acquisition of a substantial portion of the optoelectronics business of Agere Systems Inc. (“Agere”) for $40.0 million in cash plus acquisition costs and certain assumed liabilities. The transaction included the products, technology and some facilities related to Agere’s optoelectronics business, which includes active and passive components, amplifiers, transceivers and other products. As part of the acquisition, we also assumed operation of the back-end assembly and test operations associated with these components at a leased facility in Matamoros, Mexico.

We acquired this business to expand its market and product offerings in its optical networks business.Through a transition services agreement, Agere provided some business infrastructure services to us for a short period following the close of the transaction to ensure seamless transition of the business operations. On May 6, 2003, we sold a portion of the assets acquired in this transaction for $6.6 million in cash. Further, during the fourth quarter of 2004, we initiated a repositioning of our optoelectronics operation strategy and incurred charges of $3.4 million related to the restructuring (see Note 4 to our Consolidated Financial Statements).

In connection with this acquisition, we considered a number of factors, including valuations of some of the assets, when determining the purchase price allocation. Acquired in-process research and development

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(“IPR&D”) assets were expensed at the date of acquisition in accordance with FASB Interpretation (“FIN”) No. 4, Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk adjusted rate. The project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated based upon management’s estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating costs. The projections assume that the technologies will be successful and that the product’s development and commercialization will meet management’s time schedule. The discount rate was 35% and was based on the novelty of the technology, the risks remaining to complete each project, and the extent of our familiarity with the technology.

As part of the purchase, we assumed $22.7 million of liabilities, which included a warranty liability estimated to be $9.3 million. This amount was based upon Agere’s engineering data that forecasted product failure rates applied to historical revenue. Agere had offered extended product warranties that ranged from three years to lifetime. Additionally, Agere had a robust process for preparing returned product that we were not able to duplicate because we discontinued a significant number of product lines and did not hire the employees that performed the repairs for the discontinued product lines.

2002 Acquisitions

IBM’s Wireless Phone Chipset Business

On July 1, 2002, we completed the acquisition of a portion of the assets of IBM’s wireless phone chipset business to increase our product line for wireless phone handsets. The acquisition was accounted for as a purchase transaction and the results of operations are included in the consolidated financial statements from the date of acquisition. At the closing date, we paid $21.8 million to IBM for the related assets, of which $5.0 million represented an earnout deposit which was returned to us in 2003. We acquired this business to expand its market and product offerings in the wireless communications industry and to strengthen its capabilities in silicon germanium process technology.

In a transaction related to this acquisition, we transferred $1.3 million of the acquired machinery and equipment, $1.0 million of the technology licenses, $0.7 million of acquired workforce and $11.0 million in cash to a privately held technology company in exchange for a note receivable of $14.0 million.

In connection with this acquisition, we considered a number of factors, including valuations of some of the assets, when determining the purchase price allocation. Acquired IPR&D assets, a primary component of the purchase which included wide band code division multiple access (“WCDMA”), receivers and voltage controlled oscillators (“VCOs”) that are based on a wafer substrate different from gallium arsenide and developed technology related to the VCOs and low noise amplifiers, were expensed at the date of acquisition in accordance with FIN 4. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk adjusted rate. Each project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated based upon management’s estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating costs. The projections assume that the technologies will be successful and that the

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product’s development and commercialization will meet management’s time schedule. The discount rate utilized was 29% and was based on the novelty of the technology, the risks remaining to complete each project, and the extent of our familiarity with the technology. The goodwill acquired in this transaction was allocated to the Oregon operating unit.

In late 2002, we evaluated its product strategy and revenue projections related to the acquired products as well as its overall strategy and determined that the forecasts for these products were substantially lower. Further, we concluded that further investment would not earn a satisfactory return, and the product lines were abandoned. As a result, we wrote off all goodwill associated with this acquisition (see Note 15 to our Consolidated Financial Statements).

Infineon Technologies AG GaAs Business

On July 1, 2002, we completed the acquisition of the GaAs Business of Infineon Technologies AG (“Infineon”) to strengthen our European presence and to expand its market and product offerings in the wireless communications industry. The acquisition was accounted for as a purchase transaction and the results of operations are included in the consolidated financial statements from the date of acquisition. At the closing date, we paid Infineon €50.0 million (approximately $53.6 million), of which €10.0 million (approximately $9.9 million) represented an earnout deposit. Subsequent to the close of the acquisition, certain fixed assets were also purchased for €5.5 million less €1.5 million in funded liabilities acquired ($4.0 million at various spot rates). Additionally, the minimum purchase price of the acquisition was subsequently adjusted to €42.0 million from €45.0 million (approximately a $3.5 million reduction) in the fourth quarter of 2002. In the fourth quarter of 2004, Infineon repaid the contingent earnout deposit €10.0 million (approximately $13.3 million at the exchange rate at the time of receipt) and refunded us for the €3.0 million reduction in the purchase price (approximately $4.0 million at the exchange rate at the time of receipt).

In connection with this acquisition, we considered a number of factors, including valuations of some of the assets, when determining the purchase price allocation. Acquired IPR&D assets were expensed at the date of acquisition in accordance with FIN 4. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk adjusted rate. Each project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated based upon management’s estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating costs. The discount rates utilized ranged from 25% to 50% and were based on the novelty of the technology, the risks remaining to complete each project, and the extent of our familiarity with the technology. The goodwill acquired in this transaction was allocated to the Oregon operating unit. In addition, as of December 31, 2002, we wrote off all goodwill associated with this acquisition.

In late 2002, we evaluated the product strategy and revenue projections related to the acquired products as well as our overall strategy and determined that the forecasts for these products were substantially lower. Furthermore, we concluded that further investment would not earn a satisfactory return. As a result, we wrote off all goodwill associated with this acquisition (see Note 15 to our Consolidated Financial Statements ).

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Assets Held for Sale

During 2004 and 2003, we determined that we will sell the land, building and certain assets associated with our optoelectronics operation in Pennsylvania, excess equipment associated with our semiconductor manufacturing operations in Texas and Oregon and assets obtained from the liquidation of an investment we had in another company. The Pennsylvania property consists of several buildings comprising approximately 849,000 square feet of space on approximately 139 acres of land that we classified as held for sale in the second quarter of 2003. The buildings contain fabrication and assembly space, office space, and central services. During 2003 and 2004 we were in negotiations to so sell the Pennsylvania facility, however in the fourth quarter of 2004, we were notified by the potential buyer that it was not going to purchase the facility. We subsequently recorded an impairment charge of $14.3 million to reduce the value of the building to its current market value of $8.0 million. On March 7, 2005, we entered into an agreement to sell the Pennsylvania facility to a real estate investment firm and lease back approximately 80,000 square feet of the facility for continuing operations. The sale is subject to customary closing procedures and is expected to be completed with 90 days of signing the agreement (see Note 21 to our Consolidated Financial Statements). The assets associated with our optoelectronics operations consists of a variety of equipment used for optoelectronics fabrication and assembly operations as well as intangible assets that we classified as held for sale in the fourth quarter of 2004 as a result for our optoelectronics restructuring (approximately $8.1 million at December 31, 2004). The assets in Texas and Oregon consist of a variety of equipment used for semiconductor and fabrication and assembly operations ($0.7 million). Additionally, we received $0.9 million of assets from the liquidation of a company in which we had an investment. We are actively marketing these assets and have met the accounting criteria for classifying these assets as held for sale; accordingly, they are identified on our balance sheet as assets held for sale. The carrying value of assets held for sale at December 31, 2004 and 2003 was $17.7 million and $24.4 million, respectively (see Note 10 of our Consolidated Financial Statements for further discussion).

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Results of Operations

The following table sets forth the results of our operations expressed as a percentage of revenues. Our historical operating results are not necessarily indicative of the results for any future period.

	Years Ended December 31,
	2004		2003		2002
Revenues	100.0	%	100.0	%	100.0	%
Cost of goods sold	71.1	%	72.1	%	64.4	%
Gross profit	28.9	%	27.9	%	35.6	%
Operating expenses:
Research, development and engineering	17.5	%	20.8	%	21.9	%
Selling, general and administrative	15.3	%	16.5	%	16.0	%
In-process research and development	—		0.2	%	3.2	%
Reduction in workforce	0.6	%	0.8	%	0.4	%
Impairment of long-lived assets and goodwill	4.5	%	—		35.5	%
Gain on disposal of equipment	(1.3	)%	—		—
Lease termination costs	—		13.4	%	—
Total operating expenses	36.6	%	51.7	%	77.0	%
Loss from operations	(7.7	)%	(23.8	)%	(41.4	)%
Other income (expense):
Interest income	2.1	%	1.9	%	4.4	%
Interest expense	(3.1	)%	(3.8	)%	(4.7	)%
Foreign currency gain (loss)	0.6	%	(0.1	)%	(0.0	)%
Impairment charge—investments of other companies	(0.3	)%	(0.8	)%	(8.9	)%
Gain on recovery of previously impaired investment	—		2.7	%	—
Gain on retirement of debt	0.1	%	—		2.2	%
Other, net	0.0	%	(0.0	)%	1.9	%
Total other income (expenses), net	(0.6	)%	(0.1	)%	(5.1	)%
Loss before income tax	(8.3	)%	(23.9	)%	(46.5	)%
Income tax expense (benefit)	0.1	%	(0.5	)%	12.8	%
Net loss	(8.4	)%	(23.4	)%	(59.3	)%

Years Ended December 31, 2004 and 2003

Revenues

Our operating results improved significantly during 2004, from a net loss of $73.0 million for the year ended December 31, 2003 to a net loss of $29.1 million for the year ended December 31, 2004. Our 2004 total operating results were primarily influenced by improvements in total revenues from strengthening demand in most of our markets, our introduction of and customer acceptance of new products, improvements in gross margin and reductions in operating expenses resulting from our cost reduction efforts, increased capacity utilization from increased demand and the absence of lease termination costs which were incurred in 2003. These improvements were partially offset by greater losses of our optoelectronics products in 2004 as compared to 2003.

Our revenues increased 11%, or $34.7 million, to $347.0 million for the year ended December 31, 2004 compared $312.3 million for the year ended December 31, 2003. This increase in revenues is primarily due to increased shipments of products for the infrastructure networks markets, specifically for applications for base stations for wireless communications, wireless local area networks (“WLAN”),

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point-to-point radios, and satellite, and increased revenue for products for wireless phones. The increase in revenues more than offsets declines in defense related products and flat revenue for products for optical networks.

The overall demand for our products was strong in the first six months of 2004, but started to diminish in the latter part of the third quarter of 2004, and continued at a lower level in the fourth quarter of 2004, specifically in products for wireless phones, satellite communications, base stations and WLAN. Our book-to-bill ratio for the full year ended December 31, 2004 was 0.94 to 1.00, compared to a book-to-bill ratio of 1.03 to 1.00 for the year ended December 31, 2003. Our revenues by end market for the years ended December 31, 2004 and 2003 were as follows:

	Years Ended December 31,
	2004			2003
Revenues:
Wireless phones		40	%		41	%
Infrastructure networks		33	%		29	%
Defense		13	%		16	%
Optical networks		14	%		14	%
		100	%		100	%

Wireless Phones

Our wireless phone market revenues are from electronic components for mobile phones including filters, amplifiers, receivers, duplexers, switches, mixers and other related items. We sell these parts to phone manufactures worldwide. The demand for components parts has been historically driven by the increasing usage of wireless phones and due to the complexity of wireless phones utilizing features such as multiband and global positioning systems which require more components. Worldwide, the total number of wireless phones in use continues to grow with Asia and Eastern Europe growing at the fastest rates. There are a number of wireless phone standards in use. GSM, CDMA, and TDMA refer to the primary wireless air interface standards used throughout the world. GSM (Global System for Mobile communications) is the most prevalent standard, utilized primarily in Europe and many parts of Asia with a growing presence in the U.S. This standard accounts for over 60% of total phone sales and subscribers worldwide. CDMA (Code Division Multiple Access) is the standard used principally in North and South America, Korea, and parts of China and India. Historically, we have more sales into CDMA applications as many of our products, such as IF SAW filters, receivers, duplexers, and triplexers are better suited for CDMA and in some cases are not used in GSM. TDMA (Time Division Multiple Access) is an older digital air interface standard that wireless phone manufacturers are phasing out. Our efforts to design and introduce products based on the GSM standard are an important element in our strategy and we believe we are gaining share in this large market.

Our revenues from products for wireless phones increased approximately 8% in 2004, due to the overall strength in end market demand for wireless phones, especially in Asia. We experienced an increase in revenues from new products, specifically PAs and PAMs for wireless phones, which grew from approximately $7.6 million in revenues last year, to approximately $19.8 million in 2004. Our new integrated RF front end module also experienced a significant increase in revenues compared to 2003 as did our duplexer products for CDMA phones and our RF filter products for both CDMA and GSM applications. Revenues from IF filters, low noise amplifiers and mixers declined in 2004 compared to 2003 as these products are older products and are being phased out by direct conversion architectures in newer phone models which do not need these products. Overall, revenues for CDMA based applications accounted for about 78% of our revenues from wireless phones in 2004, compared to 84% last year, but our GSM based products are growing and now account for 21% of our wireless phone revenues, up from 9% a year ago. Revenues from TDMA based phones are declining rapidly and now account for only about

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1% of our wireless phone revenues in 2004, compared to approximately 7% for last year. Unit shipments remain high and we shipped our highest ever quantity of devices for the wireless phone market in 2004. Pricing, which at times may be under severe competitive pressure, was relatively stable and our average selling prices for products for wireless phones were flat overall compared to 2003. We shipped more higher dollar value module based products such as GSM power amplifier and RF front-end modules, which offset price declines for our other wireless phone products.

Infrastructure Networks

The infrastructure networks market includes a variety of applications such as base stations, point-to-point radios, satellite systems, broadband cable, WLAN, automotive, and standard products. This end market has been the fastest growing for us over the past year due in part to an overall recovery in infrastructure spending, new applications and new products. Overall, our revenues in this market increased by approximately 28% in 2004 compared to 2003.

Our largest source of revenues in this market is from base stations, which increased by approximately 60% in 2004, compared to 2003. Base station revenues increased due to increased volumes of filters and other devices for this market. Base stations are used to handle calls from wireless phones and, as usage of mobile phones increases, the demand for more and better base stations grows. While shipments were extremely robust for base station products in the first three quarters of 2004, the bookings for these products in the third and fourth quarter of 2004 declined. Other applications in this market that experienced an increase in revenues in 2004 compared to 2003 include point-to-point radios, WLAN, and satellite systems.

Defense

Revenues from our defense related market decreased by approximately 8% in 2004 compared to 2003, due to the timing and roll out of large scale defense programs and the negative impact that the war in Iraq has had on defense related spending for fighter jets and research and development. The defense department has allocated more of its budget for current operations and has deferred some orders for longer-term programs. Our products for this market typically are for phased-array antenna and similar applications for airborne systems and these programs normally have long lead times.

Optical Networks

Revenues from products of optical networks were essentially unchanged in 2004 compared to 2003. However, our revenues in this market declined in the second half of 2004 and fell below our expectations. The optical component market continues to suffer from excess capacity, sluggish demand and price competition. On November 29, 2004, we announced that we are repositioning our strategy to address this market. As part of the announcement, we are exiting certain module related products for this market which may result in lower projected revenue for 2005 for this market.

Domestic and International Revenues

Revenues from domestic customers were $151.7 million in 2004, compared to $122.9 million in 2003. Revenues from international customers were $195.3 million in 2004 compared to $189.4 million in 2003. Revenues continue to grow due to the increasing demand for wireless phones and infrastructure products from countries in Asia, South America, and Eastern Europe where wireless subscriber penetration rates are significantly lower than penetration rates in the U.S. and Western Europe. Revenues from Korea, the only foreign country which represented 10% or more of revenues, were $35.0 million in 2004 and $49.1 million in 2003, respectively.

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Revenues generated from U.S. operations were $304.1 million in 2004 and $258.5 million in 2003, respectively. Revenues generated from our international operations were $80.5 million in 2004 and $84.4 million in 2003, respectively. Transfers between these operations were $37.6 million in 2004 and $30.7 million in 2003, respectively. Our U.S. operations accounted for $174.0 million of our long-lived assets in 2004 and $202.6 million in 2003. Our international operations accounted for $27.8 million of our long-lived assets in 2004 and $24.7 million in 2003.

Gross Profit

Gross profit is defined as revenues less cost of goods sold. Cost of goods sold includes direct material, labor and overhead expenses and certain production costs related to non-recurring engineering revenues. In general, we derive a higher gross profit margin on lower volume products for the infrastructure network market products such as base stations, point-to-point radios and satellite systems, whereas products for the wireless phone and WLAN market are higher volume, price sensitive, and generally lower margin products. Our gross profit margin as a percentage of revenues increased to 28.9% in 2004, compared to 27.9% in 2003. The increase was primarily due to increased sales of products for the network infrastructure market such as filters and components for base stations, point-to-point radio, and satellite systems which have higher gross profit margins than our consumer driven products such as wireless phones. In addition, the higher overall revenues in 2004 compared to 2003 allows for more absorption of fixed costs. Additionally, the results for 2003 included numerous transition related costs associated with the purchase of the optoelectronics business from Agere Systems in early 2003 which negatively affected gross margins. We incurred no such charges in 2004.

We also recorded a benefit of approximately $7.3 million in 2004 associated with the reclaim of platinum and gold from our Pennsylvania and Texas manufacturing operations. Precious metals are a primary component of our semiconductor fabrication process. Process wastes are routinely collected and processed to reclaim the precious metal component. In the case of our Pennsylvania operation, we reclaimed $6.1 million of platinum in 2004 that was embedded in equipment that was in excess of our needs. We did not recognize any gain on reclamation of platinum in 2003.

The operation of our own wafer fabrication facilities entails a high degree of fixed costs and requires an adequate volume of production and sales to be profitable. During periods of decreased demand, high fixed wafer fabrication costs have a materially adverse effect on our operating results. As of the end of 2004, three of our four fabrication facilities are running at under 30% utilization capacity. Our SAW filter fabrication facility was running at over 60% utilization capacity.

We routinely review our accounting reserves, including those for excess and obsolete inventory and potential warranty claims, as described under “Critical Accounting Policies and Estimates” above, and make adjustments as necessary. When we initially acquired the optoelectronics business from Agere Systems in January 2003, we established warranty reserves during the three months ended March 31, 2003, using engineering failure rate data obtained from Agere. We have continued to refine our estimates for warranty reserves and have developed data from returns during the course of 2003. Accordingly, during 2004, we recorded a reduction to the warranty reserve for our optoelectronics operations totaling approximately $1.6 million due to a change in the methodology we use to estimate the reserve. In addition, we identified a portion of the remaining warranty reserve balance for catastrophic warranty claims. This was done in response to increasing requests by our customers for catastrophic warranty clauses that extend our obligation beyond the repair and replacement of a faulty product, to include other losses our customers may experience as a result of failures in our products. We experienced one such warranty claim during 2003. During 2004, warranty reserves decreased $2.9 million, largely due to the resolution of certain warranty claims. Also, during 2004, gross inventory decreased $1.7 million and corresponding inventory reserves decreased $3.9 million as compared to 2003. The decrease in the warranty reserve was primarily due to consumption of previously reserved inventories by the optoelectronics operations.

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Research, development and engineering expenses

Research, development and engineering expenses include the costs incurred in the design of new products, as well as ongoing product research and development expenses. Our research, development and engineering expenses for the year ended December 31, 2004 decreased $4.3 million (7%) to $60.8 million, as compared to $65.0 million for the year ended December 31, 2003. This decrease was primarily the result of our cost reduction programs implemented during 2003, which included reductions in our workforce, a change in our procedures on development of wafers, a consolidation of vendors for certain purchases, use of common computer aided design tools and reduced work hours.

Selling, general and administrative expenses

Selling, general and administrative expenses include commissions, labor expenses for marketing and administrative personnel, and other corporate administrative expenses. Selling, general and administrative expenses for the year ended December 31, 2004 increased $1.8 million (4%) to $53.3 million, as compared to $51.4 million for the year ended December 31, 2003. The increase was primarily due to the commission and sales related expenses associated with our higher revenues in 2004, as well as increased administrative costs to comply with Section 404 of the Sarbanes-Oxley Act of 2002.

In-process research and development

In 2003, we recorded a charge of $0.5 million for the write-off of acquired in-process research and development associated with our acquisition of the Agere optoelectronics business. We recorded no similar charge during 2004.

Reduction in workforce

In 2004, we recorded net severance costs of $2.0 million related to reductions in our workforce of approximately 110 employees in Pennsylvania and approximately 90 employees in Mexico associated with our optoelectronics operations and approximately 30 employees assigned to our Texas operations. Included in this amount is a credit of $0.8 million to reflect a reduction in the number of employees originally expected to be impacted from the Agere acquisition. During 2003, we recorded severance costs of $2.5 million. These costs related to reductions in our workforce of approximately 80 employees, resulting from our efforts to align our costs and capacity with our levels of production and revenues. These reductions primarily impacted the workforce of our newly acquired optoelectronics operations and our German engineering and marketing operations.

Impairment of long-lived assets and goodwill

In 2004, we recorded impairments to long-lived assets of $15.5 million. We did not have any charges for impairments in 2003. The impairments recorded in 2004 include impairments of our optoelectronics facility in Pennsylvania ($14.3 million), optoelectronic module manufacturing equipment ($0.5 million), excess six-inch wafer fabrication equipment ($0.3 million), and a charge associated with the closing of our Tianjin, China facility ($0.4 million). In regard to the optoelectronics facility, we were in negotiations to sell the fabrication facility located in Breinigsville, Pennsylvania for more than one year with an agency of the Commonwealth of Pennsylvania. We acquired the building as part of our acquisition of a portion of the optoelectronics business from Agere Systems in January 2003. At the time of the acquisition, we determined the value of the facility to be $30.0 million, and recorded it on our books after a reduction due to purchase accounting adjustments at $22.3 million. On October 18, 2004, we were informed that this agency was not going to purchase the facility. In May of 2003, we engaged a national real estate agency to market the facility with an asking price of $30.0 million. At that time, we reclassified the facility to assets held for sale. At December 31, 2004, we continued to hold the facility as held for sale, and in the first

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quarter of 2005 we entered into an agreement to sell the facility to a real estate investment firm and lease back approximately 80,000 square feet of the facility for continuing operations (see Note 21 to our Consolidated Financial Statements).

As a result of the optoelectronics restructuring we announced in October 2004, we reviewed the carrying value of all of our optoelectronics related assets and recorded an impairment of $0.5 million related to specialized module manufacturing equipment during the fourth quarter of 2004. Additionally, we recorded an impairment charge of $0.3 million on certain six-inch wafer fabrication equipment to current market values. The equipment was in excess of our needs and had been classified as held for sale. The $0.4 million charge associated with the Tianjin, China facility was related to leasehold and other assets. The closure was made as our primary customer in the region no longer required a manufacturing presence in the region and is expected to reduce employee expenses approximately $0.5 million per year.

Gain on disposal of equipment

In 2004, we recorded a $4.5 million gain on the disposal of equipment, primarily related to the sale of equipment at our optoelectronics facility. The optoelectronic equipment sold had been classified as held for sale. We recorded no similar gains in 2003.

Lease termination costs

In 2003, we recorded a charge of $42.0 million for costs associated with the termination of the lease on our wafer fabrication facility located in Richardson, Texas. Under the original lease agreement sponsored by a financial institution, we were required to make lease payments through August 2005 or purchase the property at that time. In June 2003, we notified the lender of our intention to terminate the lease and purchase the property. The purchase was completed in July 2003. We incurred no similar costs in 2004 and have no similar lease agreements in place at December 31, 2004.

Interest income (expense), net

Interest income (expense), net decreased as an expense $2.3 million (39%) to $3.6 million for the year ended December 31, 2004, as compared to $5.9 million in 2003. This change was attributable to higher interest rates earned on our short and long-term investments as interest rates on these investments rose in 2004 as compared to 2003. For example, in 2004 the average commercial paper interest rate was 1.41% compared to 1.11% in 2003. Further, we repurchased $45.0 million of our subordinated debt in 2004 which also reduced our interest expense.

Foreign currency gain (loss)

In 2004, we recorded a foreign currency gain of $2.1 million, as compared to a foreign currency loss of $0.3 million for the year ended December 31, 2003. The gain in 2004 was primarily attributable to foreign currency receivables of €13.0 million (approximately $13.4 million at the exchange rate in effect at the time of the transactions) that were reclassified as short-term monetary asset in the third quarter. As a result of the reclassification, we recorded a foreign currency gain of $2.5 million on the remeasurment of the receivables as the Euro strengthened relative to the U.S. dollar. In November 2004, we received payment on the receivable.

Impairment charge—Investment in other companies

In 2004, we recorded impairment losses of $1.2 million as a result of either cessation of operations, deteriorating financial condition or a reduction in our pro-rata ownership of the privately held company in which we had invested. In 2003, we recorded impairment losses of $2.4 million, respectively, as a result of either deteriorating financial condition or cessation of operations of the privately held company in which

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we had invested. Additionally in 2003, we received a cash settlement on a previously impaired promissory note from one of the privately held investees, resulting in a gain of $8.5 million.

The following table provides a summary of the impairments during fiscal years 2004 and 2003 (in millions)

Year	Description		Impairment
2004	·	Impairment of investment in an optoelectronics company that ceased operations, net of expected proceeds from recovered assets		$0.7
	·	Impairment of investments in two privately held companies based on deteriorating financial conditions and/or reduction in our pro-rata ownership		0.5
	Total impairments in 2004			$1.2
2003	·	Impairment of investments in privately held semiconductor companies based on deteriorating financial conditions		$1.4
	·	Impairment of investments in privately held companies that ceased operations		0.3
	·	Impairment of investment in privately held optoelectronics company based on its deteriorating financial condition		0.7
	Total impairments in 2003			$2.4

Gain on retirement of debt

In 2004, we recorded a gain on the retirement of debt resulting from our repurchase of $45.0 million principal amount of our convertible subordinated notes at the then current market prices resulting in a gain of $0.5 million, net of the write off of associated capitalized bond issuance costs of $0.6 million. We recorded no similar benefit in 2003 as we did not repurchase any debt during that fiscal year. From time to time, we may repurchase additional notes in the open market.

Income tax expense (benefit)

In 2004, we recorded income tax expense of $0.4 million as compared to an income tax benefit of $1.5 million in 2003. The income tax expense in 2004 was primarily the result of income taxes in foreign jurisdictions. The income tax benefit in 2003 was primarily the result of the settlement of certain prior year tax accruals and refunds.

Years Ended December 31, 2003 and 2002

Our operating results improved significantly from a net loss of $158.6 million in 2002 to a net loss of $73.0 million in 2003. Our total operating results were influenced during 2003 primarily by improvements in total revenues from strengthening demand in most of our markets, our introduction of and customer acceptance of new products, and the addition of the newly acquired optoelectronics operations, reductions in operating expenses primarily due to the elimination of a lease obligation associated with our Texas facility in 2002, and increased capacity utilization from increased demand. These gains were partially offset by losses of our newly acquired optoelectronics operations. The optoelectronics operation was acquired with more capacity than necessary to support the size of the business and have subsequently repositioned our strategy in the optoelectronics market.

Revenues

Our revenues increased 16.8% to $312.3 million in 2003 from $267.3 million in 2002. Of this increase from 2002 to 2003, $36.5 million was attributable to the optoelectronics operations we acquired from Agere in January 2003. Our revenues in 2003, as compared to 2002, increased for wireless phone and WLAN products, but decreased for other infrastructure network products and decreased slightly for

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defense related products. The majority of our shipments are made directly to our customers, with shipments to distributors accounting for only approximately 6% of our total revenues in 2003. Our revenues by end market for the years ended December 31, 2003 and 2002 were as follows:

	Years Ended December 31,
	2003			2002
Revenues:
Wireless phones		41	%		45	%
Infrastructure networks		29	%		31	%
Defense		16	%		19	%
Optical networks		14	%		5	%
		100	%		100	%

Wireless Phones

On an absolute dollar basis, our revenues from the wireless phone market increased from 2002 to 2003. This increase was driven by increased end market demand due to new phone subscribers in Asia, the popularity of new feature-rich phones which include color screens and digital photography, and our new product introductions. The worldwide sales of wireless phones grew by over 10% to approximately 500 million phones in 2003. Pricing on component parts, such as the products that we sell, declined generally, while our unit shipments increased. For example, we increased our total shipments of RF SAW filters by nearly 70% in 2003 compared to 2002, while average selling prices for these products declined over 20% over the same time period. We shipped a record number of SAW filters, began shipments of a new power amplifier module for the GSM market, and have increased sales of a new receiver product for CDMA phones. Our revenue in the wireless phone market is dominated by sales for CDMA applications, accounting for 84% of our wireless phone revenue, followed by GSM applications at 9% and TDMA at 7% in 2003. This in comparison to 2002, in which CDMA accounted for 68%, GSM 9%, and TDMA 23% of total wireless phone revenues. TDMA is an older digital air interface standard that is being phased out. In the fourth quarter of 2003, our sales into TDMA applications were only 4% of our total wireless phone revenue and we expect this level to further decline over time. We have more sales into CDMA applications as many of our products, such as IF SAW filters, receivers, duplexers, and triplexers are better suited for CDMA and in some cases are not used in GSM. GSM is the world’s largest air interface standard, accounting for over 60% of total phone sales and subscribers.

Infrastructure Networks

Our infrastructure network products address a variety of application areas, such as base stations, satellite, point-to-point radios, and WLAN. Base station products comprise our largest proportion of this business, but decreased significantly in 2003 to 25% of network infrastructure revenue from 39% in 2002 due to price declines and continued softness in this market. WLAN product revenues increased in proportion from 10% of infrastructure revenue in 2002 to 19% in 2003. This increase was driven by increasing demand for 802.11 standard products used in many of the new personal computer and laptop computer for wireless access to the internet. We maintain a very high market share for many of the products we supply to the infrastructure network market. This is a highly competitive market, however, and is characterized by intense pressure on selling prices.

Defense

Revenues from our defense business declined slightly from 2002 to 2003. We believe this was caused by a temporary shift of government funding from research and development and long-term programs toward short-term spending related to conflicts in Iraq and Afghanistan. Our business in this market is very stable and we have a strong position, particularly for phased-array antenna and communications systems.

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Optical Networks

Products addressing optical network applications have become a much bigger part of our overall revenues since our acquisition of Agere’s optoelectronics business in early January 2003, growing from 5% of our total revenues in 2002 to 14% in 2003. Revenues from our legacy optoelectronics products such as multiplexers, demultiplexers, and transimpedence amplifiers have been declining in recent years and that trend continued in 2003.

Domestic and International Revenues

Domestic and international revenues were $122.9 million and $189.4 million, respectively, in 2003 as compared to $116.1 million and $151.2 million, respectively, in 2002. The shift in the proportion of our total revenues from international sources from 56.6% in 2002 to 60.7% in 2003 reflects the increasing demand from countries in Asia, Africa, and South America, where wireless subscriber penetration rates are cumulatively 20% or less, compared to penetration rates in the U.S. and Europe of approximately 50%, and the need to develop the wireless infrastructure in these regions.

Gross Profit

Gross profit decreased 8.5% to $87.0 million in 2003 from $95.1 million in 2002. Our gross profit also decreased as measured as a percentage of revenues, from 35.6% in 2002 to 27.9% in 2003. This decline in our gross profitability was attributable primarily to the following factors: excessive cost structure and an extremely competitive pricing environment in the optoelectronics business we acquired from Agere in early January 2003, continued underutilization of our Oregon and Texas wafer fabrication plants, and lower prices for our products for wireless phones and base stations.

As of the end of 2003, our Oregon GaAs fabrication facility was operating at only 35% utilization, our Texas fabrication facility was operating at less than 30% utilization, and our optoelectronics manufacturing facility in Pennsylvania was operating at less than 10% of its capacity. Our SAW filter factories were operating at over 80% utilization as of the end of 2003. During 2003, we implemented several measures to reduce our cost and capacity levels to more closely match demand. We reduced ongoing operating expenses by approximately $1.2 million by disposing of non-strategic elements of the optoelectronics business acquired from Agere, saved approximately $0.9 million by transferring the manufacturing associated with the products we acquired from Infineon to our fabrication facility in Oregon, saved approximately $2.0 million by reducing work schedules, and reduced operating expenses by approximately $0.8 million by moving the majority of the assembly and test operations associated with our optoelectronics products in Pennsylvania to our plant in Matamoros, Mexico. Other efforts aimed at improving utilization of our manufacturing facilities included shipping a record number of 150mm GaAs wafers from our Oregon fabrication facility and record yields in our Pennsylvania and Texas fabrication facilities.

Most of the markets in which we operate are highly competitive and characterized by intense price pressure. The average selling prices of many of our products decreased during 2003. Our strategy for maintaining profitability under these conditions is to maintain tight control of our spending, implementing measures to maintain the proper level of capacity such as those described above, and continuing to aggressively develop new products.

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Research, development and engineering expenses

Research, development and engineering expenses include the costs incurred in the design of new products, as well as ongoing product research and development expenses. Our research, development and engineering expenses increased 11.1% in 2003 to $65.0 million from $58.5 million in 2002. Research, development and engineering expenses as a percentage of revenues decreased to 20.8% in 2003 from 21.9% in 2002. The increase in research, development and engineering expenses on an absolute dollar basis was primarily due to the additional research, development and engineering activities associated with our newly acquired businesses from Infineon and Agere and to the ongoing costs associated with our ongoing investment in wireless, broadband, microwave, and optoelectronics products and technologies. We introduced 173 new products in 2003, including several key products, such as our GSM module products, a family of WLAN products, and a family of small form factor optical transceiver products. As a percentage of revenue, the decrease from 2002 to 2003 was attributable to the increase in revenues from 2002 to 2003.

Selling, general and administrative expenses

Selling, general and administrative expenses include commissions, labor expenses for marketing and administrative personnel, and other corporate administrative expenses. Selling, general and administrative expenses increased 19.9% to $51.4 million in 2003 from $42.9 million in 2002. Selling, general and administrative expenses as a percentage of revenues increased to 16.5% in 2003 compared to 16.0% in 2002. This spending increase was primarily due to increased selling expenses associated with increased revenues and additional costs associated with our acquisition of the Infineon and Agere businesses.

In-process research and development

In 2003, we recorded a charge of $0.5 million for the write-off of acquired IPR&D associated with our acquisition of the Agere optoelectronics business. During 2002, we recorded a charge of $8.6 million for the write-off of acquired IPR&D and other costs associated with our acquisition of the Infineon and IBM businesses.

Reduction in workforce

In 2003, we recorded severance costs of $2.5 million. These costs relate to reductions in our workforce of approximately 80 employees, resulting from our efforts to align our costs and capacity with our levels of production and revenues. These reductions primarily impacted the workforce of our newly acquired optoelectronics operations and our German engineering and marketing operations. During 2002, we reduced our workforce by approximately 117 employees also as a result of the decreased demand for our products and the underutilization of our fabrication facilities. We recorded a charge of $1.0 million associated with this reduction in workforce.

Impairment of long-lived assets and goodwill

We recorded no charges from the impairment of long-lived assets in 2003, however, in 2002 we recorded impairment charges of $94.7 million. The impairment charge in 2002 was the result of the abandonment of $5.8 million of certain production assets associated with one of our six-inch wafer productions lines at our Richardson facility, the writedown of $49.0 million of certain equipment and facilities associated with excess capacity at our Oregon facility and the impairment of $39.9 million of goodwill and other intangibles associated with our acquisitions of businesses from IBM and Infineon. The businesses acquired from IBM and Infineon were assigned to the Oregon operating unit when purchased. The determination and recording of an impairment of the value of certain assets associated with the Oregon operating units was an event which also required the evaluation of the carrying value of goodwill associated with the acquisition of the IBM and Infineon businesses, since these businesses are associated with the Oregon operating unit. The anticipated effect on depreciation expense of the impairment was approximately $6.5 million per year.

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Lease termination costs

In 2003, we recorded a charge of $42.0 million for costs associated with the termination of the lease on our wafer fabrication facility located in Richardson, Texas. Under the original lease agreement sponsored by a financial institution, we were required to make lease payments through August 2005 or purchase the property at that time. In June 2003, we notified the lender of our intention to terminate the lease and purchase the property. The purchase was completed in July 2003. We incurred no similar costs in 2002 and have no similar lease agreements in place at December 31, 2003.

Interest income (expense), net

Interest income (expense), net increased as an expense to $5.9 million in 2003 compared to an expense of approximately $0.8 million in 2002. This change was attributable to lower interest rates earned on investments and a lower level of cash and short and long-term investments due to our recent capital investments and acquisitions.

Impairment charge—Investment in other companies

In 2003 and 2002, we recorded impairment losses of $2.4 million and $23.8 million, respectively, on impairments of investments we have made in small, privately held technology companies. The impairments in 2003 were the result of either deteriorating financial condition of the company or cessation of operations of the company. Additionally in 2003, we received a cash settlement on a previously impaired promissory note from one of the privately held investees described above, resulting in a gain of $8.5 million. We had no similar gain in 2002.

The following table provides a summary of the impairments during fiscal years 2003 and 2002 (in millions):

Year	Description		Impairment
2003	·	Impairment of investments in privately held semiconductor companies based on deteriorating financial conditions		$  1.4
	·	Impairment of investments in privately held companies that ceased operations		0.3
	·	Impairment of investment in privately held optoelectronics company based on its deteriorating financial condition		0.7
	Total impairments in 2003			$  2.4
2002	·	Impairment of investments in privately held technology companies based on deteriorating financial conditions that subsequently either were liquidated or filed for bankruptcy		$  9.9
	·	Impairment of investment in privately held RF integrated circuit company based on its deteriorating financial condition due to lack of revenue and reduced cash position. Company later was sold in 2003 and investment was largely recovered.		11.2
	·	Impairment of investments in privately held technology companies based on deteriorating financial conditions		2.7
	Total impairments in 2002			$23.8

Gain on retirement of debt

In 2002 we recorded a gain on retirement of debt resulted from our repurchase of $27.7 million principal amount of our convertible subordinated notes at the then current market prices resulting in a gain of $6.0 million. We repurchased no additional debt in 2003 and recorded no similar gain.

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Other, net

Other, net for the year ended December 31, 2003 was a net expense of $0.1 million as compared to net income of $4.9 million for the year ended December 31, 2002. The income in 2002 was primarily due to a realized gain of $4.6 million on a forward currency contract associated with the Infineon acquisition. We had no similar gain in 2003.

Income tax expense (benefit)

In 2003, we recorded an income tax benefit of $1.5 million compared to an income tax expense of $34.2 million recorded in 2002. The income tax benefit in 2003 was primarily the result of the settlement of certain prior year tax accruals and refunds. The income tax expense in 2002 related to our determination that a valuation allowance should be recorded against all of our deferred tax assets based on the criteria of SFAS 109 concerning whether it is more likely than not that our deferred tax assets may not be realized. In both 2003 and 2002, we determined that a valuation allowance should be recorded against all of our deferred tax assets based on the criteria of SFAS 109.

Outlook for 2005

We expect revenues for 2005 to be similar to 2004 and operating losses to be less than those in 2004. We are anticipating growth in handsets, driven by our continued penetration of the GSM market. However, the impact of direct conversion architectures, which reduce the need for some of our products in CDMA handsets in 2005, is expected to reduce our revenues by $20.0 million to $26.0 million in 2005 as compared to 2004. We are also anticipating growth in defense related revenues, due to our planned program ramps and the integration of our newly acquired subsidiary, TFR. Base station and broadband revenues are expected to be flat to slightly down and we believe optoelectronics revenues will decrease in 2005 as compared to 2004 due to discontinued product offerings. We expect improved profitability in 2005 as compared to 2004 due to the elimination of certain expenses related to the optoelectronics restructuring announced on November 29, 2004.

Liquidity and Capital Resources

As of December 31, 2004, our cash, cash equivalents and marketable securities decreased $12.0 million (3%) to $388.3 million, from $400.3 million at December 31, 2003. The net decrease in cash, cash equivalents, and marketable securities was primarily related to the repurchase of a portion of our subordinated notes ($43.9 million) and our capital expenditures ($25.3 million), partially offset by cash provided by operating activities ($45.8 million) and the issuance of common stock ($12.1 million). Cash flows provided by operating activities in 2004 reflect net income adjusted for depreciation and amortization ($12.1 million) and decreases in prepaid expenses and other assets ($15.5 million), inventories ($5.5 million) and receivables ($1.8 million), partially offset by increases in accounts payable and accrued expenses ($6.6 million). The adjusted net income for 2004 was negatively affected by losses from the impairment of assets ($15.5 million), net losses from the sale of assets ($1.4 million) and impairment charges from investments in other companies ($1.2 million).

The $41.5 million of cash provided by operations in 2004 represents a $69.3 million change from the cash used in operating activities during 2003 ($27.8 million). This variance from 2003 is primarily related to a net loss adjusted for depreciation and amortization ($33.5 million) in 2003 and increases in inventories ($17.0 million), receivables ($7.0 million), account payable and accrued expenses ($5.1 million) and prepaid expenses ($2.6 million) during 2003. The adjusted net loss in 2003 was primarily due to a non-cash lease termination costs ($42.0 million) and impairment charges from investments in other companies ($2.4 million), partially offset by a gain on the recovery of a previously impaired investment ($8.5 million).

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At December 31, 2004, our net accounts receivable decreased $1.8 million (4%) to $40.1 million, from $41.9 million at December 31, 2003. The decrease is primarily due to a decrease in sales during the fourth quarter of 2004 as compared to the fourth quarter of 2003, partially offset by an increase in our days sales outstanding as of December 31, 2004 of 48 days, compared to 44 days as of December 31, 2003.

At December 31, 2004, our net inventory balance decreased $5.6 million (8%) to $59.7 million, from $65.3 million at December 31, 2003. This decrease is primarily due to decreases in inventory values from our optoelectronics repositioning. At December 31, 2004, our inventory turnover ratio was 3.7 times, consistent with December 31, 2003.

At December 31, 2004, our assets held for sale balance decreased $6.7 million (28%) to $17.7 million, from $24.4 million at December 31, 2003. This decrease is primarily due to a $14.3 million impairment of our optoelectronics facility we recorded in the fourth quarter of 2004 (see Note 15 to our Consolidated Financial Statements), partially offset by $7.2 million of net transfers of equipment from property, plant and equipment to held for sale as a result of the optoelectronics restructuring, also in the fourth quarter of 2004 (see Note 4 to our Consolidated Financial Statements).

At December 31, 2004, our net property, plant and equipment balance decreased $22.2 million (10%) to $199.5 million, from $221.7 million at December 31, 2003. This decrease is primarily due to current-year depreciation expense of $37.7 million, the transfer of $7.2 million of assets to held for sale as a result of the optoelectronics restructuring and disposals of equipment of $2.8 million. The decrease was partially offset by current-year capital expenditures of $25.3 million.

Recent Transactions Affecting Liquidity

On May 18, 2004, we completed the repurchase of $45.0 million (face value) of our convertible subordinated notes for $43.9 million before accrued interest. We regularly evaluate the market pricing of these notes in comparison to our cash flow forecast to determine the value to us of repurchasing a portion of them. Since 2001, we have repurchased $121.2 million face value of the original $345.0 million issuance.

On July 16, 2003, we terminated the lease on our wafer fabrication facility located in Richardson, Texas and took ownership of the facility. In association with the termination of this lease, we released the $17.4 million to the financial institution sponsoring the lease and incurred various legal fees associated with the title transfer.

On January 2, 2003, we completed our acquisition of a substantial portion of the optoelectronics business of Agere for $40.0 million in cash plus acquisition costs and certain assumed liabilities. Through a transitional manufacturing agreement, Agere supplied components for us for a short period following the close of the transaction to ensure seamless service to customers. Agere also provided some business infrastructure services to us for a short period following the close of the transaction to provide for an uninterrupted transition of the business operations.

Sources of Liquidity

Our current cash, cash equivalent and short-term investment balances, together with cash anticipated to be generated from operations are currently our principal sources of liquidity and we believe these will satisfy our projected working capital, capital expenditure, and possible investment needs, at a minimum, through the next 12 months. We expect our need for capital expenditures in 2005 to be between $20.0 million and $26.0 million. The principal risks to these sources of liquidity would be capital expenditures or investment needs in excess of our expectations, in which case we may be required to finance any additional requirements through additional equity offerings, debt financings or credit facilities. We may not be able to obtain additional financings or credit facilities, or if these funds are available, they may not be available on satisfactory terms.

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Other Significant Cash Obligations

The following table summarizes our scheduled contractual commitments that will affect our future liquidity as of December 31, 2004:

			Payments Due By Period
(In millions)	Total		Less than 1 Year			1-3 Years			4-5 Years			After 5 Years
Convertible Subordinated Notes(1)	$	246.1		$	8.9		$	237.2		$	—		$	—
Operating Leases(2)	5.7			1.8			3.4			0.5			—
Capital Lease(3)	0.3			0.3			—			—			—
Unconditional Purchase Obligations(4)	5.6			0.5			0.7			0.7			3.7
Deferred Compensation(5)	0.1			—			—			—			0.1
Other Obligations(6)	3.0			—			—			—			3.0
Total	$	260.8		$	11.5		$	241.3		$	1.2		$	6.8

⁽¹⁾The notes are due on March 1, 2007 and have a fixed interest rate of 4%. We have repurchased a total of $121.2 million of the original $345.0 million obligation in the open market during 2004, 2002 and 2001, to reduce our obligation and we may repurchase additional notes in the future.

⁽²⁾The amounts presented represent leases of certain equipment, office and manufacturing space under operating leases. The amounts presented in this line item represent commitments for minimum lease payments under non-cancelable operating leases.

⁽³⁾The amounts presented represent leased computer equipment under a capital lease. The amounts presented in this line item represent commitments for minimum lease payments under non-cancelable capital leases.

⁽⁴⁾The purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on TriQuint and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable without penalty.

⁽⁵⁾The amount presented represents the liability for our Non-Qualified Deferred Compensation Plan (the “Plan”) established in October 2004. The Plan provides employees who are eligible to participate and the members of the Board of Directors with the opportunity to defer a specified percentage of their cash compensation. The deferred earnings are invested at the discretion of each participating employee or director and the deferred compensation we are obligated to deliver is adjusted for increases or decreases in the deferred amount due to such investment. We include the asset deferred by the participants ($0.1 million) in the “Other noncurrent assets, net” line item and our obligation to deliver the deferred compensation in the “Other long-term liabilities” line item on our consolidated balance sheet.

⁽⁶⁾The balance represents the pension liability of our German subsidiary ($2.2 million) and our termination liability to certain officers if they are terminated for other than cause ($0.8 million). The pension liability is associated with our German subsidiary, which becomes payable when the covered employees reach the age of 60 or 65. The liability was acquired through our purchase of Infineon in 2002. We elected to secure the liability through a reinsurance program supported by us. No individual is eligible within the next five years. We included the reinsurance receivables ($2.1 million) in the “Other current assets, net” line item and our obligation to deliver the pension obligation in the “Accrued Payroll” line item on our consolidated balance sheet.

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Recent Accounting Pronouncements

On December 16, 2004, the FASB issued SFAS No. 123(R), Share-Based Payment’, which replaces SFAS No. 123, supersedes APB No. 25, and amends SFAS No. 95, Statement of Cash Flow. Currently, we use the Black-Scholes model for option expense calculation and present pro forma disclosure of the income statement effect in financial statement footnotes only under APB No. 25. However, under SFAS No. 123(R), pro forma disclosure of the income statement effects of share-based payments will no longer be an alternative and all share-based payments to employees, including grants of employee stock options will be recognized in the financial statements based on their fair values. In addition, companies must also recognize compensation expense related to any awards that are not fully vested as of the effective date. Compensation expense for the unvested awards will be measured based on the fair value of the awards previously calculated in developing the pro forma disclosures in accordance with the provisions of SFAS No. 123. SFAS 123(R) is effective for public companies at the beginning of the first interim or annual period beginning June 15, 2005. We are currently evaluating our share-based employee compensation programs to determine what action, if any, we may make to these programs. As part of an overall review of our compensation and benefits program we made a number of changes to these programs, including the acceleration of the vesting of options, excluding option grants to our board members and chief executive officer, with an option price equal or greater to $9.00 per share (see Note 2 to our Consolidated Financial Statements). We expect the adoption of SFAS 123(R) will have a material impact on our results of operations; however, we have not yet determined the method of adoption, the effect of adopting SFAS 123(R), or whether adoption will result in amounts that are similar to the current pro forma disclosures under SFAS 123.

In November 2004, the FASB issued SFAS No. 151, Inventory Costs—an amendment of ARB No. 43, in an effort to converge U.S. accounting standards for inventories with International Accounting Standards. FAS No. 151 requires idle facility expenses, freight, handling costs, and wasted material (spoilage) costs to be recognized as current-period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. FAS No. 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We have historically applied these principles to our costing methods and are currently in compliance with the standard. As such, the standard is not expected to have a material impact on our financial statements.

On September 30, 2004 , the Emerging Issues Task Force (“EITF”) reached consensus on Issue No. 04-08, The Effect of Contingently Convertible Debt on Diluted Earnings per Share, which changes the treatment of contingently convertible debt instruments in the calculation of diluted earnings per share. EITF No. 04-08 provides that the shares issuable upon conversion of these debt instruments be included in the earnings per share computation, if dilutive, regardless of whether the contingent conditions for their conversion have been met. This change does not have any effect on net income, however it may affect the related earnings per share amounts. EITF No. 04-08 will be effective for reporting periods ending after December 15, 2004, however the adoption of EITF No. 04-08 is not expected to have an impact on our earnings per share as our outstanding convertible debt is not contingently convertible debt.

In January 2003, the FASB released Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”). FIN 46 requires an investor with a majority of the variable interests (primary beneficiary) in a variable interest entity (“VIE”) to consolidate the entity and also requires majority and significant variable interest investors to provide certain disclosures. A VIE is an entity in which the voting equity investors do not have a controlling financial interest or the equity investment at risk is insufficient to finance the entity’s activities without receiving additional subordinated financial support from the other parties. The provisions of FIN No. 46 were effective immediately for all arrangements entered into with new VIEs created after January 31, 2003. In December 2003, the FASB published a revision of FIN 46 (“FIN 46R”) to clarify some of the provisions of FIN 46 and to defer the effective date of implementation for certain entities. Under the guidance of FIN 46R, entities that did not have interests in structures that are

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commonly referred to as special-purpose entities are required to apply the provisions of the interpretation in financial statements for periods ending after March 14, 2004. Based on the provisions of FIN 46 and FIN 46R, we do not have any variable interests in VIEs, and therefore, FIN 46 and FIN 46R has not had an impact on us in fiscal years 2003 or 2004.

Impact of Inflation

We believe that inflation has not had a material impact on operating costs and expenses.

Factors that May Affect Future Results

An investment in our common stock is extremely risky. This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Such statements reflect management’s current expectations, assumptions and estimates of future performance and economic conditions. Such statements are made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The following are some of the factors we believe could cause our actual results to differ materially from expected and historical results. The trading price of our common stock could decline due to any of these risks and you may lose part or all of your investment. Other factors besides those listed here could also adversely affect us.

Our operating results may fluctuate substantially, which may cause our stock price to fall.

Our quarterly and annual results of operations have varied in the past and may vary significantly in the future due to a number of factors including, but not limited to, the following:

·cancellation or delay of customer orders or shipments;

·our success in achieving design wins in which our products are designed into those of our customers;

·market acceptance of our products and those of our customers;

·variability of the life cycles of our customers’ products;

·variations in manufacturing yields;

·timing of announcements and introduction of new products by us and our competitors;

·changes in the mix of products we sell;

·declining average sales prices for our products;

·ability to integrate existing and newly developed technologies;

·changes in manufacturing capacity and variations in the utilization of that capacity;

·variations in operating expenses;

·impairments of our assets;

·the long sales cycles associated with our customer-specific products;

·the timing and level of product and process development costs;

·availability of materials used in the assembly of our products;

·performance of vendors and subcontractors;

·realization of research and development efforts;

·variations in raw material quality and costs;

·delays in new process qualification or delays in transferring processes;

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·the cyclical nature of the semiconductor and electronic communications component industries;

·continued softness in the optical components and networks market;

·delayed consolidations of the optoelectronics industry, continuing a state of the industry oversupply and pricing below acceptable margins;

·the timing and level of nonrecurring engineering revenues and expenses relating to customer-specific products;

·our ability to successfully integrate the operations of acquired businesses and to retain the customers of acquired businesses;

·significantly higher costs associated with integrating the operations of acquired businesses than we anticipated;

·significant changes in our and our customers’ inventory levels;

·longer payment terms; and

·delivery terms requiring that we cover shipment and insurance costs as well as request that we cover duty costs.

We expect that our operating results will continue to fluctuate in the future as a result of these and other factors. Any unfavorable changes in these or other factors could cause our results of operations to suffer as they have in the past. Due to potential fluctuations, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as indicators of our future performance.

Additionally, if our operating results are not within the market’s expectations, then our stock price may fall. The public stock markets have experienced extreme price and trading volume volatility, particularly in high technology sectors of the market. This volatility has significantly affected the market prices of securities of many technology companies for reasons frequently unrelated to or disproportionately impacted by the operating performance of these companies. These broad market fluctuations may adversely affect the market price of our common stock.

New competitive products and technologies have been announced which could reduce demand for our SAW filter products and our receiver and related products for wireless phones.

New products have been introduced in the marketplace that use a direct conversion architecture in wireless phones, which reduces the number of components needed in the receiver portion of wireless phones. Sales of our SAW IF filter products along with some of our receiver products would be negatively impacted by wireless phone manufacturers’ use of a direct conversion chipset as new phone models are developed. Direct conversion architecture has been available since the mid-1990’s for GSM phones and wireless phone manufacturers are increasing the use of this process in new phones. In 2004 and 2003, sales of SAW IF filters and receiver products for GSM phones accounted for less than 1% of our total revenues. In addition, several companies have introduced a direct conversion chipset for CDMA phones which will impact our future revenues from SAW IF filters and receiver products for CDMA phones. In 2004 and 2003, sales from SAW IF filters for CDMA phones were approximately 5% and 7%, respectively, of our total revenues and sales of receiver and related products for CDMA phones were approximately 8% and 10% of our total revenues, respectively. Further, we continue to sell products for TDMA wireless phones, which are increasingly migrating to the GSM standard. Our sales of products for TDMA phones for year ended December 31, 2004 was less than 1% of our total revenue as compared to approximately 3% of our total revenue for 2003. In 2005, we are anticipating this conversion for all standards to have a negative impact on our SAW filter revenue in certain applications of $20.0 million to $26.0 million as compared to 2004.

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Other competitive filtering technologies, including film bulk acoustic resonator (“FBAR”) and bulk acoustic wave (“BAW”), have been introduced and have gained market acceptance in certain applications.

We are actively pursuing new products such as RF filters, duplexers, power amplifiers, modules and BAW filtering to offset the decline in sales of products affected by direct conversion architecture and the loss of revenues from products for TDMA phones. If we are not successful in introducing competitive or alternative products, our business, financial condition and results of operation will suffer.

Our operating results may suffer due to fluctuations in demand for semiconductors and electronic communications components.

From time to time, the wireless phone, infrastructure networks, optical networks, and defense markets have experienced significant downturns and wide fluctuations in product supply and demand, often in connection with, or in anticipation of, maturing product cycles, capital spending cycles and declines in general economic conditions. This cyclical nature of these markets has led to significant imbalances in demand, inventory levels and production capacity. It has also accelerated the decrease of average selling prices per unit. We have experienced, and may experience again, periodic fluctuations in our financial results because of these or other industry-wide conditions. For example, if demand for communications applications were to decrease substantially, demand for the integrated circuits and modules, optical components and modules and SAW filter components in these applications would also decline, which would negatively affect our operating results. Conversely, we believe that current trends such as wireless phone portability, color screens and digital photo capability, and the development of wireless infrastructure in countries such as India and China will increase the demand for our products. We do not know, however, if this will lead to a sustained level of increased demand.

We depend on the continued growth of communications markets.

We derive all of our product revenues from sales of products and services for electronic communication applications. These markets are characterized by the following:

·cyclical demand;

·intense competition;

·rapid technological change; and

·short product life cycles, especially in the wireless phone market.

The electronic communications markets recovered some of their previous pattern of growth during the first half of 2004; however the markets softened during the third quarter. These markets may not resume historical growth rates and if the current market softness continues and demand for electronic communications applications declines, our operating results could suffer.

Products for electronic communications applications are often based on industry standards, which are continually evolving. Our future success will depend, in part, upon our ability to successfully develop and introduce new products based on emerging industry standards, which could render our existing products unmarketable or obsolete. If communications markets evolve to new standards, we may be unable to successfully design and manufacture new products that address the needs of our customers or that will meet with substantial market acceptance.

Our financial statements will have a significant material adverse charge when we are required to expense share-based payment to employees.

On December 16, 2004, the Financial Accounting Standards Board (‘‘FASB’’) issued SFAS No. 123(R), Share-Based Payment, which replaces SFAS No. 123, supersedes APB No. 25, and amends SFAS No. 95, Statement of Cash Flow. Currently, we use the Black-Scholes model for option expense

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calculation and present pro forma disclosure of the income statement effect in financial statement footnotes only under APB No. 25. However, under SFAS No. 123(R), pro forma disclosure of the income statement effects of share-based payments will no longer an alternative and all share-based payments to employees, including grants of employee stock options will be recognized in the financial statements based on their fair values. In addition, companies must also recognize compensation expense related to any awards that are not fully vested as of the effective date. Compensation expense for the unvested awards will be measured based on the fair value of the awards previously calculated in developing the pro forma disclosures in accordance with the provisions of SFAS No. 123. SFAS 123(R) is effective for public companies at the beginning of the first interim or annual period beginning June 15, 2005. We are currently evaluating our share-based employee compensation programs to determine what action, if any, may be required to reduce this potential charge when this statement becomes effective. In anticipation of the effective date, we have accelerated the vesting of options, excluding option grants to our board members and chief executive officer, with an option price equal or greater to $9.00 per share. The adoption of the standard is expected to have a material adverse impact on our financial statements.

In the event we are unable to satisfy regulatory requirements relating to internal controls, or if these internal controls over financial reporting are not effective, our business and our stock price could suffer.

Section 404 of Sarbanes-Oxley requires companies to do a comprehensive and costly evaluation of their internal controls. As a result, during 2004, we were required to perform an evaluation of our internal controls over financial reporting and have our auditor publicly attest to such evaluation. At December 31, 2004, management asserted, and our auditors attested, that we had no material weaknesses over internal controls over financial reporting and were in full compliance of Section 404. Our efforts to comply with Section 404 and related regulations regarding our management’s required assessment of internal control over financial reporting and our independent auditors’ attestation of that assessment has required, and continues to require, the commitment of significant financial and managerial resources. While we anticipate maintaining the integrity of our internal controls over financial reporting and all other aspects of Section 404, we cannot be certain that a material weakness will not arise. If a material weakness is discovered, we could be subject to regulatory investigations or sanctions, costly litigation or a loss of public confidence in our internal controls, which could have an adverse effect on our business and our stock price.

Our revenues are at risk if we do not introduce new products and/or decrease costs.

Historically, the average selling prices of our products have decreased over the products’ lives and we expect them to continue to do so. To offset these decreases, we rely primarily on achieving yield improvements and other cost reductions for existing products and on introducing new products that can be manufactured at lower costs. Selling prices for our SAW products have declined due to competitive pricing pressures and to the use of newer surface mount package devices that are smaller and less expensive than previous generation filters. For example, we have experienced declines in average selling prices for RF filters for wireless phones due to competitive pressure and for filters for base stations due to the use of surface mount packages. We believe our future success depends, in part, on our timely development and introduction of new products that compete effectively on the basis of price and performance and adequately address customer requirements. The success of new product and process introductions depends on several factors, including:

·proper selection of products and processes;

·successful and timely completion of product and process development and commercialization;

·market acceptance of our or our customers’ new products;

·achievement of acceptable manufacturing yields;

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·our ability to offer new products at competitive prices; and

·managing the cost of raw materials and manufacturing services.

Our product and process development efforts may not be successful and our new products or processes may not achieve market acceptance. To the extent that our cost reductions and new product introductions do not occur in a timely manner, our results of operations could suffer.

Our business could be harmed if systems manufacturers do not use components made of GaAs or other alternative materials we utilize.

Silicon semiconductor technologies are the dominant process technologies for integrated circuits and the performance of silicon integrated circuits continues to improve. System designers may be reluctant to adopt our products because of:

·their unfamiliarity with designing systems with our products;

·their concerns related to manufacturing costs and yields;

·their unfamiliarity with our design and manufacturing processes; and

·uncertainties about the relative cost effectiveness of our products compared to high performance silicon components.

Systems manufacturers may not use GaAs components because the production of GaAs integrated circuits has been, and continues to be, more costly than the production of silicon devices. Systems manufacturers may also be reluctant to rely on a jointly produced product because future supplies may depend on our continued good relationships with those vendors. As a result, we must offer devices that provide superior performance to that of traditional silicon based devices.

In addition, customers may be reluctant to rely on a smaller company like us for critical components. We cannot be certain that additional systems manufacturers will design our products into their systems or that the companies that have utilized our products will continue to do so in the future. If our products fail to achieve market acceptance, our results of operations would suffer.

A decline in the growth of wireless communications or in the continued acceptance of CDMA technology, particularly in emerging markets, would have an adverse impact on us.

Our products for CDMA-based systems, including filters for base stations and receivers and power amplifiers for wireless phones comprise a significant part of our business. CDMA technology is relatively expensive and there can be no assurance that emerging markets, such as China and India, will continue to adopt this technology. Our business and financial results would be adversely impacted if CDMA technology does not continue to gain acceptance or if demand does not strengthen.

Our business may be adversely impacted if we fail to successfully introduce new products or to gain our customers’ acceptance of those new products.

The markets for electronic communications applications in which we participate are subject to intense competition, rapid technological change, and short product life cycles. It is critical for companies such as ours to continually and quickly develop new products to meet the changing needs of these markets. If we fail to develop new products to meet our customers’ needs on a timely basis, we will not be able to effectively compete in these markets.

For example, we announced our intention to develop and market RF front-end modules for wireless phones at cost-effective prices. We will also need to continue to expand our wireless applications into CDMA and GSM applications. If we fail to design and produce these products in a manner acceptable to

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our customers or have incorrectly anticipated our customers’ demand for these types of products, our operating results could be harmed.

Our business will be adversely impacted if we do not continue to gain market acceptance of our wireless phone module products or develop effective manufacturing processes to produce them.

Our strategy for wireless phone products depends in large part upon the success of our design and marketing of wireless phone modules. Wireless phone modules represent the incorporation of some or all of the components of the wireless phone radio into a single product. If we are unable to design these modules in a manner acceptable to our customers or have incorrectly anticipated our customers’ demand for these products, our operating results will be adversely affected.

Manufacturing module products represents a departure from our traditional component manufacturing business. Production of module products entails different processes, costs, yields, and lead times. If we fail to successfully transition manufacturing resources to produce these products or are unable to do so cost-effectively, our operating results will be adversely affected. Our current experience is that increased module sales are having a negative impact on gross margins. If we are unable to reduce the costs of producing modules, total gross margin will decrease as the proportion of module sales increase.

If we fail to sell a high volume of products, our operating results will be harmed.

Because large portions of our manufacturing costs are relatively fixed, our manufacturing volumes are critical to our operating results. If we fail to achieve acceptable manufacturing volumes or experience product shipment delays, our results of operations could be harmed. During periods of decreased demand, our high fixed manufacturing costs negatively affect our results of operations. We base our expense levels in part on our expectations of future orders and these expense levels are predominantly fixed in the short-term. However, if the rate of growth of demand decreases, we will not be able to grow our revenue. If we receive fewer customer orders than expected or if our customers delay or cancel orders, we may not be able to reduce our manufacturing costs in the short-term and our operating results would be harmed. In addition, we are selling products to an increasing number of our customers on a consignment basis, which can limit our ability to forecast revenues.

If we do not sell our customer-specific products in large volumes, our operating results may be harmed.

We manufacture a substantial portion of our products to address the needs of individual customers. Frequent product introductions by systems manufacturers make our future success dependent on our ability to select development projects which will result in sufficient volumes to enable us to achieve manufacturing efficiencies. Because customer-specific products are developed for unique applications, we expect that some of our current and future customer-specific products may never be produced in sufficient volume and may impair our ability to cover our fixed manufacturing costs. Furthermore, if customers cancel or delay orders for these customer-specific products, our inventory of these products may become unmarketable or obsolete, which would negatively affect our operating results.

In addition, if we experience delays in completing designs, fail to obtain development contracts from customers whose products are successful, or fail to have our product designed into the next generation product of existing volume production customers, our revenues could be harmed.

Our excess manufacturing capacity may adversely affect our operating results if current market softness does not improve and if we are unable to sell our assets held for sale.

We have converted our Hillsboro facility from four-inch wafer production to six-inch wafer production and have expanded the capacity of our Texas operation with the acquisition of the Richardson facility. In addition, we have acquired additional manufacturing facilities and personnel in connection with our

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acquisition of businesses from Infineon and Agere. However, in the first quarter of 2005, we entered into an agreement to sell our Breinigsville, Pennsylvania facility to a real estate investment firm and lease back approximately 80,000 square feet of the 849,000 square foot facility to reduce excess manufacturing capacity (see Note 21 to our Consolidated Financial Statements).

These increases in capacity directly relate to significant increases in fixed costs and operating expenses. These increased costs could have an adverse effect on our results of operations during economic downturns. If the current market softness does not improve, and if we are unable to successfully complete the sale of our Pennsylvania facility and, to sell excess equipment associated with our manufacturing operations in Pennsylvania, Texas and Oregon, the decreased levels of demand and production in conjunction with these increased expense levels will have an adverse effect on our business, financial condition and results of operations.

We face challenges and risks associated with our acquisition of TFR Technologies, Inc. and, as a result, may not realize the expected benefit of this acquisition.

On January 5, 2005, we completed the acquisition of TFR Technologies, Inc., (“TFR”), a manufacturer and developer of thin film resonator filters for communication applications using bulk acoustic wave (“BAW”) or film bulk acoustic resonator (“FBAR”) technology.

We face risks associated with this acquisition such as:

·our ability to develop new products and generate new design wins;

·our ability to retain the employees and to integrate them into our corporate culture;

·our ability to retain existing partners and customers of this business;

·our ability to cost-effectively develop commercial products using BAW technology; and

·our ability to successfully integrate the BAW applications into our products.

If investors or financial or industry analysts do not think the integration of our acquisitions is proceeding as anticipated or that the benefits of the acquisitions may not be realized, the market price of our common stock may decline.

The market price of our common stock may decline if:

·the integration of our acquisitions is not completed in a timely and efficient manner;

·our assumptions about the business models and operations of the acquired businesses were incorrect or their role in our business does not develop as we planned;

·we are unable to introduce new products incorporating acquired technology;

·the effect of the acquisitions on our financial results is not consistent with the expectations of financial or industry analysts; or

·following the acquisitions, our stockholders that hold relatively larger interests in our company may decide to dispose of their shares because the results of the acquisitions are not consistent with their expectations.

We face risks of a loss of revenues as we are dependent on U.S. government and military contracts for a portion of our revenues.

While the U.S. government and military programs we are involved in generally have long lead times such as the F-22 and B-2 aircraft programs, they are also subject to delays or cancellation. Additionally, changes in government funding for defense or the loss of a significant defense program or contract would

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have a material adverse impact on our company. In 2004 and 2003, we received approximately 12% of our revenues from the U.S. government or from prime contractors on U.S. government sponsored programs principally for defense applications. Further, spending on defense contracts can vary significantly depending on funding from the U.S. government. During 2004, our government and military contracts were negatively impacted by the war in Iraq as the government allocated more business to funding the war and less on new development and long-term programs, such as the ones we are dependent upon.

We face risks from failures in our manufacturing processes, the maintenance of our fabrication facilities and the processes of our vendors.

The fabrication of integrated circuits, particularly those made of GaAs, is a highly complex and precise process. Our integrated circuits are currently manufactured on wafers made of GaAs, InP, and LiNbO3. Our SAW filters are currently manufactured primarily on LiNbO3, LiTaO3 and quartz wafers. During manufacturing, each wafer is processed to contain numerous integrated circuits or SAW filters. We may reject or be unable to sell a substantial percentage of wafers or the components on a given wafer because of:

·minute impurities;

·difficulties in the fabrication process, such as failure of special equipment, operator error or power outages;

·defects in the masks used to print circuits on a wafer;

·electrical and/or optical performance;

·wafer breakage; or

·other factors.

We refer to the proportion of final components that have been processed, assembled and tested relative to the gross number of components that could be constructed from the raw materials as our manufacturing yield. Compared to the manufacture of silicon integrated circuits, GaAs technology is less mature and more difficult to design and manufacture within specifications in large volume. In addition, the more brittle nature of GaAs wafers can result in lower manufacturing yields than with silicon wafers. We have in the past experienced lower than expected manufacturing yields, which have delayed product shipments and negatively impacted our results of operations. We may experience difficulty maintaining acceptable manufacturing yields in the future.

In addition, the maintenance of our fabrication facilities and our assembly facilities is subject to risks, including:

·the demands of managing and coordinating workflow between geographically separate production facilities;

·disruption of production in one of our facilities as a result of a slowdown or shutdown in our other facility; and

·higher operating costs from managing geographically separate manufacturing facilities.

We depend on certain vendors for components, equipment and services. We maintain stringent policies regarding qualification of these vendors. However, if these vendors’ processes vary in reliability or quality, they could negatively affect our products, and thereby, our results of operations.

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We face risks from an increasing proportion of our operations and employees being located outside of the U.S.

As we continue to expand our operations, an increasing number of our employees and operations are located in countries other than the U.S. The laws and governance of these countries may differ substantially from that of the U.S. and may expose us to increased risks of adverse impacts on our operations and results of operations. These risks could include: loss of protection of proprietary technology, disruption of production processes, interruption of freight channels and delivery schedules, currency exposure, financial institution failure, government expropriation, labor shortages, political unrest, and fraud.

Some of our manufacturing facilities are located in areas prone to natural disasters.

We have a SAW manufacturing and assembly facility located in Apopka, Florida. We also have assembly facilities for SAW products in San Jose, Costa Rica and for optoelectronics products in Matamoros, Mexico. Hurricanes, tropical storms, flooding, tornadoes, and other natural disasters are common events for the southeastern and Gulf of Mexico regions of the U.S. and in Central America which could affect our operations in these areas. Additionally, mud slides, earthquakes and volcanic eruptions could also affect our Costa Rican and Oregon facilities. Any disruptions from these or other events would have a material adverse impact on our operations and financial results.

Although we have manufacturing and assembly capabilities for our Sawtek products in both Apopka, Florida and San Jose, Costa Rica, we are only capable of fabricating wafers for those products in our Apopka facility and rely on our San Jose facility for the majority of our assembly operations. As a result, any disruption to either facility would have a material adverse impact on our operations and financial results.

The hurricanes encountered in the southeastern U.S. during the third quarter of 2004 did not cause any significant damage to our facilities.

The following table indicates the approximate exposure we believe we have with respect to natural disasters:

	Type of	Approximate Percent of Total*
Location	Disaster	Fixed Assets	Revenues
Apopka, Florida	H	10% - 15%		25	%
Dallas, Texas	H	40% - 45%		20	%
Hillsboro, Oregon	E, V	15% - 20%		30	%
Matamoros, Mexico	H	Under 5%		5	%
San Jose, Costa Rica	E, V, H	10% - 15%		25	%

E—Earthquake/mudslide

V—Volcanic eruption

H—Hurricane and/or tornado and flooding

*Figures are based on revenues for the year ended December 31, 2004 or fixed assets as of December 31, 2004. Additionally, the sum may be greater than 100% due to shared risks between locations.

A disruption in our Costa Rican or Mexican operations would have an adverse impact on our operating results.

Operating facilities in Costa Rica and Mexico presents risks of disruption such as government intervention, currency fluctuations, labor disputes, limited supplies of labor, power interruption, civil unrest, or war. Any such disruptions could have a material adverse effect on our business, results of operations and financial condition.

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Our Costa Rican operations have been a significant contributor to our operating results in the past. We expect our Costa Rican operations to continue to account for a significant proportion of our SAW operations in the future and our Mexican operation to be an important part of our optoelectronics component business. Any disruption in these operations would have a significant negative impact on our operating results.

We face risks from changes in tax regulations and a change in our Costa Rican subsidiary’s favorable tax status would have an adverse impact on our operating results.

We are subject to taxation in many different countries and localities worldwide. In some jurisdictions, we have employed specific business strategies to minimize our tax exposure. To the extent the tax laws and regulations in these various countries and localities could change, our tax liability in general could increase or our tax saving strategies could be threatened. Such changes could have a material adverse effect on our operations and financial results.

For example, our subsidiary in Costa Rica operates in a free trade zone. We expect to receive a 75% exemption from Costa Rican income taxes through 2007. The Costa Rican government continues to review its policy on granting tax exemptions to companies located in free trade zones and it may change our tax status or minimize our benefit at any time. Any adverse change in the tax structure for our Costa Rican subsidiary made by the Costa Rican government would have a negative impact on our net income. In 2004, the 75% tax exemption reduced our income tax expense by $2.7 million.

In addition, the U.S. Internal Revenue Service could assert additional taxes associated with our subsidiary due to differing interpretations of transfer pricing and other intercompany transactions.

Our business may be adversely affected by acts of terrorism or war.

Acts of terrorism or war could interrupt or restrict our business in several ways. We rely extensively on the use of air transportation to move our inventory to and from our vendors and to ship finished products to our customers. If war or terrorist acts cause air transportation to be grounded or severely interrupted, our business would be similarly adversely impacted.

In addition, war or acts of terrorism could cause existing export regulations to be changed, which could limit the extent to which we are allowed to export our products. To the extent that war or acts of terrorism also reduce customer confidence and create general economic weakness, our business would also be adversely affected.

A widespread outbreak of an infectious disease or illness could negatively affect our marketing, assembly and test, design, or other operations, making it more difficult and expensive to meet our obligations to our customers and could result in reduced demand from our customers.

A widespread outbreak of an infectious disease or illness could adversely affect our operations as well as demand from our customers. A number of countries in the Asia/Pacific region have experienced outbreaks of different infectious diseases and illnesses in the past and the U.S. has reported a current shortage in the influenza vaccine. As a result of widespread outbreaks, businesses can be temporarily affected and individuals can become ill or quarantined.

Our operating results could be harmed if we lose access to sole or limited sources of materials, equipment or services.

We currently obtain some components, equipment and services for our products from limited or single sources, such as certain ceramic packages and chemicals. Approximately 30% of our purchases are from sole sources. We purchase these components, equipment, supplies and services on a purchase order

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basis, do not carry significant inventories and generally do not have long-term supply contracts with these vendors. Our requirements are relatively small compared to silicon semiconductor manufacturers. Because we often do not account for a significant part of our vendors’ business, we may not have access to sufficient capacity from these vendors in periods of high demand. If we were to change any of our sole or limited source vendors, we would be required to requalify each new vendor. Requalification could prevent or delay product shipments, which could negatively affect our results of operations. In some cases, it would be difficult to replace these suppliers and requalification could take up to 12 months.

Our reliance on a limited number of suppliers for certain raw materials and parts may impair our ability to produce our products on time and in acceptable yields. For example, at times in the past, we have experienced difficulties in obtaining ceramic packages and lids used in the production of bandpass filters. At other times, the acquisition of relatively simple devices, such as capacitors, has been problematic because of the large demand swings that can occur in the cellular handset market for such components. Our optical components group is dependent upon a large number of suppliers, some of which are very small companies, for components that make up their components and sub-system product offerings such as transceivers. The success of these products is critical to the overall success of our business. The primary risk to our source of supply to manufacture these products is the currently depressed state of the optical network market and its potential impact on smaller vendors in terms of possible bankruptcy or inability to meet delivery schedules. In addition, our reliance on these vendors may negatively affect our production if the components, equipment or services vary in reliability or quality. If we are unable to obtain timely deliveries of sufficient quantities of acceptable quality or if the prices increase, our results of operations could be harmed.

Our operating results could be harmed if our subcontractors and partners are unable to fulfill our requirements.

We currently utilize subcontractors for the majority of our integrated circuit and module assemblies. Approximately 30% of our revenue is derived from components in which we utilize subcontractors for some portion of the production process. There are certain risks associated with dependence on third party providers, such as minimal control over delivery scheduling, adequate capacity during demand peaks, warranty issues and protection of intellectual property. Additionally, if these subcontractors are unable to meet our needs, it could prevent or delay production shipments that could negatively affect our results of operations. If we were to change any of our subcontractors, we would be required to requalify each new subcontractor, which could also prevent or delay product shipments that could negatively affect our results of operations. In addition, our reliance on these subcontractors may negatively affect our production if the services vary in reliability or quality. If we are unable to obtain timely service of acceptable quality or if the prices increase, our results of operations could be harmed.

If our products fail to perform or meet customer requirements, we could incur significant additional costs.

The fabrication of integrated circuits and SAW filters from substrate materials such and the modules containing these components is a highly complex and precise process. Our customers specify quality, performance and reliability standards that we must meet. If our products do not meet these standards, we may be required to rework or replace the products. Our products may contain undetected defects or failures that only become evident after we commence volume shipments. We have experienced product quality, performance or reliability problems from time to time. We are currently experiencing field failures and returns on some components and are collecting data for analysis and evaluation as to the extent of the problem. Other defects or failures may also occur in the future. If failures or defects occur, we could:

·lose revenues;

·incur increased costs such as warranty expense and costs associated with customer support;

·experience delays, cancellations or rescheduling of orders for our products; or

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·experience increased product returns or discounts.

We may face fines or our facilities could be closed if we fail to comply with environmental regulations.

Federal, state and local regulations impose various environmental controls on the storage, handling, discharge and disposal of chemicals and gases used in our manufacturing process. For our manufacturing facilities, we generally provide our own manufacturing waste treatment and contract for disposal of some materials. We are required to report usage of environmentally hazardous materials. The failure to comply with present or future regulations could result in fines being imposed on us and we could be required to suspend production or cease our operations. These regulations could require us to acquire significant equipment or to incur substantial other expenses to comply with environmental regulations. Any failure by us to control the use of, or to adequately restrict the discharge of, hazardous substances could subject us to future liabilities and harm our results of operations. Further, new environmental initiatives could affect the materials we currently use in production.

We have substantial indebtedness.

We have $223.8 million of indebtedness remaining in the form of our convertible subordinated notes due in 2007. We have additional indebtedness for operating and capital leases. We may incur substantial additional indebtedness in the future. The level of our indebtedness, among other things, could:

·make it difficult for us to obtain any necessary future financing for working capital, capital expenditures, debt service requirements or other purposes;

·require us to dedicate a substantial portion of our expected cash flow from operations to service our indebtedness, which would reduce the amount of our expected cash flow available for other purposes, including working capital and capital expenditures;

·limit our flexibility in planning for or reacting to, changes in our business; and

·make us more vulnerable in the event of a downturn in our business.

There can be no assurance that we will be able to meet our debt service obligations, including our obligation under the notes.

We may not be able to pay our debt and other obligations.

If our cash flow is inadequate to meet our obligations, we could face substantial liquidity problems. If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments on the notes or our other obligations, we would be in default under the terms thereof. Default under the indenture would permit the holders of the notes to accelerate the maturity of the notes and could cause defaults under future indebtedness we may incur. Any such default could have a material adverse effect on our business, prospects, financial condition and operating results. In addition, we can not assure you that we would be able to repay amounts due in respect of the notes if payment of the notes were to be accelerated following the occurrence of an event of default as defined in the indenture.

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Customers may delay or cancel orders due to regulatory delays.

The increasing significance of electronic communications products has increased pressure on regulatory bodies worldwide to adopt new standards for electronic communications, generally following extensive investigation of and deliberation over competing technologies. The delays inherent in the regulatory approval process may in the future cause the cancellation, postponement or rescheduling of the installation of communications systems by our customers. These delays have in the past had, and may in the future have, a negative effect on our sales and our results of operations.

We must improve our products and processes to remain competitive.

If technologies or standards supported by our or our customers’ products become obsolete or fail to gain widespread commercial acceptance, our results of operations may be materially impacted. Because of continual improvements in semiconductor technology, including those in high performance silicon technologies such as CMOS, where substantially more resources are invested than in other technologies such as GaAs or SAW products, we believe that our future success will depend, in part, on our ability to continue to improve our product and process technologies. We must also develop new technologies in a timely manner. In addition, we must adapt our products and processes to technological changes and to support emerging and established industry standards. We have and must continue to perform significant research and development into advanced material development such as InP, gallium nitride (“GaN”), and silicon carbide (“SiC”) to compete with future technologies of our competitors. These research and development efforts may not be accepted by our customers, and therefore may not achieve sustained production in the future. We may not be able to improve our existing products and process technologies, develop new technologies in a timely manner or effectively support industry standards. If we fail to do so, our customers may select another GaAs or SAW product or move to an alternative technology.

Our results of operations may suffer if we do not compete successfully.

The markets for our products are characterized by price competition, rapid technological change, short product life cycles, and heightened global competition. Many of our competitors have significantly greater financial, technical, manufacturing and marketing resources. Due to the increasing requirements for high-speed, high-frequency components, we expect intensified competition from existing integrated circuit and SAW device suppliers, as well as from the entry of new competitors to our target markets and from the internal operations of some companies producing products similar to ours for their internal requirements. Several key customers in the optoelectronics market have either captive internal suppliers or long-term contractual relationships with suppliers based on factors other than cost and quality.

For products in depressed or flat markets, such as for optical components, competition can be even more intense as companies attempt to maximize their revenue to cover as much of their fixed cost base as possible, even if it means selling products at a loss. There is no guarantee that pricing will stay at a level where we can sell our products on a profitable basis.

For our integrated circuit devices, we compete primarily with both manufacturers of high performance silicon integrated circuits as well as manufacturers of GaAs integrated circuits. Our silicon based competitors include companies such as Applied Micro Circuits Corporation, Maxim Integrated Products Inc., Motorola, Philips, STMicroelectronics N.V and others. Our GaAs-based competitors include companies such as Anadigics Inc., Eudyna, Inc., Raytheon, RF Micro Devices, Skyworks Solutions, Inc., Vitesse Semiconductor Corp. and others. For our SAW devices our competitors include companies such as ICS, Phonon, RF Monolithics, Vectron, EPCOS AG, Temex, TST, Fujitsu Microelectronics, Inc., Murata, Panasonic and others. Our major competitors across the optical markets include JDS Uniphase, Bookham Technologies, Avanex, Eudyna, OpNext, Mitsubishi, Sumitomo and others. Competition could also come

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from companies ahead of us in developing alternative technologies such as silicon germanium (“SiGe”) and InP integrated circuits and digital filtering and direct conversion devices.

Competition from existing or potential competitors may increase due to a number of factors including, but not limited to, the following:

·offering of new or emerging technologies in integrated circuit or optical component design using alternative materials such as InP;

·offering of new or emerging technologies such as digital filtering, BAW or direct conversion as alternatives to SAW filters;

·mergers and acquisitions of our customers by our competitors or other entities;

·longer operating histories and presence in key markets;

·development of strategic relationships between our competitors;

·ability to obtain raw materials at lower costs due to larger purchasing volumes or other advantageous supply relationships;

·access to a wider customer base; and

·access to greater financial, technical, manufacturing and marketing resources.

Additionally, manufacturers of high performance silicon integrated circuits have achieved greater market acceptance of their existing products and technologies in some applications.

We compete with both GaAs and silicon suppliers in all of our target markets. In microwave and millimeter wave applications, our competition is primarily from a limited number of GaAs suppliers, which are in the process of expanding their product offerings to address commercial applications other than aerospace. We currently have excess capacity in our GaAs fabrication plants and are in the process of evaluating the carrying value of these facilities, which may result in a potential impairment charge.

Competition is primarily based on performance elements such as speed, complexity and power dissipation, as well as price, product quality and ability to deliver products in a timely fashion. Due to the proprietary nature of our products, competition occurs almost exclusively at the system design stage. As a result, a design win by our competitors or by us typically limits further competition with respect to manufacturing a given design.

If we fail to integrate any future acquisitions, such as TFR Technologies, Inc., or successfully invest in privately held companies, our business will be harmed.

We face risks from any future acquisitions, including the following:

·we may fail to merge and coordinate the operations and personnel of newly acquired companies with our existing business;

·we may fail to retain the key employees required to make the operation successful;

·additional complexity may affect our flexibility and ability to respond quickly to market and management issues;

·we may experience difficulties integrating our financial and operating systems;

·we may experience additional financial and accounting challenges and complexities in areas such as tax planning, treasury management, financial reporting and risk management;

·our ongoing business may be disrupted or receive insufficient management attention;

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·we may not cost-effectively and rapidly incorporate the technologies we acquire;

·we may not be able to cost-effectively develop commercial products using the newly acquired technology, including the new acquired BAW technology used in military applications;

·we may not be able to recognize the cost savings or other financial benefits we anticipated;

·we may not be able to retain the existing customers of newly acquired operations;

·existing customers of the acquired operations may demand significant price reductions or other detrimental term changes as a result of the change in ownership;

·our corporate culture may clash with that of the acquired businesses;

·we may incur unknown liabilities associated with acquired businesses; and

·our increasing international presence resulting from acquisitions increases our exposure to foreign political, currency, and tax risks.

We face risks from equity investments in privately held companies, such as:

·we may not realize the expected benefits associated with the investment resulting in a partial or total write-off of this investment;

·we may need to provide additional funding to support the privately held company; or

·if their value decreases, we may realize losses on our holdings.

We may not successfully address these risks or any other problems that arise in connection with future acquisitions or equity investments in privately held companies.

We will continue to evaluate strategic opportunities available to us and we may pursue product, technology or business acquisitions or investments in strategic partners. In addition, in connection with any future acquisitions, we may issue equity securities that could dilute the percentage ownership of our existing stockholders, we may incur additional debt and we may be required to amortize expenses related to other intangible assets or record impairment of goodwill that may negatively affect our results of operations.

If we do not hire and retain key employees, our business will suffer

Our future success depends in large part on the continued service of our key technical, marketing and management personnel. We also depend on our ability to continue to identify, attract and retain qualified technical employees, particularly highly skilled design, process and test engineers involved in the manufacture and development of our products and processes. We must also recruit and train employees to manufacture our products without a substantial reduction in manufacturing yields. There are many other semiconductor companies located in the communities near our facilities and, as the economy improves, it may become increasingly difficult for us to attract and retain those employees. The competition for key employees is intense, and the loss of key employees could negatively affect us. Only four employees have employment agreements; our Chief Executive Officer, Chief Financial Officer, Vice President of Sales and the founder of TFR Technologies, Inc. (“TFR”), a company acquired on January 5, 2005. The founder of TFR is the only individual for whom we currently have key man life insurance in place.

Our business may be harmed if we fail to protect our proprietary technology.

We rely on a combination of patents, trademarks, trade secret laws, confidentiality procedures and licensing arrangements to protect our intellectual property rights. We currently have patents granted and pending in the U.S. and elsewhere and intend to seek further international and U.S. patents on our

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technology. In addition to our own inventions, we have acquired a substantial portfolio of U.S. and foreign patent applications in the optoelectronics area of technology. Many of these patent applications have issued as patents and will have lives that will extend 20 years from their respective filing dates, while other are still pending. We cannot be certain that patents will be issued from any of our pending applications or that patents will be issued in all countries where our products can be sold or that any claims allowed from pending applications or will be of sufficient scope or strength to provide meaningful protection or any commercial advantage. Our competitors may also be able to design around our patents. The laws of some countries in which our products are or may be developed, manufactured or sold, may not protect our products or intellectual property rights to the same extent as do the laws of the U.S., increasing the possibility of piracy of our technology and products. Although we intend to vigorously defend our intellectual property rights, we may not be able to prevent misappropriation of our technology. Our competitors may also independently develop technologies that are substantially equivalent or superior to our technology.

Our involvement in any patent dispute or other intellectual property dispute or action to protect trade secrets and know-how could have a material adverse effect on our business. Adverse determinations in any litigation could subject us to significant liabilities to third parties, require us to seek licenses from third parties and prevent us from manufacturing and selling our products. Any of these situations could have a material adverse effect on our business.

We have approximately 130 patents that expire from 2005 to 2023, with most expiring between 2015 and 2023. We currently do not have any significant revenue related to a patent that will soon expire.

Our ability to produce our products may suffer if someone claims we infringe on their intellectual property.

The integrated circuit and SAW device industries are characterized by vigorous protection and pursuit of intellectual property rights or positions, which have resulted in significant and often protracted and expensive litigation. If it is necessary or desirable, we may seek licenses under such patents or other intellectual property rights. However, we cannot be certain that licenses will be offered or that we would find the terms of licenses that are offered acceptable or commercially reasonable. Our failure to obtain a license from a third party for technology used by us could cause us to incur substantial liabilities and to suspend the manufacture of products. Furthermore, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Litigation by or against us could result in significant expense and divert the efforts of our technical personnel and management, whether or not the litigation results in a favorable determination. In the event of an adverse result in any litigation, we could be required to:

·pay substantial damages;

·indemnify our customers;

·stop the manufacture, use and sale of the infringing products;

·expend significant resources to develop non-infringing technology;

·discontinue the use of certain processes; or

·obtain licenses to the technology.

We may be unsuccessful in developing non-infringing products or negotiating licenses upon reasonable terms, or at all. These problems might not be resolved in time to avoid harming our results of operations. If any third party makes a successful claim against our customers or us and a license is not made available to us on commercially reasonable terms, our business could be harmed.

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Our ability to accurately predict revenues could deteriorate if we generate additional sales through inventory hubbing distribution facilities.

Several of our larger customers have requested that we send our products to independent warehouses known as inventory hubbing distribution facilities to assist them in inventory control. We do not recognize revenues from these hubbing arrangements until the customer takes delivery of the inventory and title of the goods passes to the customer. As a result, increased shipments to these facilities make it more difficult for us to predict short-term revenues as customers can take delivery of the products with little lead-time.

Our business may suffer due to risks associated with international sales.

Our sales outside of the U.S. comprised approximately 56% and 61% of revenues during 2004 and 2003, respectively. As a result, we face inherent risks from these sales, including:

·imposition of government controls;

·currency exchange fluctuations;

·longer payment cycles and difficulties related to the collection of receivables from international customers;

·reduced protection for intellectual property rights in some countries;

·unfavorable tax consequences;

·difficulty obtaining distribution and support;

·political instability; and

·tariffs and other trade barriers.

In addition, due to the technological advantages provided by GaAs integrated circuits in many military applications, the Office of Export Administration of the U.S. Department of Commerce must license all of our sales outside of North America. We are also required to obtain licenses from that agency for sales of our SAW products to customers in certain countries. If we fail to obtain these licenses or experience delays in obtaining these licenses in the future, our results of operations could be harmed. Also, because a majority of our foreign sales are denominated in U.S. dollars, increases in the value of the dollar would increase the price in local currencies of our products and make our products less price competitive.

We may be subject to a securities class action suit if our stock price falls.

Following periods of volatility in the market price of a company’s stock, some stockholders may file securities class action litigation. For example, in 1994, a stockholder class action lawsuit was filed against us, our underwriters and some of our officers, directors and investors, which alleged that we, our underwriters and certain of our officers, directors and investors intentionally misled the investing public regarding our financial prospects. We settled the action and recorded a special charge of $1.4 million associated with the settlement of this lawsuit and related legal expenses, net of accruals, in 1998.

In February 2003, several nearly identical putative civil class action lawsuits were filed in the United States District Court for the Middle District of Florida against Sawtek, Inc., our wholly owned subsidiary since July 2001. The lawsuits also named as defendants current and former officers of Sawtek and our company. The cases were consolidated into one action, and an amended complaint was filed in this action on July 21, 2003. The amended class action complaint is purportedly filed on behalf of purchasers of Sawtek’s stock between January 2000 and May 24, 2001, and alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act, as well as Securities and Exchange Commission Rule 10b-5, by making false and misleading statements and/or omissions to inflate Sawtek’s stock price and

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conceal the downward trend in revenues disclosed in Sawtek’s May 23, 2001 press release. The complaint does not specify the amount of monetary damages sought. Sawtek and the individual defendants filed their motion to dismiss on September 3, 2003, and briefing on the motion was completed on November 19, 2003. The court heard oral argument on November 21, 2003, and issued an order partially denying the motion to dismiss on December 19, 2003. Specifically, the court found that the complaint was not barred by the statute of limitations, but reserved ruling on the other aspects of the motion to dismiss. Because the statute of limitations issue is a novel question of law, the court stayed the proceedings in this case to allow the defendants to file an interlocutory appeal to the Eleventh Circuit Court of Appeals. Defendants duly filed for interlocutory appeal on January 22, 2004. Because the Court of Appeals is considering the identical issue in another matter, the appeal process has been stayed, pending the Court of Appeals’ decision in the other matter. We deny the allegations contained in the complaint and intend to continue our vigorous defense against these claims. This litigation may, however, require us to spend a substantial amount of time and money and could distract management from our day to day operations. In addition, there can be no assurance as to our success in defending ourselves against these charges. This and any future securities class action litigation could be expensive and divert our management’s attention and harm our business, regardless of its merits.

Our stock will likely be subject to substantial price and volume fluctuations due to a number of factors, many of which are beyond our control and may prevent our stockholders from reselling our common stock at a profit.

The securities markets have experienced significant price and volume fluctuations and the market prices of the securities of semiconductor companies have been especially volatile. The market price of our common stock may experience significant fluctuations in the future. For example, our common stock price has fluctuated from a high of approximately $9.93 to a low of approximately $3.20 during the fiscal year ended December 31, 2004. This market volatility, as well as general economic, market or political conditions could reduce the market price of our common stock in spite of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors, and in response, the market price of our common stock could decrease significantly.

Our certificate of incorporation and bylaws include anti-takeover provisions, which may deter or prevent a takeover attempt.

Some provisions of our certificate of incorporation and bylaws and provisions of Delaware law may deter or prevent a takeover attempt, including a takeover that might result in a premium over the market price for our common stock. These provisions include:

Cumulative voting.   Our stockholders are entitled to cumulate their votes for directors.

Stockholder proposals and nominations.   Our stockholders must give advance notice, generally 120 days prior to the relevant meeting, to nominate a candidate for director or present a proposal to our stockholders at a meeting. These notice requirements could inhibit a takeover by delaying stockholder action.

Stockholder rights plan.   We may trigger our stockholder rights plan in the event our board of directors does not agree to an acquisition proposal. The rights plan may make it more difficult and costly to acquire our company.

Preferred stock.   Our certificate of incorporation authorizes our board of directors to issue up to five million shares of preferred stock and to determine what rights, preferences and privileges such shares have. No action by our stockholders is necessary before our board of directors can issue the preferred stock. Our board of directors could use the preferred stock to make it more difficult and costly to acquire our company.

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Delaware anti-takeover statute.   The Delaware anti-takeover law restricts business combinations with some stockholders once the stockholder acquires 15% or more of our common stock. The Delaware statute makes it harder for our company to be acquired without the consent of our board of directors and management.

Item 7A.Quantitative and Qualitative Disclosure about Market Risk

Cash Equivalents, Short-term and Long-term Investments

Our investments in cash equivalents, short-term investments and long-term investments are classified as available-for-sale securities and are comprised of highly rated, short and long-term investments, such as U.S. government agencies, corporate debt securities, commercial paper and other such low risk investments, in accordance with an investment policy approved by our board of directors. All of these investments are held at fair value. Although we manage investments under an investment policy, economic, market and other events may occur which we cannot control. Although the risks are minimal, fixed rate securities may have their fair value adversely impacted because of changes in interest rates and credit ratings. Due in part to these factors, our future investment income may fall short of expectations because of changes in interest rates or we may suffer principal losses if we were to sell securities that have declined in value because of changes in interest rates or issuer credit ratings. We do not hold or issue derivatives, derivative commodity instruments or other financial instruments for trading speculative purposes. We do not believe that our results of operations would be materially impacted by an immediate 10% change in interest rates.

Debt

Our convertible subordinated notes due in 2007 have a fixed interest rate of 4%. Consequently, we do not have significant interest rate cash flow exposure on our long-term debt. However, the fair value of the convertible subordinated notes is subject to significant fluctuations due to their convertibility into shares of our stock and other market conditions. The fair value of these convertible subordinated notes is also sensitive to fluctuations in the general level of the U.S. interest rates. We would be exposed to interest rate risk, if we used additional financing to fund capital expenditures. The interest rate that we may be able to obtain on financings will depend on market conditions at that time and may differ from the rates we have secured in the past. The notes do not contain significant restrictive covenants.

The following table shows the fair values of our investments and convertible subordinated notes as of December 31, 2004:

(in thousands)	Cost		Fair Value
Cash and cash equivalents (including unrealized gains of $0)	$	90,004	$	90,004
Available-for-sale investments (including unrealized losses of $1,990)	300,323		298,333
Convertible subordinated notes	223,755		217,042

Foreign Currency Risk

We are exposed to currency exchange fluctuations, as we sell our products internationally and have operations in Costa Rica, Germany and Mexico. We manage the sensitivity of our international sales, purchases of raw materials and equipment and our Costa Rican operations by denominating most transactions in U.S. dollars. We do engage in limited foreign currency hedging transactions, principally to lock in the cost of purchase commitments and to hedge material cash flows that are not denominated in U.S. dollars, in accordance with a foreign exchange risk management policy approved by our board of directors. We primarily use currency forward contracts for this purpose. This hedging activity will reduce, but may not always entirely eliminate, the impact of currency exchange movements. As of December 31, 2004 and 2003, we had forward currency contracts outstanding of approximately $39.5 million and

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$18.4 million, respectively. The contracts designated as cash flow hedges at December 31, 2004 and 2003, were approximately $7.3 million and $2.4 million, respectively. The contracts designated as balance sheet hedges at December 31, 2004 and 2003, approximately $32.2 million and $16.0 million, respectively.

Item 8.Financial Statements and Supplementary Financial Data

Our consolidated financial statements at December 31, 2004 and 2003 and for each of the three years in the period ended December 31, 2004, together with the reports of our independent registered public accounting firm, are included in this Annual Report on Form 10-K on pages F-1 through F-40.

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A.Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404) as defined in Rules 13a-15(f) and 15d-15(f) under the U.S. Securities Exchange Act of 1934.  The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  Internal control over financial reporting includes those policies and procedures that:

·  pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

·  provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

·  provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Management has adopted the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) framework to evaluate the effectiveness of the Company’s internal control over financial reporting. Management has selected the COSO framework for its evaluation as it is a control framework recognized by the SEC and the Public Company Accounting Oversight Board, that is free from bias, permits reasonably consistent qualitative and quantitative measurement of the Company’s internal controls, is sufficiently complete so that relevant controls are not omitted and is relevant to an evaluation of internal controls over financial reporting.

Management’s evaluation of the results of testing included consideration of susceptibility to loss or fraud, subjectivity, complexity, the extent of judgment, the amount and volume of the transactions exposed to the deficiency, the existence of mitigating controls, the cause of detected exceptions, how the exception

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was detected, the pervasiveness of the exception, the significance of the deviation from policy, and the frequency of exceptions relative to the frequency of operation.

Indicators of deficiencies that may be material weakness and are at least significant include restatement, material misstatement in the current period, ineffective Audit Committee oversight, ineffective internal audit function, identification of fraud of any magnitude by management, significant deficiencies that remain uncorrected for some period of time, ineffective control environment, and the aggregate effect of all deficiencies.

As of December 31, 2004, management has assessed the effectiveness of the Company’s internal control over financial reporting, and has concluded that such control over financial reporting is effective. There are no material weaknesses in the Company’s internal control over financial reporting that have been identified by management and there were no changes in our internal control over financial reporting during the quarter ended December 31, 2004, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting

The Company’s independent registered public accounting firm, KPMG LLP has audited the consolidated financial statements of the Company for the year ended December 31, 2004 and has issued their reports on the consolidated financial statements and management’s assessment as to the effectiveness of internal controls over financial reporting under Auditing Standard No. 2 of the Public Company Accounting Oversight Board. Their report on the effectiveness of internal controls over financial reporting is included below. Their report on our consolidated financial statements is included in Item 8.

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Report of Independent Registered Public Accounting Firm

The Board of Directors
TriQuint Semiconductor, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that TriQuint Semiconductor, Inc. maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). TriQuint Semiconductor, Inc.’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on these consolidated financial statements, an opinion on management’s assessment, and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that TriQuint Semiconductor, Inc. maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, TriQuint Semiconductor, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of TriQuint Semiconductor, Inc. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2004, and our report dated March 14, 2005, expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Portland, Oregon
March 14, 2005

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Item 9B.Other Information

None

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PART III

ITEM 10.Directors and Executive Officers of the Registrant

Information required by this item is included in our definitive Proxy Statement under the captions Election of Directors and Section 16(a) Beneficial Ownership Reporting Compliance, to be filed with the Commission within 120 days after the conclusion of our fiscal year ended December 31, 2004 (April 30, 2005) pursuant to General Instructions G(3) of Form 10-K and is incorporated herein by this reference.

ITEM 11.Executive Compensation

We maintain employee benefit plans and programs in which our executive officers are participants. Copies of certain of these plans and programs are set forth or incorporated by reference as Exhibits to this report. Information required by Item 11 is included in our definitive Proxy Statement under the caption Executive Compensation and Other Matters, Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values, Employment Contracts and Termination of Employment and Change-of-Control Arrangements, Compensation Committee Interlocks and Insider Participation, Report of the Compensation Committee and Stock Price Performance Graph, to be filed with the Commission within 120 days after the conclusion of our fiscal year ended December 31, 2004 (April 30, 2005) pursuant to Regulation 14A, which information is incorporated herein by this reference.

ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information required by this item is included under the caption Common Stock Ownership of Certain Beneficial Owners and Management contained in our definitive Proxy Statement to be filed with the Commission within 120 days after the conclusion of our fiscal year ended December 31, 2004 (April 30, 2005) pursuant to Regulation 14A, which information is incorporated herein by this reference.

ITEM 13.Certain Relationships and Related Transactions

Information required by this item is included under the caption Certain Relationships and Related Transactions contained in our definitive Proxy Statement to be filed with the Commission within 120 days after the conclusion of our fiscal year ended December 31, 2004 (April 30, 2005) pursuant to Regulation 14A, which information is incorporated herein by this reference.

ITEM 14.Principal Accountant Fees and Services

Information required by this item is included under the caption Ratification of Independent Auditors contained in our definitive Proxy Statement to be filed with the Commission within 120 days after the conclusion of our fiscal year ended December 31, 2004 (April 30, 2005) pursuant to Regulation 14A, which information is incorporated herein by this reference.

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PART IV

ITEM 15.Exhibits and Financial Statement Schedules

(a)Documents filed as part of this report:

1.     Consolidated Financial Statements.   The following consolidated financial statements of TriQuint Semiconductor and its subsidiaries, together with the report thereon of KPMG LLP, required to be filed pursuant to Part II, Item 8 of this Form 10-K, are included in this Annual Report on Form 10-K on pages F-1 through F-40:

Report of Independent Registered Public Accounting Firm;

Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002;

Consolidated Balance Sheets at December 31, 2004 and 2003;

Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002;

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2004, 2003 and 2002; and

Notes to Consolidated Financial Statements.

2.     Consolidated Financial Statement Schedule.   The following consolidated financial statement schedule of TriQuint Semiconductor and its subsidiaries required to be filed pursuant to Part IV, Item 15 of this Form 10-K, is included in this Annual Report on Form 10-K on pages S-1 and S-2:

Schedule II—Consolidated Valuation and Qualifying Accounts; and

Report and Consent of Independent Registered Public Accounting Firm.

All other schedules are omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or notes thereto.

3.     Exhibits.

Exhibit No.	Description
3.1	Certificate of Incorporation, incorporated herein by reference to the corresponding exhibit to the Registrant’s Registration Statement on Form 8-B (File No. 000-22660) as declared effective by the SEC on February 18, 1997.
3.1.1	Certificate of Amendment to Certificate of Incorporation, incorporated herein by reference to the corresponding exhibit to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-22660) for the period ended September 30, 2000 filed with the SEC on November 13, 2000.
3.1.2	Certificate of Correction to Certificate of Incorporation, incorporated herein by reference to the corresponding exhibit to the Registrant’s Registration Statement on Form S-4 (File No. 333-62062) declared effective by the SEC on June 13, 2001.
3.1.3	Certificate of Designation of Series A Participating Preferred Stock, incorporated herein by reference to the corresponding exhibit to the Registrant’s Registration Statement on Form S-4 (File No. 333-62062) declared effective by the SEC on June 13, 2001.
3.1.4	Certificate of Amendment to Certificate of Incorporation, incorporated herein by reference to the corresponding exhibit to the Registrant’s Registration Statement on Form S-4 (File No. 333-62062) declared effective by the SEC on June 13, 2001.

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3.2	Bylaws of Registrant, incorporated herein by this reference to the corresponding exhibit to the Registrant’s Registration Statement on Form 8-B (File No. 000-22660) as declared effective by the SEC on February 18, 1997.
4.1	Preferred Shares Rights Agreement, dated as of June 30, 1998 between Registrant and ChaseMellon Shareholder Services, L.L.C., including the Certificate of Determination, the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A, B, and C, respectively, incorporated herein by reference to the corresponding exhibit to the Registrant’s Current Report on Form 8-A (File No. 000-22660) as declared effective by the SEC on July 24, 1998.
4.2	Indenture dated February 24, 2000 between the Registrant and State Street Bank and Trust Company of California, N.A., incorporated herein by reference to the corresponding exhibit to the Registrant’s Registration Statement on Form S-3 (File No. 333-36112) as declared effective by the SEC on May 16, 2000.
10.4	Letter Agreement dated November 22, 1991 between Registrant and Steven J. Sharp, incorporated herein by reference to the corresponding exhibit to the Registrant’s Registration Statement on Form S-1 (File No. 333-70594) as declared effective by the SEC on December 13, 1993.
10.18	1996 Stock Incentive Program and forms of agreement thereunder, incorporated herein by this reference to the corresponding exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-81273) as declared effective by the SEC on June 22, 1999, as amended by the Registrant’s Registration Statement on Form S-8 (File No. 333-39730), as declared effective by the SEC on June 20, 2000, as amended by the Registrant’s Registration Statement on Form S-8 (File No. 333-61582), as declared effective by the SEC on May 24, 2001, as amended by the Registrant’s Registration Statement on Form S-8 (File No. 333-105701), as declared effective by the SEC on May 30, 2003 and incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-22660) for the period ended September 30, 2003 filed with the SEC on November 4, 2003.
10.19	Form of Indemnification Agreement executed by Registrant and its officers and directors pursuant to Delaware reincorporation, incorporated herein by this reference to the corresponding exhibit to the Registrant’s Registration Statement on Form 8-B (File No. 000-22660) as declared effective by the SEC on February 18, 1997.
10.22	1998 Nonstatutory Stock Option Plan and forms of agreement thereunder, incorporated herein by reference to the corresponding exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-102085) as declared effective by the SEC on December 20, 2002 and incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-22660) for the period ended September 30, 2003 filed with the SEC on November 4, 2003.
10.23	1998 Employee Stock Purchase Plan and forms of agreement thereunder, incorporated herein by reference to the corresponding exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-66707) as declared effective by the SEC on November 3, 1998, as amended by the Registrant’s Registration Statement on Form S-8 (File No. 333-39732), as declared effective by the SEC on June 20, 2000, and by the Registrant’s Registration Statement on Form S-8 (File No. 333-61582), as declared effective by the SEC on May 24, 2001.
10.33	Sawtek Inc. Employee Stock Ownership and 401(k) Plan, incorporated herein by reference to the corresponding exhibit to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-22660) for the period ended June 30, 2002 filed with the SEC on August 13, 2002.

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10.34	Sawtek Inc. 2000 Implementation Agreement, incorporated herein by reference to the corresponding exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-65850) as declared effective by the SEC on July 25, 2001.
10.35	Sawtek Inc. 2000 Modified ESOP Loan Agreement, incorporated herein by reference to the corresponding exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-65850) as declared effective by the SEC on July 25, 2001.
10.36	Sawtek Inc. 2000 Renewed ESOP Note, incorporated herein by reference to the corresponding exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-65850) as declared effective by the SEC on July 25, 2001.
10.37	Sawtek Inc. Second Stock Option Plan, incorporated herein by reference to the corresponding exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-65850) as declared effective by the SEC on July 25, 2001.
10.38	Sawtek Inc. Stock Option Plan for Acquired Companies, incorporated herein by reference to the corresponding exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-65850) as declared effective by the SEC on July 25, 2001.
10.40*	Amended Sale and Transfer Agreement between Infineon Technologies AG, Infineon Technologies North America Corp., Registrant and TriQuint GmbH dated as of April 29, 2002, incorporated herein by reference to the corresponding exhibit to the Registrant’s Current Report on Form 8-K (File No. 000-22660) filed with the SEC on July 15, 2002.
10.41	Letter Agreement dated June 28, 2002 between Registrant and Ralph G. Quinsey, incorporated herein by reference to the corresponding exhibit to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-22660) for the period ended June 30, 2002 filed with the SEC on August 13, 2002.
10.42	Asset Purchase Agreement by and between Agere Systems Inc. and Registrant dated as of October 21, 2002, incorporated herein by reference to the corresponding exhibit to the Registrant’s Current Report on Form 8-K (File No. 000-22660) filed with the SEC on January 17, 2003.
10.42.1	Amendment No. 1 to Asset Purchase Agreement by and between Agere Systems Inc. and Registrant dated as of January 2, 2003, incorporated herein by reference to the corresponding exhibit to the Registrant’s Current Report on Form 8-K (File No. 000-22660) filed with the SEC on January 17, 2003.
10.42.2	Assignment and Bill of Sale and Assumption Agreement by and between Agere Systems Inc. and TriQuint Optoelectronics, Inc. dated as of January 2, 2003, incorporated herein by reference to the corresponding exhibit to the Registrant’s Current Report on Form 8-K (File No. 000-22660) filed with the SEC on January 17, 2003.
10.42.3	Assignment and Bill of Sale and Assumption Agreement by and between Agere Systems Inc. and TriQuint Technology Holding Co. dated as of January 2, 2003, incorporated herein by reference to the corresponding exhibit to the Registrant’s Current Report on Form 8-K (File No. 000-22660) filed with the SEC on January 17, 2003.
10.43.4	Intellectual Property Agreement by and between Agere Systems Inc. and Registrant dated as of January 2, 2003, incorporated herein by reference to the corresponding exhibit to the Registrant’s Current Report on Form 8-K (File No. 000-22660) filed with the SEC on January 17, 2003.
10.43.5	Purchase Agreement by and between Agere Systems Inc. and Registrant dated as of January 2, 2003, incorporated herein by reference to the corresponding exhibit to the Registrant’s Current Report on Form 8-K (File No. 000-22660) filed with the SEC on January 17, 2003.

71

10.43.7	Equity Purchase Agreement by and among Agere Systems Inc., Agere Systems International, LLC, Registrant, TriQuint International Holding Co., TriQuint International Holding LLC and Agere Systems de Mexico, S. DE R.L. DE C.V. dated as of January 2, 2003, incorporated herein by reference to the corresponding exhibit to the Registrant’s Current Report on Form 8-K (File No. 000-22660) filed with the SEC on January 17, 2003.
10.44	Letter Agreement dated November 20, 2002 between Registrant and Raymond A. Link, incorporated herein by reference to the corresponding exhibit to the Registrant’s Annual Report on Form 10-K (File No. 000-22660) for the year ended December 31, 2002 filed with the SEC on March 27, 2003.
10.44.1	Letter Agreement dated November 19, 2003 between Registrant and Raymond A. Link, incorporated herein by reference to the corresponding exhibit to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-22660) for the period ended March 31, 2004 filed with the SEC on May 10, 2004.
10.45	Letter Agreement dated April 9, 2004 between Registrant and Todd A. Debonis, incorporated herein by reference to the corresponding exhibit to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-22660) for the period ended March 31, 2004 filed with the SEC on May 10, 2004.
10.46	TriQuint Semiconductor, Inc. Nonqualified Deferred Compensation Plan,. incorporated herein by reference to the corresponding exhibit to the Registrant’s Current Report on Form 8-K (File No. 000-22660) filed with the SEC on November 2, 2004.
10.47	Agreement and Plan of Reorganization by and among Sawtek Inc., TFR Acquisition, Inc., and TFR Technologies, Inc., dated as of December 14, 2004.±
10.47.1	Amendment No. 1 to Agreement and Plan of Reorganization by and among Sawtek Inc., TFR Acquisition, Inc., and TFR Technologies, Inc., dated as of January 6, 2005.±
10.48*	Purchase and Sale Agreement by and between TriQuint Optoelectronics, Inc. and Anthem Partners, LLC, dated as of March 7, 2005.±
12.1	Computation of Ratios of Earnings to Fixed Charges±
21.1	Subsidiaries±
23.1	Report and Consent of Independent Registered Public Accounting Firm±
24.1	Power of Attorney±
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended±
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended±
32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley act of 2002±

*Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.

±Included in this Report

72

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TRIQUINT SEMICONDUCTOR, INC.
Dated: March 15, 2005	By:	/s/ RALPH G. QUINSEY
		Ralph G. Quinsey
		President and Chief Executive Officer (Principal Executive Officer)
Dated: March 15, 2005	By:	/s/ RAYMOND A. LINK
		Raymond A. Link
		Vice President, Finance and Administration, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)

73

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ralph Quinsey and Raymond A. Link, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

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

	Signature		Title		Date
/s/ RALPH G. QUINSEY		President and Chief Executive Officer		March 15, 2005
Ralph G. Quinsey		(Principal Executive Officer)
/s/ RAYMOND A. LINK		Vice President, Finance and Administration,		March 15, 2005
Raymond A. Link		Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)
/s/ STEVEN J. SHARP		Chairman of the Board		March 15, 2005
Steven J. Sharp
/s/ FRANCISCO ALVAREZ		Director		March 15, 2005
Francisco Alvarez
/s/ PAUL A. GARY		Director		March 15, 2005
Paul A. Gary
/s/ NICOLAS KAUSER		Director		March 15, 2005
Nicolas Kauser
/s/ WALDEN C. RHINES		Director		March 15, 2005
Walden C. Rhines
/s/ EDWARD F. TUCK		Director		March 15, 2005
Edward F. Tuck
/s/ WILLIS C. YOUNG		Director		March 15, 2005
Willis C. Young

74

TRIQUINT SEMICONDUCTOR, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Contents

Report of Independent Registered Public Accounting Firm	F-2
Financial Statements:
Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002	F-3
Consolidated Balance Sheets as of December 31, 2004 and 2003	F-4
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2004, 2003 and 2002	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002	F-6
Notes to Consolidated Financial Statements	F-7

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors
TriQuint Semiconductor, Inc.:

We have audited the accompanying consolidated balance sheets of TriQuint Semiconductor, Inc. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of TriQuint Semiconductor, Inc. and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of TriQuint Semiconductor, Inc.’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 14, 2005 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

/s/ KPMG LLP

Portland, Oregon

March 14, 2005

F-2

TRIQUINT SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

	Years Ended December 31,
	2004			2003			2002
Revenues	$	347,005		$	312,272		$	267,313
Cost of goods sold	246,576			225,264			172,197
Gross profit	100,429			87,008			95,116
Operating expenses:
Research, development and engineering	60,779			65,033			58,547
Selling, general and administrative	53,261			51,415			42,889
In-process research and development	—			500			8,575
Reduction in workforce	2,005			2,484			1,011
Impairment of long-lived assets and goodwill	15,533			—			94,740
Gain on disposal of equipment	(4,492		)	—			—
Lease termination costs	—			41,962			—
Total operating expenses	127,086			161,394			205,762
Loss from operations	(26,657		)	(74,386		)	(110,646		)
Other income (expense):
Interest income	7,126			6,135			11,869
Interest expense	(10,730		)	(12,009		)	(12,684		)
Foreign currency gain (loss)	2,121			(250		)	(37		)
Impairment charge—investments in other companies	(1,189		)	(2,387		)	(23,778		)
Gain on recovery of previously impaired investment	—			8,450			—
Gain on retirement of debt	539			—			6,009
Other, net	161			(75		)	4,948
Total other income (expense), net	(1,972		)	(136		)	(13,673		)
Loss before income tax	(28,629		)	(74,522		)	(124,319		)
Income tax expense (benefit)	425			(1,544		)	34,241
Net loss	$	(29,054	)	$	(72,978	)	$	(158,560	)
Loss per common share:
Basic and Diluted	$	(0.21	)	$	(0.54	)	$	(1.20	)
Common equivalent shares:
Basic and Diluted	136,936			133,920			131,969

The accompanying notes are an integral part of these financial statements.

F-3

TRIQUINT SEMICONDUCTOR, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

	December 31,
	2004			2003
ASSETS
Current assets:
Cash and cash equivalents	$	90,004		$	125,549
Investments in marketable securities	108,778			154,581
Accounts receivable, net	40,131			41,911
Inventories, net	59,746			65,286
Assets held for sale	17,654			24,423
Prepaid expenses	3,290			8,592
Other current assets	8,359			5,497
Total current assets	327,962			425,839
Long-term investments in marketable securities	189,555			120,134
Property, plant and equipment, net	199,518			221,678
Other noncurrent assets, net	5,365			25,149
Total assets	$	722,400		$	792,800
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	12,792		$	18,905
Accrued payroll	11,726			7,668
Deferred tax liability	7,607			7,607
Capital leases, current portion	275			—
Other accrued liabilities	24,242			29,144
Total current liabilities	56,642			63,324
Long-term liabilities:
Convertible subordinated notes	223,755			268,755
Other long-term liabilities	616			600
Total liabilities	281,013			332,679
Commitments and contingencies (Note 16)
Stockholders’ equity:
Common stock, $.001 par value, 600,000,000 shares authorized, 138,773,680 shares and 135,403,258 shares issued and outstanding at December 31, 2004 and December 31, 2003, respectively	139			135
Additional paid-in capital	472,675			460,593
Accumulated other comprehensive income (loss)	(1,707		)	59
Accumulated deficit	(29,720		)	(666		)
Total stockholders’ equity	441,387			460,121
Total liabilities and stockholders’ equity	$	722,400		$	792,800

The accompanying notes are an integral part of these financial statements.

F-4

TRIQUINT SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)

	Common Stock				Additional  Paid-in				Accumulated Other Comprehensive				Unearned ESOP				Retained Earnings (Accumulated				Total Stockholders’
	Shares	Amount			Capital				Income (Loss)				Compensation				Deficit)				Equity
Balance, December 31, 2001	131,141		$	131		$	451,703			$	458			$	(390	)		$	230,872			$	682,774
Issuance of common stock under plans	2,022		2			9,132				—				—				—				9,134
Income tax benefit of stock option plans	—		—			(8,074		)		—				—				—				(8,074		)
ESOP allocation	—		—			—				—				195				—				195
Accumulated other comprehensive income	—		—			—				203				—				—				203
Net loss	—		—			—				—				—				(158,560		)		(158,560		)
Balance, December 31, 2002	133,163		133			452,761				661				(195		)		72,312				525,672
Issuance of common stock under plans	2,240		2			7,832				—				—				—				7,834
ESOP allocation	—		—			—				—				195				—				195
Accumulated other comprehensive income	—		—			—				(602		)		—				—				(602		)
Net loss	—		—			—				—				—				(72,978		)		(72,978		)
Balance, December 31, 2003	135,403		135			460,593				59				—				(666		)		460,121
Issuance of common stock under plans	3,371		4			12,082				—				—				—				12,086
Accumulated other comprehensive income	—		—			—				(1,766		)		—				—				(1,766		)
Net loss	—		—			—				—				—				(29,054		)		(29,054		)
Balance, December 31, 2004	138,774		$	139		$	472,675			$	(1,707	)		$	—			$	(29,720	)		$	441,387

The accompanying notes are an integral part of these financial statements.

F-5

TRIQUINT SEMICONDUCTOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	Years Ended December 31,
	2004			2003			2002
Cash flows from operating activities:
Net loss	$	(29,054	)	$	(72,978	)	$	(158,560	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	41,113			39,516			38,312
Income tax benefit of stock option exercises	—			—			(8,074		)
Loss (gain) on disposal of assets	(2,987		)	856			287
Impairment of long-lived assets and goodwill	15,533			—			94,740
Lease termination costs	—			41,962			—
Acquired in-process research and development	—			500			8,575
Gain on retirement of debt	(539		)	—			(6,009		)
Realized gain on forward contract	—			—			(4,570		)
Gain on recovery of previously impaired investment	—			(8,450		)	—
Impairment charge—investments in other companies	1,189			2,387			23,778
Deferred income taxes	—			—			35,120
Unrealized ESOP compensation	—			195			195
Changes in assets and liabilities, net of assets acquired:
Accounts receivable, net	1,780			(7,042		)	(445		)
Inventories, net	5,540			(17,003		)	(1,447		)
Other assets	15,499			(2,591		)	3,574
Accounts payable and accrued expenses	(6,624		)	(5,122		)	5,068
Net cash provided by (used in) operating activities	41,450			(27,770		)	30,544
Cash flows from investing activities:
Purchase of available-for-sale investments	(526,695		)	(1,271,527		)	(1,747,399		)
Proceeds from note receivable	—			11,250			—
Maturity / sale of available-for-sale investments	500,985			1,279,817			1,873,366
Increase in restricted long-term assets	—			—			(2,861		)
Infineon acquisition	—			—			(49,557		)
IBM acquisition	—			—			(23,411		)
Agere acquisition	—			(40,151		)	—
Capital expenditures	(25,288		)	(27,934		)	(24,185		)
Investments in other companies	—			—			(17,103		)
Purchase of other investments	—			—			(14,475		)
Proceeds from sale of assets	5,792			10,895			—
Book value of assets sold							—
Net cash used in investing activities	(45,206		)	(37,650		)	(5,625		)
Cash flows from financing activities:
Principal payments under capital lease and installment note obligations	—			(341		)	(1,598		)
Repurchase of convertible subordinated notes	(43,875		)	—			(21,137		)
Issuance of common stock, net	12,086			7,834			9,089
Net cash provided by (used in) financing activities	(31,789		)	7,493			(13,646		)
Net decrease in cash and cash equivalents	(35,545		)	(57,927		)	11,273
Cash and cash equivalents at beginning of period	125,549			183,476			172,203
Cash and cash equivalents at end of period	$	90,004		$	125,549		$	183,476
Supplemental disclosures:
Cash paid for interest	$	10,225		$	10,762		$	11,744
Cash paid for income taxes	$	655		$	702		$	992

The accompanying notes are an integral part of these financial statements.

F-6

TRIQUINT SEMICONDUCTOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands unless otherwise noted, except share and per share amounts)

Note 1.   The Company

TriQuint Semiconductor, Inc. (the “Company”) is a supplier of high performance components and modules for communications applications. The Company’s focus is on the specialized expertise, materials and know-how for radio frequency (“RF”), intermediate frequency (“IF”) and optical applications. The Company’s markets include wireless phones, wireless infrastructure networks, optical networks, and defense. The Company provides customers with standard and custom product solutions as well as foundry services. The Company’s products are designed on various wafer substrates including compound semiconductor materials such as gallium arsenide (“GaAs”) and indium phosphate (“InP”) and other materials such as quartz, as well as using a variety of semiconductor device process technologies and surface acoustic wave (“SAW”) technology. The Company’s customers include major communication companies worldwide.

Note 2.   Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements for the periods presented include the accounts of the Company and its wholly owned subsidiaries, TriQuint Optoelectronics, Inc., TriQuint Semiconductor Texas LP, TriQuint Semiconductor GMBH, Sawtek, Inc. and Sawtek SRL. Investments in which the Company does not exercise significant influence are recorded at cost (generally less than a 20% interest). The Company has no investments in which it exercises significant influence but which it does not control (generally 20% to 50% ownership interest). All significant intercompany transactions and balances have been eliminated.

Reclassifications

Certain amounts in the December 31, 2003 and 2002 financial statements have been reclassified to conform to the December 31, 2004 presentation. Reclassifications made to the 2003 and 2002 financial statements include adjustments to reclassify auction rate preferred securities from cash and cash equiliviants to short-term investments. For the years ended December 31, 2003, 2002 and 2001, these reclassifications totaled $96,475, $42,750 and $89,525, respectively. Further, purchases and sales of available-for-sale securities were increased $928,800 and $875,075, respectively, for the year ended December 31, 2003, and $1,290,830 and $1,337,605, respectively, for the year ended December 31 2002, to account for the reclassification of the auction rate preferred securities. Additionally, in 2004 $22,000 of securities classified as short-term investments as of December 31, 2003 were reclassified as long-term investments. These reclassifications had no effect on net income or loss or stockholders’ equity as previously reported.

Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Examples of such estimates include, but are not limited

F-7

to, allowance for doubtful accounts, sales returns reserves, inventory reserves, income tax valuation allowance, warranty reserves, investment impairments, impairments of goodwill and long-lived assets and commitments and contingencies. On a regular basis, the Company reviews its estimates to ensure the estimates appropriately reflect changes in its business or as new information becomes available. Management believes that these estimates are reasonable; however, actual results could materially differ from these estimates.

Recognition of Revenues

Revenues are primarily derived from the sale of standard and customer-specific products and services. The Company also receives revenue from foundry services, non-recurring engineering fees and cost-plus contracts for research and development work, which collectively are less than 5% of consolidated revenue for any period. Sales of products are generally done through either the Company’s sales force and manufacturers’ representatives or through a distribution network. Revenues from standard and customer-specific products are recognized when title to the products pass to the buyer. Revenues from foundry services and non-recurring engineering fees are recorded when the service is completed or upon certain milestones as provided for in the agreements. Revenues from cost plus contracts are recognized on the percentage of completion method based on the costs incurred to date and the total contract amount, plus the contractual fee. Revenues from distributor sales are recognized when the product is sold to the distributor. The Company’s distribution agreements provide for selling prices that are fixed at the date of sale, although the Company occasionally offers price concessions which are specific, of a fixed duration and reserved for by the Company. Further, the distributor is obligated to pay the amount and it is not contingent on reselling the product; the distributor takes title to the product and bears substantially all of the risks of ownership; the distributor has economic substance; the Company has no significant obligations for future performance to bring about resale; and the amount of future returns can be reasonably estimated. The Company allows its stocking distributor to return products for warranty reasons as well as exchange products, within certain limitations. Customers can only return product for warranty reasons. If the Company is unable to repair or replace products returned under warranty, the Company will issue a credit for a warranty return. Revenues from stocking distributors in 2004, 2003 and 2002 were $4,679, $4,343 and $5,677, respectively. Additionally, the Company records a general reserve based on historical experience and judgment of expected levels of returns, as well, as the Company becomes aware of potential returns due to warranty or other issues.

Product Warranty

The Company sells product with warranties that the product will be free of faulty workmanship or defective materials and that it will conform to the Company’s published specifications or other specifications mutually agreed to with the customer. The Company has also established a reserve for potential catastrophic warranty claims for cases in which the obligation may extend beyond the repair and replacement of a faulty product. The Company estimates the potential liability associated with these warranties based on a combination of factors including historical product return experience, known product warranty issues with specific customers, and judgment of expected levels of returns based on economic and other factors. An accrual for expected warranty costs results in a charge to the financial results in the period recorded. This liability can be difficult to estimate and, if the Company experiences warranty claims in excess of projections, the Company may need to record additional accruals which would adversely affect the financial results. In some cases, the Company has also assumed the existing warranties on products previously sold by businesses that the Company has acquired, such as the Agere optoelectronics business.

F-8

The Company allows only our stocking distributor to return product for other than warranty reasons. If the Company is unable to repair or replace a product returned under warranty, the Company will issue a credit for a warranty return.

The liability for product warranties is included in “Other accrued liabilities” on the Company’s condensed consolidated balance sheet. The following table provides a reconciliation of the activity related to the Company’s reserve for warranty expense:

	Years Ended December 31,
	2004			2003			2002
Beginning balance	$	9,293		$	2,159		$	1,577
Additions	(442		)(2)	1,321			1,388
Deductions	(2,427		)	(3,487		)	(806		)
Acquisition related(1)	—			9,300			—
Ending balance	$	6,424		$	9,293		$	2,159

⁽¹⁾As part of the Agere acquisition in 2003, the Company assumed the existing warranties on products previously sold by Agere.

⁽²⁾During 2004, the Company continued to refine its methodology for determining its estimated warranty liability. As a result, the Company reduced the warranty liability approximately $1,588 in the first quarter of 2004.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, marketable securities, trade receivables and payables and forward currency contracts. The carrying amounts of these instruments approximate fair value because of their short-term maturities and variable interest rates. The Company also has 4% convertible subordinated notes due in 2007 (Note 11). The fair value of the convertible subordinated notes is subject to significant fluctuations due to their convertibility into shares of the Company’s stock and other market conditions. The fair value of these notes is also sensitive to fluctuations in the general level of the U.S. interest rates.

Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Cash and Cash Equivalents

The Company considers all highly liquid debt and other instruments purchased with an original maturity of three months or less to be cash equivalents. These investments include obligations of U.S. government agencies, corporate debt securities, commercial paper and money market funds.

Marketable Securities and Other Investments

The Company determines the appropriate classification of its investments at the time of acquisition and reevaluates such determination at each balance sheet date. The Company’s investment policy sets minimum credit quality criteria and maximum maturity limits on its investment to provide for safety of principal, liquidity and a reasonable rate of return. Investments for which maturity from the balance sheet date is greater than one year are classified as long-term investments in marketable securities. Available-for-sale securities are recorded at fair value, based on current market valuations. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are

F-9

reported as a separate component of other comprehensive income until realized. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of the securities sold. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. During 2004 the Company determined that its auction preferred securities were short-term investments and reclassified these holdings from cash and cash equilivants to short-term investments for the years ended December 31, 2004, 2003 and 2002.

At December 31, 2004 and 2003 the Company’s investments consisted of U.S. treasury securities and obligations of U.S. government agencies, municipal notes and bonds, corporate debt securities, auction rate preferred securities and other investments. All are classified as available-for-sale.

Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company establishes an allowance for the trade accounts receivable which represents the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance by performing on-going evaluations of its customers and their ability to make payments. The Company determines the adequacy of the allowance based on length of time past due, historical experience and judgment of economic conditions. Additionally, the Company has a credit policy that is applied to potential customers. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance sheet credit exposure related to its customers.

Inventories

The Company states its inventories at the lower of cost or market. The Company uses a combination of standard cost and moving average cost methodologies to determine its cost basis for its inventories. This methodology approximates actual cost on a first-in, first-out basis. In addition to stating inventory at a lower of cost or market valuation, the Company also evaluates it each period for excess quantities and obsolescence. This evaluation includes identifying those parts specifically identified as obsolete and reserving for them, analyzing forecasted demand versus quantities on hand and reserving for the excess, identifying and recording other specific reserves, and estimating and recording a general reserve based on historical experience and judgment of economic conditions. If future demand or market conditions are less favorable than projections and the Company fails to reduce manufacturing output accordingly, additional inventory reserves may be required and would have a negative impact on the Company’s gross margin in the period the adjustment is made.

Property, Plant & Equipment

Property, plant and equipment is recorded at cost. Machinery and equipment under capital leases is stated at the lower of the present value of the minimum lease payments at the beginning of the lease term or the fair value of the leased assets at the inception of the lease.

Depreciation is provided using the straight-line method over the estimated useful lives of the assets, which are as follows: three to seven years for machinery and equipment, furniture and fixtures and computer equipment and software and 39 years for buildings. Leasehold improvements are amortized over the shorter of the estimated life of the asset or the term of the related lease, generally three to seven years. Asset lives are reviewed periodically to determine if appropriate and adjustments are made as necessary. Depreciation begins at the time assets are placed in service. Maintenance and repairs are expensed as incurred. For the years ended December 31, 2004, 2003 and 2002, the Company incurred depreciation expense of $37,691, $35,029 and $35,502, respectively.

F-10

Goodwill and Other Intangible Assets

Goodwill represents the excess of costs over fair value of assets of business acquired. Other intangible assets consists primarily of patents, developed technology and other intangibles with estimable useful lives, ranging from two to 10 years at the time of acquisition. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead reviewed at least annually for impairment. Intangible assets with estimable useful lives are amortized over their respective estimated lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

The Company performs impairment tests annually and when events and circumstances warrant. The amount of other intangible asset impairment, if any, is measured based on projected discounted future operating cash flows using a discount rate reflecting the Company’s average cost of funds. Financing costs related to the issuance of debt are capitalized as other noncurrent assets, net and amortized to interest expense over the term of the related debt using the straight-line method, which approximates the effective interest method. Intangible assets are included in other non-current assets in the Consolidated Balance Sheet. See Note 9 for additional discussion of goodwill and other intangible assets.

Investments in Privately Held Companies

The Company has made a number of investments in small, privately held technology companies in which the Company holds less than 20% of the capital stock or hold notes receivable. The Company accounts for these investments at their cost unless their value has been determined to be other than temporarily impaired, in which case the investment is impaired to its current value. The investments are included in other noncurrent assets in the Consolidated Balance Sheet. The Company reviews the investments periodically for impairment and makes appropriate reductions in carrying value when an other-than-temporary decline is evident; however, for non-marketable equity securities, the impairment analysis requires significant judgment. The Company evaluates the financial condition of the investee, market conditions, and other factors providing an indication of the fair value of the investments. Adverse changes in market conditions or poor operating results of the investees could result in additional other-than-temporary losses in future periods. See Note 15 for further discussion of impairments that have been recorded by the Company.

Assets Held for Sale

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company has classified as held for sale, certain buildings, land, machinery and equipment, and intangible assets that the Company is marketing and expects to sell within one year.

Research and Development Costs

The Company charges research and development costs associated with the development of new products to expense when incurred. Engineering and design costs related to revenues on nonrecurring engineering services billed to customers are classified as cost of goods sold.

Advertising Costs

The Company expenses advertising costs as incurred.

Comprehensive Income (Loss)

The Company has adopted the provisions of SFAS No. 130, Reporting Comprehensive Income. The objective of SFAS No. 130 is to report all changes in equity that result from transactions and economic events other than transactions with owners. The components of comprehensive income include unrealized

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holding gains and losses on available-for-sale investments and unrealized gains and losses on cash flow hedges which are included as a separate component of stockholders’ equity until realized. For the years presented, other comprehensive loss approximates net income. The Components of accumulated other comprehensive income (loss) are as follows:

	Years Ended December 31,
	2004			2003			2002
Net loss	$	(29,054	)	$	(72,978	)	$	(158,560	)
Other comprehensive income (loss):
Net unrealized gain on cash flow hedges	326			(43		)	—
Net unrealized gain (loss) on available for sale investments	(2,092		)	(559		)	203
Comprehensive loss	$	(30,820	)	$	(73,580	)	$	(158,357	)

Earnings (Loss) Per Share

Basic earnings (loss) per share is calculated by dividing the net income (loss) for the period by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is calculated by dividing net income for the period by the weighted-average number of common shares outstanding during the period, increased by potentially dilutive common shares (“dilutive securities”) that were outstanding during the period. Dilutive securities include options granted pursuant to the Company’s stock option plans and potential shares related to the Employee Stock Purchase Plan and convertible subordinated debt. A reconciliation of the numerators and denominators of the basic and diluted earnings (loss) per share calculations for the years ended December 31, 2004, 2003 and 2002 is presented in Note 8.

Income Taxes

The Company is subject to taxation from federal, state and international jurisdictions. A significant amount of management judgment is involved with the Company’s annual provision for income taxes and the calculation of resulting deferred tax assets and liabilities. The Company evaluates liabilities for estimated tax exposures in jurisdictions of operation. These tax jurisdictions include federal, state and international tax jurisdictions. Significant income tax exposures include potential challenges on foreign entities, merger, acquisition and disposition transactions and intercompany pricing. Exposures are settled primarily through the completion of audits within these tax jurisdictions, but can also be affected by other factors. Changes could cause management to find a revision of past estimates appropriate. The liabilities are frequently reviewed by management for their adequacy and appropriateness. As of December 31, 2004, the Company was not currently under audit by the taxing authorities. The Company concluded federal income tax audits for the U.S. consolidated tax group on earlier years, most recently for the years 2000 and 2001. Tax periods within the statutory period of limitations not previously audited are potentially open for examination by the taxing authorities. Potential liabilities associated with these years will be resolved when an event occurs to warrant closure, primarily through the completion of audits by the taxing jurisdictions. The Company is scheduled for an audit of its German subsidiary (TriQuint Semiconductor GmbH) in 2005. Issues related to the German subsidiary include the Infineon Technologies purchase accounting, intercompany loans and transfer pricing. To the extent audits or other events result in a material adjustment to the accrued estimates, the effect would be recognized during the period of the event. Management believes that an appropriate liability has been established for estimated exposures, though the potential exists for results to materially vary from these estimates.

The Company records a valuation allowance to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets may not be realized. The Company considers future

F-12

taxable income and prudent and feasible tax planning strategies in determining the need for a valuation allowance. The Company evaluates the need for a valuation allowance on a regular basis and adjusts the balance as needed. These adjustments have an impact on the Company’s financial statements in the periods in which they are recorded. In 2002, the Company determined that a valuation allowance should be recorded against all of the Company’s deferred tax assets based on the criteria of SFAS No. 109, Accounting for Income Taxes. As December 31, 2004, this valuation allowance is still in place.

Foreign Currency Remeasurement

The Company’s functional currency for all operations worldwide is the U.S. dollar. For foreign operations with the U.S. dollar as the functional currency, monetary assets and liabilities are remeasured at the year-end exchange rates. Certain non-monetary assets and liabilities are remeasured using historical rates. Statements of operations are remeasured at an average exchange rate for the year. See Note 13 for additional information about the Company’s foreign currency remeasurement activity.

Derivatives and Hedging

The Company enters into forward currency contracts for hedging purposes and accounts for derivatives and hedging activities in accordance with SFAS No. 133, Accounting for Derivative Instruments and Certain Hedging Activities, as amended, which requires that all derivative instruments be recorded on the balance sheet at their respective fair values. The purpose of the forward currency hedges is to minimize the variability of cash flows associated with the anticipated transactions being hedged. As changes in foreign currency rates impact the U.S. dollar value transactions, the fair value of the forward contracts also changes, offsetting the foreign currency rate fluctuations. Changes in the fair value of derivatives are recorded in each period in income or other comprehensive income, depending on the types and effectiveness of the hedges.

On the date the derivative contract is entered into, the Company designates the derivative as either a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge), a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge), a foreign currency fair value or cash flow hedge (foreign currency hedge), or a hedge or a net investment in a foreign operation. For all hedging relationships the Company formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the item, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed, and a description of the method of measuring ineffectiveness. This process includes linking all derivatives that are designated as fair value, cash flow, or foreign currency hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. Changes in the fair-value of a derivative that is highly effective and that is designated and qualifies as a fair-value hedge, along with the loss or gain on the hedged asset or liability or unrecognized firm commitment of the hedged item that is attributable to the hedged risk, are recorded in earnings. Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash flow hedge are recorded in other comprehensive income to the extent that the derivative is effective as a hedge, until earnings are affected by the variability in cash flows of the designated hedged item. Changes in the fair value of derivatives that are highly effective as hedges and that are designated and qualify foreign-currency hedges are recorded in either earnings or other comprehensive income, depending on whether the hedge transaction is a fair-value hedge or cash flow hedge.

Additional information about the Company’s use of derivative instruments is presented in Note 13.

F-13

Impairments of Long-lived Assets to be Disposed of

Long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is determined by reference to market prices or through discounted cash flow analysis, depending on the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale are presented separately in the appropriate asset and liability sections of the balance sheet.

ESOP Compensation Expense

The Company has an employee stock ownership plan (“ESOP”), which is described in Note 18. The Company accounts for the ESOP shares acquired prior to January 1, 1993 in accordance with Statement of Position (“SOP”) 76-3, Accounting Practices for Certain Employee Stock Ownership Plans, which requires compensation expense to be measured using the cost basis of the shares when the shares are committed to be released to employees. Compensation expense associated with the allocation of the ESOP shares was $195 for the years ended December 31, 2003 and 2002. There was no allocated compensation expense for the year ended December 31, 2004 as all shares were allocated as of December 31, 2003.

Stock-Based Compensation

The Company has stock-based employee compensation plans, which are described in Note 18. The Company accounts for compensation cost related to employee stock options and other forms of employee stock-based compensation plans other than ESOP in accordance with the provisions of Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. The Company also applies SFAS No. 123, Accounting for Stock-Based Compensation, which allows entities to continue to apply the provisions of APB No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants as if the fair value based method defined in SFAS No. 123 had been applied. Beginning in the third quarter of 2005, the Company will be required to account for stock-based compensation under SFAS No. 123(R), Share-Based Payment, which will require the Company to recognize the cost on its financial statements. See “Recent Accounting Pronouncements” below for further discussion.

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The Company continues to apply the provisions of APB No. 25 in accounting for its plans. As the fair value was equal to the grant price on the date of grant, no compensation cost has been recognized for its stock-based compensation awards in the financial statements. Had the Company determined compensation cost based on the fair value at the date of grant for its stock-based compensation awards under SFAS No. 123, the Company’s net loss would have been adjusted to the pro forma amounts indicated in the following table:

(In thousands, except per share amounts)	Years Ended December 31,
	2004			2003			2002
Net loss as reported	$	(29,054	)	$	(72,978	)	$	(158,560	)
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards(1)	(37,042		)	(53,559		)	(56,253		)
Pro forma net loss	$	(66,096	)	$	(126,537	)	$	(214,813	)
Loss per share:
Basic and diluted—as reported	$	(0.21	)	$	(0.54	)	$	(1.20	)
Basic and diluted—pro forma	$	(0.48	)	$	(0.94	)	$	(1.63	)

⁽¹⁾On November 11, 2004, the Compensation Committee of the Board of Directors approved the acceleration of the vesting of those employee stock options, excluding option grants to the Company’s board members and chief executive officer, with an option price equal or greater to $9.00 per share. The acceleration was done as part of a comprehensive review of the Company’s entire benefits program. The decision to accelerate some of the Company’s options was made after review of the Company’s current stock price, the competitive standpoint for the Company from the options, the benefit of the options to the employees and the potential effects of SFAS No. 123(R). As a result of this action, approximately 832,793 options with varying remaining vesting schedules were subject to the acceleration provision and became immediately exercisable. The Company’s stock price on the acceleration date was $4.00, as reported on the Nasdaq National Market. The total pro-forma stock-based employee compensation expense stated of $37,042 for the year ended December 31, 2004 includes approximately $4,223 of expense resulting from this acceleration provision.

The pro forma amounts reflected above may not be reflective of future disclosures since the estimated fair value of stock options is amortized to expense as the options vest and additional options may be granted in future years. The fair value of employee stock options and employee stock purchase plans was estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions:

	Years Ended December 31,
Stock Option Plans	2004	2003	2002
Risk free interest rates	3.43%	3.52%	3.82%
Expected life in years	4-5 years	5-6 years	5-6 years
Expected volatility	87%	93%	97%
Per share weighted-average grant-date fair value	$4	$3	$5

	Years Ended December 31,
Employee Stock Purchase Plans	2004	2003	2002
Risk free interest rates	1.89%	1.24%	2.00%
Expected life in years	0-1 years	0-1 years	0-1 years
Expected volatility	60%	71%	95%
Per share weighted-average grant-date fair value	$2	$2	$2

F-15

Recent Accounting Pronouncements

On December 16, 2004, the Financial Accounting Standards Board (‘‘FASB’’) issued SFAS No. 123(R), Share-Based Payment, which replaces SFAS No. 123, supersedes APB No. 25, and amends SFAS No. 95, Statement of Cash Flow. Currently, the Company uses the Black-Scholes model for option expense calculation and presents pro forma disclosure of the income statement effect in financial statement footnotes only under APB No. 25. However, under SFAS No. 123(R), pro forma disclosure of the income statement effects of share-based payments will no longer be an alternative and all share-based payments to employees, including grants of employee stock options, will be recognized in the financial statements based on their fair values. In addition, companies must also recognize compensation expense related to any awards that are not fully vested as of the effective date. Compensation expense for the unvested awards will be measured based on the fair value of the awards previously calculated in developing the pro forma disclosures in accordance with the provisions of SFAS No. 123. SFAS 123(R) is effective for public companies at the beginning of the first interim or annual period beginning June 15, 2005. In anticipation of the effective date, the Company has accelerated the vesting of options, excluding option grants to the Company’s board members and chief executive officer, with an option price equal or greater to $9.00 per share. (see “Stock-Based Compensation” above for further discussion). The Company expects the adoption of the adoption of SFAS 123(R) will have a material impact on its results of operations however the Company has not yet determined the method of adoption, the effect of adopting SFAS 123(R), or whether adoption will result in amounts that are similar to the current pro forma disclosures under SFAS 123.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets, which amends APB Opinion No. 29, Accounting for Nonmonetary Transactions. SFAS No. 153 amends APB Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The statement is to be applied prospectively for nonmonetary assets exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not anticipate that the adoption of SFAS No. 153 will have a significant impact on the Company’s overall results of operations or financial position.

In November 2004, the FASB issued SFAS No. 151, Inventory Costs—an amendment of ARB No. 43, in an effort to converge U.S. accounting standards for inventories with International Accounting Standards. FAS No. 151 requires idle facility expenses, freight, handling costs, and wasted material (spoilage) costs to be recognized as current-period charges. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. FAS No. 151 will be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company is currently in compliance with the standard and it has not had a material impact on the Company’s financial statements.

In November 2004, the FASB ratified a consensus reached by the Emerging Issues Task Force (“EITF”) with respect to EITF Issue No. 03-13, Applying the Conditions in Paragraph 42 of FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, in Determining Whether to Report Discontinued Operations. A number of issues have arisen in practice in applying the criteria in paragraph 42, and the following broad categories of issues related to the application of both criteria in that paragraph have been identified: (a) whether the intent of the paragraph is that all operations and cash flows of the disposal component be eliminated from the ongoing operations of the entity or whether some minor level of operations or cash flow may remain; (b) if some insignificant level of operations or cash flows of the disposal component can continue without precluding discontinued operations reporting, the level at which “significance” should be measured; and (c) in applying the paragraph, the factors to consider in determining whether the selling entity has retained “significant continuing involvement” in the disposed

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component. At December 31, 2004, the Company did not have a component that had been identified for disposal. The Company will adopt this EITF January 1, 2005 and do not expect it to have a material effect on the Company’s consolidated financial statements

In October 2004, the FASB ratified the consensus reached by the EITF with respect to EITF No. 04-10, Determining Whether to Aggregate Operating Segments That Do Not Meet the Quantitative Thresholds, which clarifies the guidance in paragraph 19 of SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. According to EITF Issue No. 04-10, operating segments that do not meet the quantitative thresholds can be aggregated only if aggregation is consistent with the objective and basic principles of SFAS No. 131, the segments have similar economic characteristics, and the segments share a majority of the aggregation criteria listed in items (a)-(e) in paragraph 17 of SFAS No. 131. The consensus applies to fiscal years ending after October 13, 2004. EITF 04-10 has not resulted in a change to our SFAS No. 131 disclosure.

On September 30, 2004, the EITF reached consensus on Issue No. 04-08, The Effect of Contingently Convertible Debt on Diluted Earnings per Share, which changes the treatment of contingently convertible debt instruments in the calculation of diluted earnings per share. EITF No. 04-08 provides that the shares issuable upon conversion of these debt instruments be included in the earnings per share computation, if dilutive, regardless of whether the contingent conditions for their conversion have been met. This change does not have any effect on the Company’s net income, however it may affect the related earnings per share amounts. EITF No. 04-08 will be effective for reporting periods ending after December 15, 2004, however the adoption of EITF No. 04-08 is not expected to have an impact on the Company’s earnings per share as the Company’s outstanding convertible debt is not contingently convertible debt.

Note 3.Business Combinations

Agere’s Optoelectronics Business

On January 2, 2003, the Company completed an acquisition of a substantial portion of the optoelectronics business of Agere Systems Inc. (“Agere”) for $40,000 in cash plus acquisition costs and certain assumed liabilities. The transaction included the products, technology and some facilities related to Agere’s optoelectronics business, which includes active and passive components, amplifiers, transceivers and other products. As part of the acquisition, the Company has also assumed operation of the back-end assembly and test operations associated with these components at a leased facility in Matamoros, Mexico.

The Company acquired this business to expand its market and product offerings in its optical networks business.Through a transition services agreement, Agere provided some business infrastructure services to the Company for a short period following the close of the transaction to ensure seamless transition of the business operations. On May 6, 2003, the Company sold a portion of the assets acquired in this transaction for $6,600 in cash. Further, during the fourth quarter of 2004, the Company initiated a repositioning of its optoelectronics business strategy and incurred charges of $3,417 related to the restructuring (see Note 4).

Details of the purchase price were as follows:

Cash paid at closing	$	40,000
Acquisition costs	200
Total purchase price	$	40,200

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The purchase price was allocated to the assets and liabilities based on fair values as follows:

Property, plant and equipment	$	36,271
Inventory	12,000
Product line held for sale	6,600
Precious metals held for sale	3,295
Identifiable intangibles	2,178
Equipment held for sale	1,000
Other assets	1,105
Acquired in-process research and development	500
Liabilities assumed	(22,749		)
Allocated purchase price	$	40,200

In connection with this acquisition, the Company considered a number of factors, including valuations of some of the assets, when determining the purchase price allocation. Acquired in-process research and development (“IPR&D”) assets were expensed at the date of acquisition in accordance with FASB Interpretation (“FIN”) No. 4, Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk adjusted rate. The project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated based upon management’s estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating costs. The projections assume that the technologies will be successful and that the product’s development and commercialization will meet management’s time schedule. The discount rate was 35% and was based on the novelty of the technology, the risks remaining to complete each project, and the extent of the Company’s familiarity with the technology.

As part of the purchase, the Company assumed $22,749 of liabilities, which included a warranty liability estimated to be $9,300. The warranty liability was based upon Agere’s engineering data that forecasted product failure rates applied to historical revenue. Agere had offered extended product warranties that ranged from three years to lifetime. Additionally, Agere had a robust process for preparing returned product that TriQuint was not able to duplicate because TriQuint discontinued a significant number of product lines and did not hire the employees that performed the repairs for the discontinued product lines.

IBM’s Wireless Phone Chipset Business

On July 1, 2002, the Company completed the acquisition of a portion of the assets of IBM’s wireless phone chipset business to increase the Company’s product line for wireless phone handsets. The acquisition was accounted for as a purchase transaction and the results of operations are included in the consolidated financial statements from the date of acquisition. At the closing date, the Company paid $21,750 to IBM for the related assets, of which $5,000 represented an earnout deposit which was returned to the Company in 2003. The Company acquired this business to expand its market and product offerings in the wireless communications industry and to strengthen its capabilities in silicon germanium process technology.

F-18

Details of the purchase price were as follows:

Cash paid at closing	$	21,750
Acquisition costs	1,661
Less: Earnout deposit	(5,000		)
Total purchase price	$	18,411

The purchase price was allocated to the assets and liabilities based on fair values as follows:

Machinery and equipment	$	1,959
Goodwill	7,682
Acquired in-process research and development	5,900
Technology licenses	1,635
Current technology	1,077
Backlog	158
Allocated purchase price	$	18,411

In a transaction related to this acquisition, the Company transferred $1.3 million of the acquired machinery and equipment, $1.0 million of the technology licenses, $733 of acquired workforce and $11.0 million in cash to a privately held technology company in exchange for a note receivable of $14.0 million.

In connection with this acquisition, the Company considered a number of factors, including valuations of some of the assets, when determining the purchase price allocation. Acquired IPR&D assets, a primary component of the purchase which included wide band code division multiple access (“WCDMA”), receivers and voltage controlled oscillators (“VCOs”) that are based on a wafer substrate different from gallium arsenide and developed technology related to the VCOs and low noise amplifiers, were expensed at the date of acquisition in accordance with FIN 4. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk adjusted rate. Each project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated based upon management’s estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating costs. The projections assume that the technologies will be successful and that the product’s development and commercialization will meet management’s time schedule. The discount rate utilized was 29% and was based on the novelty of the technology, the risks remaining to complete each project, and the extent of the Company’s familiarity with the technology. The goodwill acquired in this transaction was allocated to the Oregon operating unit.

In late 2002, the Company evaluated its product strategy and revenue projections related to the acquired products as well as its overall strategy and determined that the forecasts for these products were substantially lower. Further, the Company concluded that further investment would not earn a satisfactory return, and the product lines were abandoned. As a result, the Company wrote off all goodwill associated with this acquisition (see Note 15).

Infineon Technologies AG GaAs Business

On July 1, 2002, the Company completed the acquisition of the GaAs business of Infineon Technologies AG (“Infineon”) to strengthen its European presence and to expand its market and product offerings in the wireless communications industry. The acquisition was accounted for as a purchase

F-19

transaction and the results of operations are included in the consolidated financial statements from the date of acquisition. At the closing date, the Company paid Infineon €50,000 ($53,559), of which €10,000 ($9,910) represented an earnout deposit. Subsequent to the close of the acquisition, certain fixed assets were also purchased for €5,500, less €1,500 in funded liabilities acquired ($4,000 at various spot rates). Additionally, the minimum purchase price of the acquisition was subsequently adjusted to €42,000 from €45,000 (a $3,528 reduction) in the fourth quarter of 2002. In the fourth quarter of 2004, Infineon repaid the contingent earnout deposit of €10,000 ($13,288 at the exchange rate at the time of receipt) and refunded the Company for the €3,000 reduction in the purchase price ($3,986 at the exchange rate at the time of receipt). See Note 19 for further discussion of the Infineon receivable.

Details of the purchase price were as follows:

Cash paid at closing	$	53,559
Acquisition costs	568
Less: Earnout deposit	(9,910		)
Total purchase price	$	44,217

The purchase price was allocated to the assets and liabilities based on fair values as follows:

Machinery and equipment	$	5,440
Goodwill	24,024
Identifiable intangibles	13,373
Acquired in-process research and development	2,675
Liabilities assumed	(1,295		)
Allocated purchase price	$	44,217

In connection with this acquisition, the Company considered a number of factors, including valuations of some of the assets, when determining the purchase price allocation. Acquired IPR&D assets were expensed at the date of acquisition in accordance with FIN 4. The value assigned to IPR&D related to research projects for which technological feasibility had not been established and no future alternative uses existed. The fair value was determined using the income approach, which discounts expected future cash flows from projects under development to their net present value using a risk adjusted rate. Each project was analyzed to determine the following: the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated based upon management’s estimates of revenues expected to be generated upon completion of the projects and the beginning of commercial sales and related operating costs. The discount rates utilized ranged from 25% to 50% and were based on the novelty of the technology, the risks remaining to complete each project, and the extent of the Company’s familiarity with the technology. The goodwill acquired in this transaction was allocated to the Oregon operating unit. In addition, as of December 31, 2002, the Company wrote off all goodwill associated with this acquisition.

In late 2002, the Company evaluated its product strategy and revenue projections related to the acquired products as well as its overall strategy and determined that the forecasts for these products were substantially lower. Further, the Company concluded that further investment would not earn a satisfactory return. As a result, the Company wrote off all goodwill associated with this acquisition (see Note 15).

Note 4.Optoelectronics Repositioning

During the fourth quarter of 2004, the Company initiated a repositioning of its optoelectronics product strategy. The repositioning was done to focus on InP components, chips, subassemblies and

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technology and to discontinue further investment in pluggable optical modules. The Company believes the restructuring will allow the Company to be a more focused supplier of optical components, InP laser and detector chips, optical sub-assemblies and technology to the optical networking market.

As a result of the restructuring, the Company recorded a charge of $2,337 related to severance costs as it will eliminate approximately 110 employees in Pennsylvania and approximately 90 employees in Mexico (see Note 14). The Company also transferred certain optoelectronic assets, including module-related capital equipment ($7,158) and related intangible assets ($972) to held for sale (see Note 10). Additionally, the Company recorded charges of $519 related to the write down of surplus optoelectronics module-related capital assets and $108 related to modules inventory that was scrapped, both results of the restructuring and included in cost of goods sold (see Note 15). Other charges related to the restructuring include a charge of $445 related to purchase order cancellations and $8 for other services also included in costs of goods sold. The restructuring will eliminate significant ongoing costs of the business beginning in mid-2005.

During the fourth quarter, the Company also recorded an impairment charge on the Company’s Pennsylvania facility it had classified as held-for-sale (see Note 15).

Note 5.Change in Accounting Estimate

In preparing its financial statements, the Company is required to make certain estimates, including those for uncollectible accounts receivable, excess and obsolete inventory and potential warranty claims, and make adjustments as necessary. In connection with the acquisition of the optoelectronics business from Agere Systems in January 2003, the Company established warranty reserves using engineering failure rate data obtained from Agere. Subsequent to the acquisition, the Company continued to refine its estimates for the warranty reserves and developed data from returns during the course of 2003. Accordingly, during fiscal year 2004, the Company recorded a reduction to the warranty reserve of its optoelectronics operation totaling approximately $1,588 due to a change in the methodology we use to estimates reserves. In addition, the Company identified a portion of the remaining warranty reserve balance for catastrophic warranty claims. This was done in response to increasing requests by the Company’s customers for catastrophic warranty clauses that extend the Company’s obligation beyond the repair and replacement of a faulty product, to include other losses the Company’s customers may experience as a result of failures in the Company’s products. The Company experienced one such warranty claim during 2003. During 2004, warranty reserves decreased $2,869, largely due to the $1,588 reduction noted above and the resolution of certain warranty claims.

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Note 6.Selected Financial Statement Information

	December 31, 2004				December 31, 2003
Accounts receivable, net:
Trade accounts receivable		$	40,957			$	43,122
Allowance for doubtful accounts		(826		)		(1,211		)
		$	40,131			$	41,911
Inventories, net:
Raw materials		$	25,577			$	27,405
Work-in-process		22,850				31,973
Finished goods		24,205				22,709
		72,632				82,087
Reserve for excess and obsolescence		(12,886		)		(16,801		)
		$	59,746			$	65,286
Property, plant and equipment, net:
Land		$	19,691			$	19,691
Buildings		92,113				89,226
Leasehold improvements		1,299				2,014
Machinery and equipment		238,073				236,017
Furniture and fixtures		4,903				6,972
Computer equipment and software		21,042				20,269
Assets in process		3,961				6,385
		381,082				380,574
Accumulated depreciation		(181,564		)		(158,896		)
		$	199,518			$	221,678
Accrued payroll:
Accrued payroll and taxes		$	7,009			$	3,092
Accrued vacation and sick pay		4,717				4,576
		$	11,726			$	7,668
Other accrued liabilities:
Warranty liability		$	6,424			$	9,293
Accrued interest payable		2,983				3,583
Sales return reserve		1,287				4,387
Other		13,548				11,881
		$	24,242			$	29,144

Note 7.Investments in Marketable Securities

The cost, gross unrealized holding gains, gross unrealized holding losses and fair value of available-for-sale investments by types and classes of security at December 31, 2004 and 2003 consisted of the following:

At December 31, 2004	Cost		Gross unrealized holding gains			Gross unrealized holding losses			Fair Value
Available-for-sale:
U.S. treasury securities and obligations of U.S government agencies	$	230,829		$	15		$	1,819	$	229,025
Corporate debt securities and other	69,494			1			187		69,308
	$	300,323		$	16		$	2,006	$	298,333

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At December 31, 2003	Cost		Gross unrealized holding gains			Gross unrealized holding losses			Fair Value
Available-for-sale:
U.S. treasury securities and obligations of U.S government agencies	$	128,280		$	257		$	208	$	128,329
Corporate debt securities and other	146,333			53			—		146,386
	$	274,613		$	310		$	208	$	274,715

Investments by contractual maturity are as follows (in thousands):

	December 31, 2004				December 31, 2003
	Cost		Fair Value		Cost		Fair Value
Due or callable in one year or less	$	109,151	$	108,778	$	154,552	$	154,581
Due after one year through 42 months	$	191,172	$	189,555	$	120,061	$	120,134

Note 8.Earnings (Loss) Per Share

The schedule below summarizes the elements included in the calculation of basic and diluted earnings (loss) per share for the years ended December 31, 2004, 2003 and 2002.

(in thousands, except per share amounts)	Years Ended December 31,
	2004			2003			2002
Net loss	$	(29,054	)	$	(72,978	)	$	(158,560	)
Weighted-average shares outstanding—Basic	136,936			133,920			131,969
Dilutive securities	—			—			—
Weighted-average shares outstanding—Dilutive	136,936			133,920			131,969
Net loss per shares—Basic and dilututed	$	(0.21	)	$	(0.54	)	$	(1.20	)

For the years ended December 31, 2004, 2003 and 2002, options and other exercisable convertible securities totaling 18,127 shares, 16,600 shares and 14,997 shares, respectively, were excluded from the calculation as their effect would have been antidilutive.

Note 9.Goodwill and Other Acquisition-Related Intangible Assets

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, the Company is required to perform impairment tests of goodwill at least annually or when events and circumstances warrant. The Company performs this test in the fourth quarter of each year. At December 31, 2004, there were no events or circumstances warranting impairment and therefore the Company did not record any impairments of intangible assets during the year. However, in late 2002, the Company evaluated its goodwill and intangible assets related to previous acquisitions and, due to revenue projections related to the acquired products as well as its overall strategy and determined that the forecasts for these products being substantially lower than anticipated, the Company concluded that further investment would not earn a satisfactory return. As a result, the Company wrote off all goodwill associated with the acquisitions (see Note 15). Goodwill and other acquisition-related intangible assets, other than those held for sale, are included in “Other non-current assets, net” on the Company’s consolidated balance sheet. IP licenses and sublicenses held for sale are included in “Assets held for sale” on the Company’s consolidated balance sheet.

F-23

Information regarding the Company’s other acquisition-related intangible assets is as follows:

	Useful		December 31, 2004								December 31, 2003
	Life (Years)		Gross		Accumulated Amortization			Net Book Value			Gross		Accumulated Amortization			Net Book Value
Non-Amortizing:
Goodwill			$	450		$	—		$	450	$	450		$	—		$	450
IP licenses and sublicenses held for sale(1)			972			—			972		—			—			—
Amortizing:
Patents, trademarks and other		2 - 10	7,416			5,605			1,811		9,594			4,493			5,101
Total intangible assets			$	8,838		$	5,605		$	3,233	$	10,044		$	4,493		$	5,551

(1)As part of the Company’s repositioning of its optoelectronics operation in the fourth quarter of 2004, approximately $972 of net intellectual property (“IP”) licenses and sublicenses were reclassified as held for sale.

Amortization expense of intangible assets was approximately $2,318, $3,254 and $1,503 for the years ended December 31, 2004, 2003 and 2002, respectively. Amortization expense related to intangible assets at December 31, 2004 in each of the next five fiscal years and beyond is expected to be as follows:

2005	$	1,007
2006	227
2007	227
2008	175
2009	175
Thereafter	—
	$1,811

Note 10.Assets Held for Sale

At December 31, 2004 the Company had $17,654 of assets held for sale as compared to $24,423 at December 31, 2003. The balance at December 31, 2004 includes $16,130 of assets associated with its optoelectronics operations in Pennsylvania and Mexico, $674 related to certain equipment located at the Company’s Texas facility, and $850 of assets obtained from the liquidation of an investment the Company had in another company. The assets associated with the Company’s optoelectronics operations include the Company’s Pennsylvania facility ($8,000) that the Company had classified as held for sale in the second quarter of 2003. In the fourth quarter 2004, a potential buyer of the facility notified the Company that it was not going to purchase the facility and as a result, the Company recorded an impairment charge of $14,305 to reduce the value of the building to its current level (see Note 15). Other assets associated with the Company’s optoelectronics operations that are classified as held for sale as of December 31, 2004 consists of a variety of equipment used for optoelectronics fabrication and assembly operations at the Company’s Pennsylvania and Mexico facilities ($7,158) and intangible assets related to the optoelectronics business ($972), both of which were classified as held for sale as a result of the Company’s restructuring announced in the fourth quarter of 2004 (see Note 4). During 2004, the Company sold $1,453 of assets classified as held for sale by its optoelectronics operations. The Company also classified $14 of assets at its Texas facility as held for sale and sold $60 of assets classified as held for sale during the year. No gain or loss was recorded on these asset sales. Additionally, in the fourth quarter of 2004, the Company recorded an impairment of $320 on a portion of the assets at its Texas facility classified as held for sale (see Note 15). No assets were sold in 2003 and no gains were recognized

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For the year ended December 31, 2004, the Company reclassified $1,092 of assets held for sale to held and used at their carrying value. This reclassification is the result of the assets being transferred to other locations to replace or enhance existing capacity. No adjustment for depreciation expense for the period of time the assets were classified as held for sale was necessary as the assets had never been placed into service. On March 7, 2005, we entered into an agreement to sell the Pennsylvania facility to a real estate investment firm and lease back approximately 80,000 square feet of space for continuing operations. The sale is subject to customary closing procedures and is expected to be completed with 90 days of signing the agreement (see Note 21).

Note 11.Convertible Subordinated Notes

In February and March 2000, the Company completed the sale of $345,000 aggregate principal amount of 4% convertible subordinated notes due in 2007, raising approximately $333,900 net of fees and expenses. The notes are unsecured obligations of the Company, subordinated to all of the Company’s present and future senior indebtedness and do not contain significant restrictive covenants. Interest on the notes is payable in arrears semiannually on each March 1 and September 1. The notes are convertible, at the option of the holder, at any time prior to redemption or maturity into shares of the Company’s common stock at a conversion price per share of $67.80, subject to certain adjustments. Financing costs related to the issuance of the debt are capitalized as “Other noncurrent assets, net” on the Company’s condensed balance sheet, and are amortized over the term of the related debt using the straight-line method which approximates the effective interest method.

During 2004, the Company repurchased approximately $45,000 of these notes at a cost of $43,875. The 2004 repurchase resulted in a gain on retirement of long term debt of $539, net of the write-down of associated capitalized bond issuance costs of $586. During 2002, the Company repurchased approximately $27,745 of these notes at a cost of $21,137. The 2002 repurchase resulted in a gain on retirement of long term debt of $6,009, net of the write-down of associated capitalized bond issuance costs of $599. During 2001, the Company repurchased approximately $48,500 of these notes at a cost of $39,100, which includes the write-down of associated capitalized bond issuance cost of $1,228. The 2001 repurchase resulted in a gain of $9,401. At December 31, 2004, the Company had $233,755 of convertible subordinated notes outstanding and net capitalized issuance costs of $2,228 as compared to $268,755 of convertible subordinated notes outstanding and $3,917 of net capitalized issuance costs at December 31, 2003. There were no repurchases during 2003. During the years ended December 31, 2004, 2003 and 2002, the Company amortized $1,104, $1,233 and $1,306, respectively, of the capitalized issuance costs.

Note12.   Income Taxes

Domestic and foreign pre-tax income (loss) for the years ended December 31, 2004, 2003 and 2002 were as follows:

	Years Ended December 31,
	2004			2003			2002
Domestic	$	(47,020	)	$	(88,889	)	$	(139,158	)
Foreign	18,391			14,367			14,839
	$	(28,629	)	$	(74,522	)	$	(124,319	)

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Income tax expense (benefit) for the years ended December 31, 2004, 2003 and 2002, consisted of the following:

	Years Ended December 31,
	2004			2003				2002
Current:
Federal	$	(335	)		$	741		$	6,063
State	(53		)		(1,916		)	1,087
Foreign	813				(369		)	—
	425				(1,544		)	7,150
Deferred:
Federal	—				—			24,554
State	—				—			2,537
Foreign	—				—			—
	—				—			27,091
Net income tax expense (benefit)	$	425			$	(1,544	)	$	34,241

The effective tax rate differed from the federal statutory income tax rate for the years ended December 31, 2004, 2003 and 2002 were as follows:

	Years Ended December 31,
	2004		2003			2002
Tax computed at the federal statutory rate	(35.0	)%		(35.0	)%	(35.0	)%
State income tax, net of federal effect	(2.0	)		(2.0	)	(2.0	)
Increase in valuation allowance	19.6			38.1		69.7
Non-deductible merger costs	2.8			—		—
Foreign sales benefit	—			—		(0.8	)
Current benefit of tax exemption of Costa Rican subsidiary	(11.2	)		(5.7	)	(5.6	)
Subpart F income	28.6			3.0		—
IRS settlement	—			2.7		—
Other, including credits, tax-exempt interest income and dividend income	(1.3	)		(3.2	)	1.2
Effective tax rate	1.5	%		(2.1	)%	27.5	%

The tax effects of significant items comprising the Company’s deferred tax asset and liability as of December 31, 2004 and 2003 were as follows:

	December 31,				December 31,
	2004				2003
Deferred tax assets:
Amortization and depreciation		$	42,960			$	55,323
Capital research and development expenditures		7,147				8,434
Reserves and allowances		2,949				4,215
Accrued liabilities		5,100				1,430
Impairment of investment in other companies		5,697				5,463
Inventory		8,729				6,839
Net operating loss carryforwards		50,360				44,670
Capital loss carryforwards		6,174				6,174
Research and development, and other credits		1,807				2,338
Other		124				—
Total deferred tax asset		131,047				134,886
Valuation allowance		(131,047		)		(134,886		)
Net deferred tax asset		$	—			$	—

F-26

The Company recorded a tax provision of $425 and $34,241 for the years ended December 31, 2004 and 2002, and a tax benefit of $1,544 for the year ended December 31, 2003. The provision for fiscal year 2004 does not reflect a benefit for current year losses due to a full valuation allowance against deferred tax assets. The net change in total valuation allowance for the deferred tax assets for the year ended December 31, 2004 was a net decrease of $3,839. For the years ended December 31, 2003 and 2002 the net change in the valuation allowance for the deferred tax assets were net increases of $40,868 and $88,003, respectively.

In assessing the realizability of deferred tax assets, SFAS No. 109 establishes a more likely than not standard. If it is determined that it is more likely than not that deferred tax assets will not be realized, a valuation allowance must be established against the deferred tax assets. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the associated temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

Although the Company anticipates future sustained profitability, SFAS No. 109 requires that recent historical operating performance and income projections be considered in assessing the realizability of the deferred tax assets. The more likely than not assessment was principally based upon the losses generated during 2004, 2003 and 2002.

At December 31, 2004, the Company had approximately $133,536 of net operating loss carryforwards to offset future U.S. taxable income, expiring from 2005 through 2024, $101,631 for state tax purposes, expiring 2007 through 2024 and $1,446 for foreign tax purposes, which carry forward indefinitely. Additionally, during 2003 the Company generated $16,248 of capital loss carryforwards to offset future capital gains, which will expire in 2008. The Company has placed a full valuation allowance against the tax effect of all net operating and capital loss carryforwards.

For 2004, the Company generated $5,520 of net operating loss carryforwards resulting from stock option transactions, which were offset by a valuation allowance. The Company will record benefits to additional paid in capital as the net operating losses are realized pursuant to SFAS No 109. Due to the creation of a valuation allowance against deferred tax assets during 2002, the Company recorded a decrease to additional paid-in capital of $8,074 to reverse the benefit of net operating loss carryforwards generated from stock option transaction.

During 2003, the Company settled an IRS tax examination relating to the 2000 and 2001 tax years, which resulted in the reduction of net operating loss carryforwards by $2,292 and $10,105, respectively.

The Company provided for deferred taxes on the non-repatriated earnings of its subsidiary in Costa Rica prior to fiscal 2000. This subsidiary benefited from a complete exemption from Costa Rican income taxes through 2003 and 75% exemption thereafter through 2007. In 2000, the Company determined that its investments in Germany and Costa Rica were permanent and that its earnings are considered indefinitely reinvested; and, accordingly, no provision for U.S. federal and state income taxes has been provided for 2004, 2003 or 2002. In the event the Costa Rican subsidiary remits these earnings to the U.S. parent, the earnings may be subject to U.S. federal and state income taxes. The estimated unrecognized deferred income tax liability on these unremitted earnings at December 31, 2004, 2003 and 2002 was $46,285, $44,300 and $39,600, respectively.

On October 22, 2004, the American Jobs Creation Act was signed into law, which included a deduction of 85% of certain foreign earnings that are repatriated, provided certain restrictions are met. The Company may elect to apply this provision to qualifying earnings repatriations in either 2005 or 2006. The Company has started an evaluation of the effects of the repatriation provisions. The range of possible

F-27

amounts that the Company is considering for repatriation under the provision is between zero and $80.0 million. The related potential range of income tax is between zero and $4.6 million.

Note 13.   Foreign Currency Exchange

The Company’s functional currency for all operations worldwide is the U.S. dollar. For foreign operations with the U.S. dollar as the functional currency, monetary assets and liabilities are remeasured at the period-end exchange rates. Certain non-monetary assets and liabilities are remeasured using historical rates. Statements of operations are remeasured at the prior months balance sheet rate. To manage its exposure to foreign currency exchange rate fluctuations, the Company enters into derivative financial instruments, including hedges. The ineffective portion of the gain or loss for derivative instruments that are designated and qualify as cash flow hedges is immediately reported as a component of other income (expense), net. The effective portion of the gain or loss on the derivative instrument is initially recorded in accumulated other comprehensive income (“OCI”) as a separate component of stockholders’ equity and subsequently reclassified into earnings in the period during which the hedged transaction is recognized into earnings. For the years ended December 31, 2004, the Company reported foreign currency gains from remeasurement and hedging activity of $2,121, compared to foreign currency losses from remeasurement and hedging activity of $250 for the year ended December 31, 2003 and losses from remeasurement of $37 for the year ended December 31, 2002, respectively. The gain recognized in fiscal year 2004 was primarily due to the remeasurement of a Euro receivable during the year (see Note 19 for further discussion).

As of December 31, 2004 and 2003, the Company had forward currency contracts outstanding of $39,492 and $18,438, respectively. The contracts designated as cash flow hedges at December 31, 2004 and 2003 were approximately $7,331 and $2,448, respectively. The contracts designated as balance sheet hedges at December 31, 2004 and 2003, were approximately $32,161 and $15,990, respectively.

Note 14.   Severance Costs

In the fourth quarter of 2004, the Company repositioned its optoelectronics product strategy (see Note 4). As part of this restructuring the Company terminated approximately 110 employees in Pennsylvania and approximately 90 employees in Mexico. At the time of the restructuring, the Company incurred severance and related payroll costs of $2,337 and anticipates recording an additional $908 during the first half of 2005. As of December 31, 2004, a liability of $1,485 was included in “Other Accrued liabilities” related to the severance charges recorded in the fourth quarter of 2004. Also during 2004, the Company accrued and recorded as a charge to earnings $428 for severance costs associated with a reduction in force of approximately 30 employees assigned to its Texas operations. The charge was a result of the Company’s ongoing efforts to align costs and capacity with its levels of production and revenue. As of December 31, 2004, no liability remained for the unpaid portion of these severance costs.

Due to continued losses in the optoelectronics operations and excess design engineering capacity, the Company adopted a plan to reduce its operating costs and streamline its available capacity in June 2003. As part of this plan, the Company determined that it would terminate approximately 80 employees associated with its optoelectronics operation in Breinigsville, Pennsylvania and its design center in Munich, Germany. During the year ended December 31, 2003, the Company accrued and recorded as a charge to earnings $2,633 for expected severance costs related to the plan as an operating expense. This amount was adjusted $160 during the third quarter of 2003 to reflect a reduction in the number of employees originally expected to be impacted from the reduction in workforce due to greater than expected attrition of the workforce which reduced the estimated involuntary workforce reductions. As of December 31, 2004, no liability remained for the unpaid portion of the severance costs related to the German operations. As of December 31, 2003, the liability for the unpaid portion of the severance costs was $752.

F-28

As part of the Agere purchase in the first quarter of 2003, the Company recorded an accrued severance liability of $1,800. This amount was reduced by $614 during the first quarter of fiscal year 2004 to reflect a reduction in the number of employees originally expected to be impacted from the acquisition due to normal attrition of the workforce which reduced the estimated involuntary workforce reductions. Additionally, in the second quarter of fiscal year 2004, the remaining liability of $147 was eliminated due to continued attrition and the reversal of the decision to lay off certain individuals. As of December 31, 2004, no liability remained for these severance costs. As of December 31, 2003, the liability for the unpaid portion of the severance costs was $838.

In 2002, the Company reduced its workforce by approximately 117 employees at its Oregon and Texas facilities as a result of the decreased demand for products and the underutilization of its fabrication facilities. The $1,011 charge associated with these reductions was recorded in the third quarter of 2002 and there was no remaining liability at December 31, 2002.

The following table details the severance activity for periods presented:

	Years Ended December 31,
	2004			2003			2002
Beginning severance liability	$	1,590		$	—		$	—
Severance charges incurred	2,766			2,644			1,011
Severance liability assumed from acquisition(1)	—			1,800			—
Severance disbursements	(2,110		)	(2,694		)	(1,011		)
Adjustments to severance liability	(761		)	(160		)	—
Ending severance liability	$	1,485		$	1,590		$	—

(1)As part of the Agere acquisition in 2003, the Company recorded an accrued severance liability of $1,800 during the first quarter of 2003. During the first half of 2004 the Company reduced the liability due to attrition and the reversal of a decision to lay off certain employees.

Note 15.   Impairments

Impairments of Long-Lived Assets and Intangibles

During fiscal years 2004 and 2002, the Company recorded impairment charges of $15,533 and $94,740 on long-lived assets and intangible assets to reduce the carrying value of these assets to their current market values. The impairments were due to business decisions, current and projected market conditions resulting in excess capacity and reduced cash flow projection on these assets. Factors incorporated in the projections of future cash flows included reduced revenue projections of future years compared to prior projections, continued excess capacity, the continuation of the trend toward the movement of production to offshore facilities and independent third-party valuations. These factors, combined with further reductions in the demand for, and value of, used semiconductor fabrication equipment resulted in additional impairments over and above those recorded. The impairments taken during 2004 are as follows:

·An impairment charge of $14,305 was recognized in the fourth quarter of 2004 associated with the Company’s optoelectronics facility located in Pennsylvania. This facility was acquired from Agere Systems in 2003, and was recorded on the Company’s books at approximately $30,000, reduced by purchase accounting adjustments to $22,307. During the second quarter of 2003 the facility was classified as an asset held for sale, and has been actively marketed by a national realtor since May 2003. The Company had been in negotiations to sell this facility to an agency of the Commonwealth of Pennsylvania for more than one year at a price approximating book value. However in October 2004, the Company was informed by the agency that it would not purchase the facility. Concurrently, the market for large specialized high technology manufacturing plants in eastern Pennsylvania declined since the acquisition due to an excess of similar properties available

F-29

for sale. In December 2004, the Company began negotiating a sale of the facility to a qualified firm that is expected to yield a net cash amount of approximately $8,000, the current estimated market value for this facility. As the facility was classified as held for sale, there is no reduction in anticipated depreciation expense.

·An impairment charge of $519 was recorded during the fourth quarter of 2004 related to the write down of surplus optoelectronics assets. The charge was a result of the Company’s repositioning of its business strategy, including the exit of certain product lines in the optoelectronics market (see Note 4). The charge taken reduced the carrying value of the assets to their current market value as determined by management, which considered a number of factors including an evaluation by independent equipment experts.

·An impairment charge of $320 was recorded during the fourth quarter of 2004 related to certain excess gallium arsenide wafer manufacturing equipment that were classified as held for sale during 2002 (see below). The impairment reduced the carrying value of these assets to their market values as determined by management, which considered a number of factors including an independent appraisal. As these assets were classified as held for sale, there is no reduction in depreciation expense.

·An impairment charge of $389 was recorded in the third quarter of 2004 related to leasehold and other assets associated with the closure of the Company’s operation in Tianjin, China. The closure was made as the Company’s primary customer in the region no longer required a manufacturing presence in China.

During fiscal year 2002, the Company recorded charges for the impairment of long-lived assets and goodwill to reduce the carrying value of assets previously impaired in fiscal year 2001. Continued deterioration in market conditions during fiscal year 2002 resulted in reduced cash flow forecasts used in the evaluation of potential impairments. The reduced cash flow forecasts once again resulted in the carrying value of the assets exceeding the cash flow forecasts. As such, the Company recorded further impairments on the assets. The impairments taken during 2002 are as follows:

·The Company recorded an impairment charge of $48,984 on property, plant and equipment during the fourth quarter of 2002 related to excess facility space and equipment in the Company’s Oregon operation. In determining the impairment at the Company’s Oregon facility, management considered a number of factors, including appraisals and excess facility space when making these determinations.

·The Company recorded an impairment charge of $5,829 during the third quarter of 2004 resulting from the Company’s decision to abandon certain production assets associated with one of the Company’s six-inch wafer production lines at the Company’s Richardson, Texas facility. Subsequent to the abandonment, the equipment was either transferred to Company’s Oregon facility, converted for use in the Texas 4-inch wafer line, sold or currently held for sale.

·The Company recorded impairment charges of $30,973 related to the evaluation of the carrying value of the goodwill associated with acquisitions of technology assets and product lines and $8,954 related to the carrying value of other intangible assets with respect to assets acquired in acquisitions earlier in 2002. The impairment charge recorded on the Company’s goodwill and intangible assets was related goodwill and intangibles obtained during the acquisition of certain assets and product lines from the IBM RF integrated circuits business and certain assets and product lines of the Infineon gallium arsenide semiconductor operation. The decrease in the carrying value to market value was determined through a present value analysis similar to that prepared in the original purchase price allocation for the goodwill and other intangible assets in 2002. In late 2002, the Company evaluated its product strategy and forecasts related to the acquired products as well as its

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overall strategy and determined that the forecasts for these products were substantially lower. As a result, the Company reassessed the carrying value of the other intangible assets and goodwill from these acquisitions and determined that an impairment had occurred. The Company determined that an impairment of this nature existed due to the impairment of the carrying value of the assets assigned to the Oregon operating unit, an event requiring the evaluation of the goodwill associated with these acquisitions assigned to this operating unit. The impairment was determined based upon the Company’s estimate of fair value of the Oregon operating unit. With respect to the assets acquired from IBM, the Company, after reviewing the products, markets, technologies and costs to further develop these products, determined that a substantial investment would be required and that the core technology of silicon germanium was not cost effective. As a result, the Company concluded that further investment would not earn a satisfactory return, and the product lines were abandoned. With respect to the assets acquired from Infineon, the Company concluded that a decline in the forecast from original expectations due to slower market demand for these products would result in a significant decline in projected revenue. The Company’s valuation methods did not change, but due to overall deteriorating market conditions, a change in strategic direction, and costs to complete the development of some of the acquired products, the Company’s revenue forecasts fell, which triggered an impairment review.

There were no impairments of fixed assets recorded during fiscal year 2003.

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Impairments of Investments in Other Companies

During fiscal years 2004, 2003 and 2002, the Company recorded charges of $1,189, $2,387 and $23,778, respectively, related to the deteriorating financial condition of certain investments in privately held technology companies. These investments were in small companies whose valuations declined significantly based on factors such as current equity offerings, projected financial conditions, decline in market value of similar companies, or cessation of operations. The charges were derived through analysis of such companies’ current operating results, anticipated future results and discussions such companies’ representatives. The following table provides a summary of the impairments during each of the fiscal years presented:

Year	Description	Impairment
2004	· Impairment of investment in an optoelectronics company that ceased operations, net of expected proceeds from recovered assets		$	652
	· Impairment of investments in two privately held companies based on deteriorating financial conditions and/or reduction in the Company’s pro-rata ownership		537
	Total impairments in 2004		$	1,189
2003	· Impairment of investments in privately held semiconductor companies based on deteriorating financial conditions		$	1,392
	· Impairment of investments in privately held companies that ceased operations		270
	· Impairment of investment in privately held optoelectronics company based on its deteriorating financial condition		725
	Total impairments in 2003		$	2,387
2002	· Impairment of investments in privately held technology companies based on deteriorating financial conditions that subsequently either were liquidated or filed for bankruptcy		$	9,867
	· Impairment of investment in privately held RF integrated circuit company based on its deteriorating financial condition due to lack of revenue and reduced cash position. Company later was sold in 2003 and investment was largely recovered(1).		11,200
	· Impairment of investments in privately held technology companies based on deteriorating financial conditions		2,711
	Total impairments in 2002		$	23,778

⁽¹⁾In the fourth quarter of 2003, the RF integrated circuit company noted above was sold to a large public semiconductor company and the Company was able to recover $11,250 from the sale, resulting in a net gain of $8,450 in the fourth quarter of 2003.

Note 16.   Commitments and Contingencies

Legal Matters

In February 2003, several nearly identical putative civil class action lawsuits were filed in the United States District Court for the Middle District of Florida against Sawtek, Inc., the Company’s wholly owned subsidiary since July 2001. The lawsuits also named as defendants current and former officers of Sawtek and the Company. The cases were consolidated into one action, and an amended complaint was filed in this action on July 21, 2003. The amended class action complaint is purportedly filed on behalf of purchasers of Sawtek’s stock between January 2000 and May 24, 2001, and alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act, as well as Securities and Exchange Commission Rule 10b-5, by making false and misleading statements and/or omissions to inflate Sawtek’s stock price and conceal the downward trend in revenues disclosed in Sawtek’s May 23, 2001 press release. The complaint does not specify the amount of monetary damages sought. Sawtek and the individual

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defendants filed their motion to dismiss on September 3, 2003, and briefing on the motion was completed on November 19, 2003. The court heard oral argument on November 21, 2003, and issued an order partially denying the motion to dismiss on December 19, 2003. Specifically, the court found that the complaint was not barred by the statute of limitations, but reserved ruling on the other aspects of the motion to dismiss. Because the statute of limitations issue is a novel question of law, the court stayed the proceedings in this case to allow the defendants to file an interlocutory appeal to the Eleventh Circuit Court of Appeals. The defendants duly filed for interlocutory appeal on January 22, 2004. Because the Court of Appeals is considering the identical issue in another matter, the appeal process has been stayed, pending the Court of Appeals’ decision in the other matter. The Company denies the allegations contained in the complaint and intends to continue its vigorous defense against these claims.

On February 16, 2005, the Company received notice that a summons of civil action was filed in the Court of Common Pleas of Lehigh County, Pennsylvania by Preferred Real Estate Investments, Inc. against its subsidiary, TriQuint Optoelectronics, Inc. relating to negotiations for the sale of its facility in Breinigsville, Pennsylvania. The Company denies any wrongdoing and intends to vigorously defend itself in this action.

Lease Commitments

The Company leases certain equipment, office and manufacturing space under operating leases and certain computer equipment under capital leases. Lease terms range from approximately one to ten years, expiring at various dates through 2015 with options to renew at varying terms. At December 31, 2004, the Company had $275 of outstanding capital leases obligations, all of which were current obligations. Commitments for minimum lease payments under non-cancelable leases as of December 31, 2004 were as follows:

2005	$1,822
2006	1,691
2007	1,684
2008	472
2009	—
Thereafter	—
	$	5,669

The Company also had a $342 per year commitment, through 2015, for materials and services at December 31, 2004. Rent expense under operating leases for the years ended December 31, 2004, 2003 and 2002 was $2,634, $2,672 and $2,168, respectively.

In August 2000, the Company acquired a 420,000 square foot wafer fabrication facility located in Richardson, Texas for $87.0 million. The acquisition was financed by a variable interest entity (“VIE”) sponsored by a financial institution in which the Company contributed $73.0 million and a lender contributed $14.0 million. In September 2002, the Company completed an improvement to the Richardson, Texas facility, of which $18.5 million was financed through the same financial institution-sponsored VIE as part of the original financing agreement. The Company contributed $14.5 million and the lender contributed $4.0 million. Of the total amount contributed to the VIE, the Company was required to collateralize 97% through pledged investment securities and a participation interest in the VIE. Under the agreement, the Company was required to make lease payments through August 2005 or purchase the property at that time. On July 16, 2003, the Company terminated the lease on its wafer fabrication facility located in Richardson, Texas and took ownership of the facility. In association with the termination of this lease, the Company released the $17.4 million on its balance sheet as “Restricted long-term assets” as of December 31, 2002 to the financial institution sponsoring the lease and incurred various

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legal fees associated with the title transfer. In addition, of the $88.1 million shown on the Company’s balance sheet as “Other investment” as of December 31, 2002, representing the Company’s previous participation in the VIE financing to the facility, $46.1 million was reclassified as “Property, plant and equipment” and $42.0 million was recorded as a noncash charge to earnings during the year ended December 31, 2003 for costs associated with the termination of this lease. Management considered a number of factors, including third-party valuations, in determining the noncash charge and the market value of the building and land of $82.0 million. Of the $82.0 million assigned to the fixed assets, $8.0 million was assigned to the value of the 38 acres of land associated with the building. The remaining $74.0 million was assigned to the building and equipment. The Company recorded these assets at fair market value at the date of the lease termination. The difference between the lease buyout amount and the market value was recorded as a charge to earnings in the second quarter of fiscal year 2003. This charge is classified as “Lease termination costs” on the Consolidated Statements of Operations. There were no related charges during the years ended December 31, 2004 or 2002, respectively.

Note 17.   Concentration of Credit Risk

Suppliers

The Company currently obtains some components, equipment and services for their products from limited or single sources. The Company purchases these components, equipment and services on a purchase order basis, does not carry significant inventories of components and does not have any long-term supply contracts with these vendors. Requirements of the Company are relatively small compared to silicon semiconductor manufacturers. Access to sufficient capacity from these vendors in periods of high demand may be limited, as the Company often does not account for a significant part of the vendor’s business. If the Company were to change any of its sole or limited source vendors, it would be required to requalify each new vendor. Requalification could prevent or delay product shipments that could negatively affect its results of operations. In addition, reliance on these vendors may negatively affect the Company’s production if the components, equipment or services vary in reliability or quality. If the Company is unable to obtain timely deliveries of sufficient quantities of acceptable quality or if the prices increase, results of operations could be harmed.

Credit Risk

The Company performs periodic credit evaluations of certain customers and generally does not require collateral; however, in certain circumstances, the Company may require letters of credit from its customers. All of the Company’s customers are in the communications markets.

Foreign Currency Exchange

At times the Company may engage in foreign exchange forward contracts to lock in the cost of foreign currency exposures for the purchase of equipment or raw materials denominated in foreign currencies. While these forward contracts are subject to fluctuations in value from movement in the foreign currency exchange rates, such fluctuations are offset by the change in value of the underlying exposures being hedged.

The Company is not a party to leveraged derivatives and does not hold or issue financial instruments for trading purposes. Foreign currency contracts are entered into with major financial institutions with investment grade credit ratings, thereby decreasing the risk of credit loss. Gains and losses on instruments that hedge firm commitments are deferred and are included in the basis of the underlying hedged item.

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Note 18.Stock, Stock Options, Employee Benefit Plans and Rights

Common Stock

The Company has authorized capital of 600,000,000 common shares, $.001 par value Common Stock. Holders of the Common Stock are entitled to one vote for each share of Common Stock on all matters submitted to a vote of the Company’s shareholders.

Stock Option Plans

The Company had two stock option plans under which shares were available for grant at December 31, 2004: the 1996 Stock Incentive Plan (the “1996 Plan”) and the 1998 Nonstatutory Stock Option Plan (the “1998 Plan” and together with the 1996 Plan, the “Plans”). The 1996 Plan provides for the grant of incentive stock options to officers, outside directors and other employees of the Company or any parent or subsidiary. The 1998 Plan provides for the grant of non-qualified stock options to non-officer employees of the Company. The stock plans were amended in 2002 to provide that options granted thereunder must have an exercise price per share no less than 100% of the fair market value of the share price on the grant date. Further, with respect to any participant who owns stock possessing more than 10% of the voting rights of the Company’s outstanding capital stock, the exercise price of any incentive stock option granted must equal at least 110% of the fair market value on the grant date. The terms of all options granted under the Plans may not exceed 10 years.

The following table presents shares authorized, available for future grant and outstanding under each of the Company’ plans at December 31, 2004:

	Authorized		Available		Outstanding
1987 Stock Incentive Program		11,387		—		116
1996 Stock Incentive Program		36,050		9,450		22,144
1998 Nonstatutory Stock Option Plan		4,000		703		2,065
Sawtek Stock Option Plans(1)		2,603		—		1,527
Total		54,040		10,153		25,852

⁽¹⁾Includes the acquired Sawtek Inc. Second Stock Option Plan and the Sawtek Inc. Stock Option Plan for Acquired Companies

Subject to the discretion of the Board of Directors, outstanding options granted to new employees under the Plans generally vest and become exercisable at the rate of 28% at the end of the first year, and thereafter at a rate of 2% per month and generally expire up to 10 years after the grant date. Options granted to current employees typically vest and become exercisable between the third and fourth year following the grant date, or as approved by the Compensation Committee, and typically expire up to 10 years after the grant date.

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The following summarizes the Company’s stock option transactions for the years ended December 31, 2004, 2003 and 2002:

	Years Ended December 31,
(in thousand, except per share data)	2004					2003					2002
	Shares		Weighted- average exercise price			Shares		Weighted- average exercise price			Shares		Weighted- Average Exercise Price
Outstanding at beginning of year	24,257			$	12.21	19,168			$	14.94	17,662			$	16.80
Granted	5,108			$	5.53	7,265			$	4.14	4,355			$	6.88
Exercised	(1,253	)		$	3.60	(528	)		$	3.03	(1,128	)		$	3.06
Cancelled	(2,260	)		$	12.32	(1,648	)		$	11.36	(1,721	)		$	21.87
Outstanding at end of year	25,852			$	11.30	24,257			$	12.21	19,168			$	14.94

The following table summarizes information concerning stock options outstanding and exercisable at December 31, 2004 (in thousands, except per share data):

Range of Exercise Price	Number Outstanding (in thousands)		Weighted-Average Remaining Contractual Life-Years		Weighted-Average Exercise Price			Number Exercisable (in thousands)		Weighted-Average Exercise Price
$  0.59 - $  5.00		9,501		6.43		$	3.62		5,385		$	3.40
$  5.01 - $10.00		8,223		8.04		$	6.63		3,227		$	7.76
$10.01 - $15.00		2,661		6.14		$	11.40		2,660		$	11.40
$15.01 - $25.00		2,271		5.24		$	21.20		2,266		$	21.20
$25.01 - $61.44		3,196		5.36		$	38.97		3,196		$	38.97
$  0.59 - $61.44		25,852		6.68		$	11.30		16,734		$	14.72

Employee Benefit Plans

The Company has a qualified retirement plan under the provisions of Section 401(k) of the Internal Revenue Code covering substantially all employees in the U.S. Participants in this plan may defer up to the maximum annual amount allowable under IRS regulations. Company contributions to the 401(k) Plan were approximately $543, $733 and $745 in 2004, 2003 and 2002. The Company also has profit share and other benefit plans covering substantially all employees worldwide. The Company made contributions under these plans of approximately $230, $180, and $211 for 2004, 2003 and 2002, respectively.

The Company also has an Employee Stock Purchase Plan (“ESPP”), pursuant to which participating employees authorize the Company to withhold compensation and to use the withheld amounts to purchase shares of the Company’s Common Stock at 85% of the lower of the fair market value on the first day of a two year offering period or the last day of each six month exercise period. During 2004, 2003 and 2002, approximately 2,116,969, 1,712,583 and 892,876 shares, respectively, of the Company’s Common Stock were purchased under the ESPP. As of December 31, 2004 283,031 shares were reserved for issuance under the ESPP. In addition, the Company has an employee stock ownership plan (“ESOP”) for employees of its Sawtek, Inc. subsidiary acquired in 2001. Under the ESOP, the Company made contributions of approximately $209 and $223 during 2003 and 2002, respectively. There was no ESOP expense in 2004. Share allocation to participants’ accounts in 2003 and 2002 were 831,599 and 887,164, respectively. The shares allocated to the ESOP were acquired by the Plan in 1991. As of December 31, 2003, all shares under the ESOP Plan had been allocated.

During the fourth quarter of 2004, the Company’s Board of Directors approved a non-qualified deferred compensation plan (the “Compensation Plan”). Under the Compensation Plan, employees who are eligible to participate and members of its Board of Directors, are provided with the opportunity to defer a specified percentage of their cash compensation which the Company will obligated to deliver on a

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future date. At the time of deferral, the Company allocates the deferred monies to a trust account that is invested at the participants election. The amount of compensation to be deferred by each participating employee or board member will be based on elections by each participant and adjusted for any positive or negative investment results from investment alternatives selected by the participant under the Compensation Plan. The liability for the deferred compensation is included in “Other long-term liabilities” on the Company’s balance sheet and was $99 at December 31, 2004. The value of the funds allocated to the trust by the Company was $99 at December 31, 2004 and included in “Other noncurrent assets, net.” For the year ended December 31, 2004, the total participant deferrals were $97.

Preferred Shares Rights Plan

On June 30, 1998, the Company adopted a Preferred Shares Rights Agreement (the “Agreement”). Pursuant to the Agreement, rights were distributed as a dividend at the rate of one right for each share of TriQuint common stock, held by stockholders of record as of the close of business on July 24, 1998. The rights expire on June 29, 2008, unless redeemed or exchanged. Initially, under the Agreement, each right entitled the registered holder to buy one share of preferred stock for $20.83. On April 5, 2000, the Company approved an amendment to the Agreement to increase the per unit price to $200.00. These prices are reflective of all stock splits. The rights will become exercisable only if a person or group (other than stockholders currently owning 15% of the Company’s common stock) acquires beneficial ownership of 15% or more of the Company’s common stock, or commences a tender offer or exchange offer upon consummation of which such person or group would beneficially own 15% or more of the Company’s common stock.

Note 19.   Infineon Receivable

As part of the Infineon purchase in 2002, the price paid by the Company included a €10,000 (approximately $9,920) contingent earnout deposit. The earnout deposit required certain sales goals to be met for products acquired as part of the acquisition for Infineon to retain the deposit. If the sales goals were not met by September 30, 2004, Infineon was to reimburse the Company the entire amount. At the time of the purchase, the earnout deposit was recorded by the Company as a non-monetary long-term asset at its historical value of $9,920. The Company continued to monitor the sales of the products associated with the deposit to determine if the expense has been incurred. On September 30, 2004, the Company determined that the sales goals had not been met and notified Infineon that repayment of the earnout deposit was required by December 31, 2004, in accordance with the terms of the purchase agreement. During 2004, the Company reclassified the deposit as a non-monetary short-term asset and when the earnout period expired at the end of the third quarter of 2004, the Company reclassified the deposit as a monetary asset and recorded a foreign currency gain of $2,480 on the remeasurment. On November 16, 2004, the Company received payment on the receivable.

Additionally, in the fourth quarter of 2002, the Company recorded a receivable of approximately $3,526 as a result of the €3,000 reduction in the purchase price. On November 16, 2004, the Company received payment on the balance.

Note 20.   Segment Information

The Company complies with Statement of SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information. SFAS No. 131 establishes standards for the reporting by public business enterprises of information about operating segments, products and services, geographic areas and major customers. The method for determining what information to report is based on the way that management organizes the segments within the Company for making operating decisions and assessing financial performance.

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The Company’s chief operating decision maker is considered to be the President and Chief Executive Officer (the “CEO”). The Company’s CEO evaluates both consolidated and disaggregated financial information in deciding how to allocate resources and assess performance. The CEO receives certain disaggregated financial information for the Company’s four markets, including, Wireless Phones, Infrastructure Networks, Optical Networks and Defense, and four geographic units, including, Oregon, Pennsylvania, Texas and Florida.

The Company has aggregated its businesses into a single reportable segment as allowed under SFAS 131 as each of the businesses have similar long-term economic characteristics, including average gross margin. In addition, the businesses are similar in regards to (a) nature of products and production processes, (b) type of customers and (c) method used to distribute products. Accordingly, the Company describes its reportable segment as high performance components and modules for communications applications. All of the Company’s revenues result from sales in these product lines.

The Company’s revenue by business market (as a percentage of total revenues) are as follows:

	Years Ended December 31,
	2004		2003		2002
Business market:
Wireless phones	40	%	41	%	45	%
Infrastructure networks	33	%	29	%	31	%
Optical networks	14	%	14	%	5	%
Defense	13	%	16	%	19	%
	100	%	100	%	100	%

Revenues are reported in the geographic areas where they originate. Transfers from the U.S. to Costa Rica are made on a basis intended to reflect the market price of the products. This market price is above cost and are consistent with rules and regulations of taxing authorities. Such transfers are eliminated in the consolidated financial statements. To date, substantially all sales have been denominated in U.S. dollars. The functional currency for the Costa Rican operations is the U.S. dollar as sales, most material cost and equipment are denominated in the U.S. dollar. The impact of fluctuations of the local Costa Rican currency is not considered significant and the foreign exchange rate is not hedged. Selected financial information by geographical area is summarized below:

	Years Ended December 31,
	2004			2003			2002
Revenues (origin):
United States	$	304,072		$	258,515		$	214,001
Costa Rica	80,547			84,438			79,147
Transfers / Eliminations	(37,614		)	(30,681		)	(25,835		)
	$	347,005		$	312,272		$	267,313
Operating Income (Loss):
United States	$	(35,398	)	$	(84,289	)	$	(124,758	)
Costa Rica	8,741			10,002			14,220
Transfers / Eliminations	—			(99		)	(108		)
	$	(26,657	)	$	(74,386	)	$	(110,646	)
Long-Lived Assets:
United States	$	173,996		$	202,579		$	135,177
Costa Rica	27,783			24,650			24,537
	$	201,779		$	227,229		$	159,714

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Revenues outside of the U.S. were approximately $195,300 in 2004 of which revenues to Korea were approximately $35,000. In 2003 and 2002, revenues outside of the U.S., were approximately $189,400 and $151,200, respectively, of which revenues to Korea were $49,100 and $34,900 in 2003 and 2002. There were no other foreign countries to which revenues represented 10% or more of revenues.

Revenues for significant customers, those representing approximately 10% or more of total revenues for each period, generated from both geographic areas were as follows:

	Years Ended December 31,
	2004			2003			2002
Motorola		10	%		14	%		16	%
Nokia			(1)			(1)		10	%

⁽¹⁾During the period presented, Nokia did not represent more than 10% of the Company’s total revenues

Related receivables from Motorola at December 31, 2004 and 2003 were 10% and 8% of trade accounts receivable, respectively.

Note 21.   Subsequent Events

On January 5, 2005, the Company successfully completed the acquisition of TFR Technologies, Inc. (“TFR”), a manufacturer and developer of thin film resonator filters for communication applications using bulk acoustic wave (“BAW”) or film bulk acoustic resonator (“FBAR”) technology. The Company believes that BAW technology is critical to developing higher frequency filters for next generation wireless communication products and is a natural complement to the Company’s SAW filters. This acquisition is not considered a material acquisition for the Company.

On February 16, 2005, the Company received notice that a summons of civil action was filed in the Court of Common Pleas of Lehigh County, Pennsylvania by Preferred Real Estate Investments, Inc. against its subsidiary, TriQuint Optoelectronics, Inc. relating to negotiations for the sale of its facility in Breinigsville, Pennsylvania. The Company denies any wrongdoing and intends to vigorously defend itself in this action.

On March 7, 2005, TriQuint Optoelectronics, Inc., a wholly-owned subsidiary of the Company, entered into a purchase and sale agreement to sell to Anthem Partners, LLC (“Anthem”) the land and building and related facilities occupied by TriQuint’s optoelectronics operations in Breinigsville, Pennsylvania (the “Agreement”). The gross sales price is approximately $9,300, less commissions and certain facility clean-up and other costs. Pursuant to the Agreement, the Company and Anthem have agreed to negotiate in good faith a lease for approximately 80,000 square feet of the 849,000 square foot facility for the Company’s continuing operations based upon the general terms set forth in the Agreement. The lease term will be two years from the closing of the sale, with an option to renew and the lease will be assignable to third parties provided that the Company guarantees the payments due under the initial two year term. The Agreement also provides Anthem with the right to terminate the Agreement up until April 6, 2005 for any or no reason. The sale is subject to customary closing conditions and is scheduled to occur within approximately 90 days from the date of the Agreement. At December 31, 2004, the facility was recorded on the Company’s consolidated balance sheet at $8,000 in the “Assets held for sale” line item.

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Note 22.   Summarized Quarterly Data (Unaudited)

	Fiscal Year 2004 Quarters
	1st		2nd		3rd			4th			Total
	(In thousands, except per share data)
Revenues	$	89,903	$	92,648	$	89,729		$	74,725		$	347,005
Gross profit	$	29,480	$	30,038	$	21,219		$	19,692		$	100,429
Net income (loss)	$	2	$	287	$	(4,087	)	$	(25,256	)(2)	$	(29,054	)
Earnings (loss) per common share(1)
Basic	$	0.00	$	0.00	$	(0.03	)	$	(0.18	)	$	(0.21	)
Diluted	$	0.00	$	0.00	$	(0.03	)	$	(0.18	)	$	(0.21	)

	Fiscal Year 2003 Quarters
	1st			2nd			3rd			4th		Total
Revenues	$	71,655		$	72,815		$	78,794		$	89,008	$	312,272
Gross profit	$	15,923		$	18,725		$	23,443		$	28,917	$	87,008
Net income (loss)	$	(16,515	)	$	(59,560	)	$	(5,764	)	$	8,861	$	(72,978	)
Earnings (loss) per common share(1)
Basic	$	(0.12	)	$	(0.45	)	$	(0.04	)	$	0.07	$	(0.54	)
Diluted	$	(0.12	)	$	(0.45	)	$	(0.04	)	$	0.06	$	(0.54	)

⁽¹⁾Earnings per share is computed individually for each of the quarters presented; therefore, the sum of the quarterly earnings per share may not necessarily equal the total for the year.

⁽²⁾In the fourth quarter of 2004, the Company recorded charges of $15,144 for the impairments of long-term assets and $2,337 for severance charges relating to the Company’s optoelectronics restructuring.

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Schedule II

TRIQUINT SEMICONDUCTOR, INC.
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands)

	Allowance for				Inventory			Estimated
	Doubtful				Valuation			Liability for
Date	Accounts				Reserve			Warranty
Balance at December 31, 2001		$	2,565		$	20,171			$	1,577
Additions charged to costs and expenses		1,424			1,349				1,388
Deductions		(122		)	(1,734		)		(806		)
Balance at December 31, 2002		3,867			19,786				2,159
Acquisition related(1)		—			—				9,300
Additions charged to costs and expenses		755			6,222				1,321
Deductions		(3,411		)	(9,207		)		(3,487		)
Balance at December 31, 2003		1,211			16,801				9,293
Additions/(deductions) charged/(credited) to costs and expenses		(359		)	4,283				(442		)(2)
Deductions		(26		)	(8,198		)		(2,427		)
Balance at December 31, 2004		$	826		$	12,886			$	6,424

⁽¹⁾As part of the Agere Optoelectronics (“Agere”) acquisition in 2003, the Company assumed the existing warranties on products previously sold by Agere.

⁽²⁾During 2004, the Company continued to refine its methodology for determining its estimated warranty liability. As a result, the Company reduced the warranty liability approximately $1,588 in the first quarter of 2004.

S-1

Report and Consent OF Independent REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
TriQuint Semiconductor, Inc.:

The audits referred to in our report dated March 14, 2005, with respect to the consolidated financial statements of TriQuint Semiconductor, Inc. and Subsidiary, included the related financial statement schedule as of December 31, 2004, and for each of the years in the three-year period ended December 31, 2004, as contained in the annual report in Form 10-K for the year 2004. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.

We consent to the incorporation by reference in the registration statement (Nos. 33-75464, 333-02166, 333-08893, 333-08891, 333-31585, 333-39732, 333-48883, 333-66707, 333-74617, 333-81273, 333-39730, 333-61582, 333-65850, 333-89242, 333-102085, 333-105701, 333-15809 and 333-120407) on Form S-8 of our reports dated March 14, 2005, with respect to the consolidated balance sheets of TriQuint Semiconductor, Inc as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders’ equity, cash flows, and comprehensive income for each of the years in the three-year period ended December 31, 2004, and the related financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2004 and the effectiveness of internal control over financial reporting as of December 31, 2004, which reports appear in the December 31, 2004 annual report on Form 10-K of TriQuint Semiconductor.

/s/ KPMG LLP  

Portland, Oregon
March 14, 2005

S-2

EX-10.47

Exhibit 10.47

AGREEMENT AND PLAN OF REORGANIZATION

BY AND AMONG

SAWTEK INC.,

TFR ACQUISITION, INC.,

AND

TFR TECHNOLOGIES INC.

Dated as of December 14, 2004

CONFIDENTIAL

TABLE OF CONTENTS

ARTICLE 1.			The Merger
1.1	The Merger
1.2	Effective Time
1.3	Closing of the Merger
1.4	Effects of the Merger
1.5	Articles of Incorporation and Bylaws
1.6	Directors and Officers
ARTICLE 2.			Effect of Merger on the Capital Stock of the Constituent Corporations
2.1	Conversion of Shares
2.2	Stock Options.
2.3	Payment Fund
2.4	Payment Procedures
2.5	No Further Ownership Rights in Company Common Stock
2.6	Termination of Payment Fund
2.7	No Liability
2.8	Investment of the Payment Fund
2.9	Lost, Stolen, or Destroyed Certificates
2.10	Withholding Rights
2.11	Stock Transfer Books
2.12	Dissenting Shares
ARTICLE 3.			Representations and Warranties of Parent and MergerSub
3.1	Due Organization
3.2	Authorization and Effect of Agreement
3.3	No Violations; Consents and Approvals
ARTICLE 4.		Representations and Warranties of the Company
4.1	Capitalization; Ownership of Shares; No Liens on Shares
4.2	Due Organization
4.3	Subsidiaries
4.4	Authority; Absence of Conflicts

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4.5	Financial Statements
4.6	Absence of Undisclosed Liabilities
4.7	Conduct of Business; Certain Actions
4.8	Real Property
4.9	Tangible Personal Property
4.10	Accounts Receivable
4.11	Accounts Payable
4.12	Sales Representatives and Other Sales Agents/Sales Offices
4.13	Inventory
4.14	Backlog
4.15	Material and Affiliated Contracts
4.16	Compliance with Laws
4.17	Legal Proceedings
4.18	Ability to Conduct the Business
4.19	Labor Matters
4.20	Employee Benefit Plans
4.21	Environmental Matters
4.22	Warranties; Products Claims
4.23	Tax Matters
4.24	Insurance
4.25	Minute Books; Stock Record Books
4.26	Brokers’ or Finders’ Fees
4.27	Material Customers and Suppliers
4.28	Bank Accounts; Powers of Attorney
4.29	Books and Records
4.30	Intellectual Property Rights
4.31	Information Furnished
ARTICLE 5.		Covenants Related to Conduct of the Business
5.1	Inspection
5.2	Financial Statements
5.3	Interim Operations of the Company and its Subsidiaries
ARTICLE 6.		Additional Agreements

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6.1	Company Shareholder Meeting
6.2	Satisfaction of All Conditions Precedent
6.3	Acquisition Proposals
6.4	Notice of Developments
6.5	Public Announcements
6.6	Notice of Breach
6.7	Continuation of Insurance Coverage
6.8	Maintenance of Credit Terms
6.9	Updating Schedules
6.10	Third Party Consents
6.11	Commercially Reasonable Efforts and Certain Filings
6.12	Confidentiality
6.13	FIRPTA
6.14	Contingent Earn-Out Payment
6.15	Benefits for Retained Employees
ARTICLE 7.		Conditions to Consummation of the Merger
7.1	Conditions to Each Party’s Obligation to Effect the Merger
7.2	Conditions to the Obligations of Parent and MergerSub
7.3	Conditions to Obligations of the Company
ARTICLE 8.		Termination
8.1	Termination by Mutual Agreement
8.2	Termination by Either Parent or the Company
8.3	Termination by the Company
8.4	Termination by Parent
8.5	Effect of Termination and Abandonment
8.6	Amendment
8.7	Extension; Waiver
ARTICLE 9.		Survival of Representations, Warranties, Covenants, and Agreements; Warranty Reserve
9.1	Survival of Representations, Warranties, Covenants and Agreements; Warranty Reserve
9.2	Warranty Reserve

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9.3	Shareholder Agent of the Shareholders; Power of Attorney
9.4	Third-Party Claims
9.5	Remedies
ARTICLE 10.		Miscellaneous
10.1	Collateral Agreements
10.2	Successors and Assigns
10.3	Guaranty
10.4	Expenses
10.5	Severability
10.6	Notices
10.7	Further Assurances
10.8	Specific Performance
10.9	Governing Law
10.10	Remedies Not Exclusive
10.11	Counterparts
10.12	Titles and Headings
10.13	Certain Interpretive Matters and Definitions

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AGREEMENT AND PLAN OF REORGANIZATION

THIS AGREEMENT AND PLAN OF REORGANIZATION (this “Agreement”) is by and among Sawtek Inc., a Florida corporation (“Parent”), TFR Acquisition, Inc., an Oregon corporation and direct wholly-owned subsidiary of Parent (“MergerSub”), and TFR Technologies, Inc., an Oregon corporation (the “Company”).

This Agreement is executed and delivered, and is entered into and effective as of December 14, 2004.

RECITALS:

WHEREAS, the Boards of Directors of Parent, MergerSub, and the Company have, in light of and subject to the terms and conditions set forth herein, approved this Agreement and the transactions contemplated hereby, including the Merger;

WHEREAS, the Board of Directors of the Company has resolved to recommend to its shareholders the approval and adoption of this Agreement and the consummation of the transactions contemplated hereby upon the terms and subject to the conditions set forth herein;

WHEREAS, at the Effective Time, MergerSub will be merged with and into the Company, the Company shall continue as the Surviving Corporation, and the separate corporate existence of MergerSub shall cease;

WHEREAS, pursuant to the Merger and subject to the terms and conditions of this Agreement, all of the issued and outstanding shares of common stock, without par value, of the Company (“Company Common Stock”) shall be converted into the right to receive payment from Parent in the amounts set forth below;

WHEREAS, a portion of payments by Parent in connection with the Merger shall be made by Parent to a Paying Agent for the benefit of the shareholders of the Company upon the occurrence of certain events and the satisfaction of certain conditions;

WHEREAS, Parent, MergerSub, and the Company desire to make certain representations, warranties, covenants, and agreements in connection with the Merger as set forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants, and agreements contained herein, and intending to be legally bound hereby, Parent, MergerSub, and the Company hereby agree as follows:

ARTICLE 1.
The Merger

1.1The Merger.  At the Effective Time and subject to and upon the terms and conditions of this Agreement and in accordance with the applicable provisions of the Oregon Business Corporation Act (the “Act”), MergerSub will be merged with and into the Company

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(the “Merger”).  Following the Merger, the Company shall continue as the surviving corporation (the “Surviving Corporation”) and the separate corporate existence of MergerSub shall cease.

1.2Effective Time.  Subject to the provisions of this Agreement, Parent, MergerSub, and the Company shall cause the Merger to be consummated by filing Articles of Merger as set forth on Exhibit A or other appropriate documents (the “Articles of Merger”) with the Secretary of State of the State of Oregon in such form as required by, and executed in accordance with, the applicable provisions of the Act, as soon as practicable on the Closing Date.  The Merger shall become effective upon such filing or at such time thereafter as is provided in the Articles of Merger (the “Effective Time”).

1.3Closing of the Merger.  The closing of the Merger (the “Closing”) will take place at a time and on a date to be specified by the parties (the “Closing Date”), which shall be no later than the second business day after satisfaction or waiver of the conditions set forth in Article 7 (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions), at the offices of Ater Wynne LLP, 222 SW Columbia Street, Suite 1800, Portland, Oregon 97201, or at such time, date, or place as agreed to in writing by the parties hereto.

1.4Effects of the Merger.  At the Effective Time, the Merger shall have the effects set forth in this Agreement, the Articles of Merger, and the applicable provisions of the Act.  Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all of the properties, rights, privileges, powers, and franchises of the Company and MergerSub shall vest in the Surviving Corporation, and all debts, liabilities, and duties of the Company and MergerSub shall become the debts, liabilities, and duties of the Surviving Corporation.

1.5Articles of Incorporation and Bylaws.  The name of the Surviving Corporation will be “TFR Technologies Inc.” Subject to the foregoing, effective immediately following the Merger: (a) the articles of incorporation of the Surviving Corporation shall be amended so that the articles of incorporation of MergerSub, in the form attached hereto as Exhibit B, shall be the articles of incorporation of the Surviving Corporation; and (b) the bylaws of the Surviving Corporation shall be amended so that the bylaws of MergerSub, in the form attached hereto as Exhibit C, shall be the bylaws of the Surviving Corporation.

1.6Directors and Officers.  The directors of MergerSub at the Effective Time shall become the directors of the Surviving Corporation and shall hold office in accordance with the articles of incorporation and bylaws of the Surviving Corporation until their successors are duly elected or appointed and qualified or until their earlier resignation or removal.  The officers of MergerSub at the Effective Time shall become the officers of the Surviving Corporation and shall hold office in accordance with the articles of incorporation and bylaws of the Surviving Corporation until their successors are duly elected or appointed and qualified or until their earlier resignation or removal.

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ARTICLE 2.
Effect of Merger on the Capital Stock of the Constituent Corporations

2.1Conversion of Shares.

(a)At the Effective Time, each outstanding share of common stock, par value $0.001 per share, of MergerSub shall, by virtue of the Merger and without any action on the part of Parent, MergerSub, or the Company, be converted into one fully paid and nonassessable share of common stock of the Surviving Corporation.

(b)At the Effective Time, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (including Outstanding Shares but subject to Section 2.12, not including Dissenting Shares) shall, by virtue of the Merger and without any action on the part of Parent, MergerSub, or the Company, be converted into and exchangeable for the right to receive the following payments:

(i)an amount of cash determined in accordance with the provisions of Section 2.1(c), payable at the Effective Time, provided, however, that for any Outstanding Share issued pursuant to the exercise of Company Stock Options pursuant to Section 7.2(g) for which there is an Unpaid Exercise Price, the amount otherwise payable with respect to such Outstanding Share shall be reduced by the Unpaid Exercise Price relating to such Outstanding Share, and such amount will be reallocated among all the Outstanding Shares (the “Tranche One Payment”);

(ii)subject to Section 9.2(c), an amount of cash equal to the quotient of $3,750,000 divided by the number of Outstanding Shares, payable on the first anniversary of the Effective Time (the “Tranche Two Payment”); and

(iii)an amount of cash determined in accordance with the provisions of Section 2.1(d) (the “Contingent Earn-Out Payment”).

The Tranche One Payment, the Tranche Two Payment, and the Contingent Earn-Out Payment are collectively referred to in this Agreement as the “Merger Consideration.”  The number of “Outstanding Shares” is the aggregate number of shares of Company Common Stock outstanding immediately prior to the Effective Time, including the shares of Company Common Stock issuable under stock options as described in Section 7.2(g).

(c)The per share Tranche One Payment is equal to the Initial Payment divided by the number of Outstanding Shares.

“Initial Payment” means $3,000,000 minus the sum of all out-of-pocket expenses incurred by the Company prior to the Effective Time in connection with the Merger and the other transactions contemplated hereby (including without limitation all legal, accounting, and other consulting fees, as described in Section 10.4).

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(d)The per share Contingent Earn-Out Payment is equal to the Distribution Amount divided by the number of Outstanding Shares.

“Distribution Amount” means, for each of the first four years following the Effective Time, 2.5% of actual revenues realized by TriQuint, Parent, or their affiliates for sales of Qualifying Products or for the license of Company Intellectual Property (to the extent, in the case of such licensing revenues, such revenues can be traced and allocated specifically to Company Intellectual Property, and not including in any event any revenues relating to any cross-licensing agreements) during such year, taking into account discounts, credits, offsets, and the like made in the ordinary course of business, including such discounts, credits, and offsets made on account of revenues realized in a prior year.  That is, there may be up to four Distribution Amounts: one for each of the four years following the Effective Time.  Notwithstanding the above, the aggregate Distribution Amounts paid under this Agreement will not exceed $3,000,000.

“Qualifying Products” means all products sold by TriQuint, Parent, or their affiliates that incorporate Company Intellectual Property relating to bulk acoustic wave filters except Company Products sold under U.S. Government contract number H98230-04-C-0724/0000 on Standard Form 28, between the Company and the Maryland Procurement Office, dated February 27, 2004, as amended.

Parent shall accurately report to the Shareholder Agent sales activity for Qualifying Products and the calculation of amounts owing to the shareholders therefor on an annual basis.  Such reports shall be delivered within 45 days of the end of each year following the Effective Time.  Parent shall also provide sale activity updates to the Shareholder Agent upon the Shareholder Agent’s reasonable request.

Parent shall keep records in sufficient detail to permit the determination of Contingent Earn-Out Payments payable under this Agreement for at least two years after each applicable period.  The Shareholder Agent may have a certified independent auditor perform an audit of Parent’s financial records and other records relevant to Contingent Earn-Out Payments under this Agreement upon reasonable advance written notice to assess the accuracy of Parent’s payments, at the Shareholder Agent’s expense, subject to the last sentence of this paragraph.  The audit shall be conducted during normal business hours no more than once per year, and shall be subject to a confidentiality agreement reasonably acceptable to Parent.  The auditor shall report to only the Shareholder Agent the amount of any underpayment and the basis therefor, and shall provide a copy of the report to Parent.  If the audit shows any underpayment, Parent shall promptly pay the outstanding amounts to the Paying Agent on behalf of the shareholders, plus interest from the time such payment was due until paid to the Paying Agent at the rate of eight percent (8%) per annum.  In the case the audit establishes an underpayment greater than ten percent (10%) of the correct total for any period audited, Parent shall reimburse the Shareholder Agent’s expenses for the audit.

2.2Stock Options.

(a)As described in Section 7.2(g), immediately prior to the Effective Time, each outstanding option to purchase shares of Company Common Stock (each a “Company Stock Option”) under Company’s stock option plans or arrangements (the “Company Stock

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Option Plans”), whether or not exercisable and whether or not vested, shall have been exercised for shares of Company Common Stock.

(b)Following the Effective Time, no holder of a Company Stock Option will have any right to receive shares of common stock of the Surviving Corporation upon exercise of the Company Stock Option.

2.3Payment Fund.

(a)As of the Effective Time, Parent shall deposit, or shall cause to be deposited, with or for the account of Kenneth Lakin or such other third party as may be designated by the holders of a majority in interest of the Company Common Stock, which shall be reasonably satisfactory to Parent (the “Paying Agent”), for the benefit of the holders of the shares of Company Common Stock, an amount of cash sufficient to pay the Tranche One Payment.  Any cash deposited with the Paying Agent is referred to as the “Payment Fund.”

(b)As of the first anniversary of the Effective Time, Parent shall deposit, or shall cause to be deposited, with or for the account of the Paying Agent, for the benefit of the holders of the Outstanding Shares, an amount of cash sufficient to pay the applicable Tranche Two Payment.

(c)No later than the 45th day following each of the first four anniversaries of the Effective Time, Parent shall deposit, or shall cause to be deposited, with or for the account of the Paying Agent, for the benefit of the holders of the Outstanding Shares, an amount of cash sufficient to pay the applicable Contingent Earn-Out Payment.

2.4Payment Procedures.

(a)Tranche One Payment.  As soon as reasonably practicable after the Effective Time (and in any event within five business days after the Effective Time), the Paying Agent shall mail to each record holder of a certificate or certificates that immediately prior to the Effective Time represented outstanding shares of Company Common Stock (including certificates representing shares of Company Common Stock issued upon exercise of Company Stock Options as described in Section 7.2(g)) (the “Certificates”) (i) a letter of transmittal which shall specify that delivery shall be effective and risk of loss and title to the Certificates shall pass only upon delivery of the Certificates to the Paying Agent, and which letter shall be in customary form and have such other provisions as Parent may reasonably specify; and (ii) instructions for effecting the surrender of such Certificates in exchange for the Merger Consideration.  Upon surrender of a Certificate to the Paying Agent together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefor a check in the amount equal to the cash that such holder has the right to receive pursuant to this Article 2 (after taking into account all shares of Company Common Stock then held by such holder).

(b)Tranche Two Payment.  Within five business days after the Paying Agent receives funds for the Tranche Two Payment, the Paying Agent shall deliver appropriate checks in the amount equal to the cash each person who held Certificates is entitled to receive as Merger

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Consideration (taking into account all shares of Company Common Stock previously held by such holder).

(c)Contingent Earn-Out Payment.  Within five business days after the Paying Agent receives funds for each applicable Contingent Earn-Out Payment, the Paying Agent shall deliver appropriate checks in the amount equal to the cash each person who held Certificates is entitled to receive as Merger Consideration (taking into account all shares of Company Common Stock previously held by such holder).

(d)General Provisions.  Interest shall accrue on any payments of Merger Consideration from Parent to the Paying Agent at the rate of 8% per annum from the date such payment is due until the date paid to the Paying Agent.  If the Merger Consideration (or any portion thereof) is to be delivered to any person other than the person in whose name the Certificate surrendered in exchange therefor is registered, it shall be a condition to such exchange that the Certificate so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the person requesting such exchange shall pay to the Paying Agent any transfer or other Taxes required by reason of the payment of such consideration to a person other than the registered holder of the Certificate surrendered, or shall establish to the satisfaction of the Paying Agent that such Tax has been paid or is not applicable.

2.5No Further Ownership Rights in Company Common Stock.  All cash paid upon conversion of the shares of Company Common Stock in accordance with this Article 2 shall be deemed to have been issued or paid in full satisfaction of all rights pertaining to the shares of Company Common Stock.

2.6Termination of Payment Fund.  Any portion of the Payment Fund that remains undistributed to the holders of Certificates after the second anniversary of the date such funds were originally delivered to the Paying Agent shall be delivered to the Surviving Corporation or otherwise on the instruction of the Surviving Corporation, and any holders of the Certificates who have not theretofore complied with this Article 2 shall thereafter look only to the Surviving Corporation and Parent and only as general creditors thereof for the Merger Consideration to which such holders are entitled pursuant to Section 2.1.  Any such portion of the Payment Fund remaining unclaimed by holders of shares of Company Common Stock five years after the date such funds were originally delivered to the Paying Agent (or such earlier date immediately prior to such time as such amounts would otherwise escheat to or become property of any Governmental Entity) shall, to the extent permitted by applicable law, become the property of the Surviving Corporation free and clear of any claims or interest of any person previously entitled thereto.

2.7No Liability.  None of Parent, MergerSub, the Company, the Surviving Corporation, or the Paying Agent shall be liable to any person in respect of any Merger Consideration delivered, in good faith, to a public official pursuant to any applicable abandoned property, escheat, or similar law.

2.8Investment of the Payment Fund.  The Paying Agent shall invest any cash included in the Payment Fund in such investments, if any, as the Paying Agent shall determine, subject to the consent of Parent, which shall not be unreasonably withheld.  Any interest and

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other income resulting from such investments shall be paid to the holders of the Outstanding Shares on a pro rata basis, based on the number of Outstanding Shares owned immediately prior to the Effective Time; provided, however, that any such interest or other income remaining in the Payment Fund when it is terminated pursuant to Section 2.6 shall be paid to Parent.

2.9Lost, Stolen, or Destroyed Certificates.  If any Certificate shall have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen, or destroyed and, if required by the Surviving Corporation, the posting by such person of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity by such person against any claim that may be made against the Surviving Corporation in respect of such Certificate, the Paying Agent will deliver in exchange for such lost, stolen, or destroyed Certificate the Merger Consideration in respect of the shares of Company Common Stock formerly represented thereby.

2.10Withholding Rights.  Each of the Surviving Corporation and Parent shall be entitled to deduct and withhold from the Merger Consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock such amounts as it is required to deduct and withhold in respect of the making of such payment under the IRC, the rules and regulations thereunder, or any provision of a Tax law, provided that no such withholding shall be made without the Shareholder Agent’s consent, which shall not be unreasonably withheld.  To the extent that amounts are so withheld by the Surviving Corporation or Parent, as the case may be, such withheld amounts shall be treated for all purposes as having been paid to the holder of Company Common Stock in respect of which such deduction and withholding was made by the Surviving Corporation or Parent, as the case may be.

2.11Stock Transfer Books.  The stock transfer books of the Company shall be closed immediately upon the Effective Time, and there shall be no further registration of transfers of shares of Company Common Stock thereafter on the records of the Company.  On or after the Effective Time, any Certificates presented to the Paying Agent or Parent for any reason shall be converted into the right to receive the Merger Consideration to which the holders thereof are entitled pursuant to Section 2.1.

2.12Dissenting Shares.  Notwithstanding any other provision of this Agreement to the contrary, shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and that are held by shareholders who did not vote in favor of the Merger (the “Dissenting Shares”), and the holders of which comply with all of the applicable provisions of the Act relating to dissenters’ rights (the “Dissenting Shareholders”), shall not be converted into or be exchangeable for the right to receive the Merger Consideration, unless and until such holders shall have failed to perfect or shall have effectively withdrawn or lost their dissenters’ rights under the Act.  If any Dissenting Shareholder shall have failed to perfect or shall have effectively withdrawn or lost the right to dissent, such holder’s shares of Company Common Stock shall thereupon be treated as though such shares of Company Common Stock had been converted, as of the Effective Time, into the right to receive the Merger Consideration pursuant to this Article 2.  The Company shall give Parent (i) prompt notice of any written demands for appraisal of any shares of Company Common Stock, attempted withdrawals of such demands, and any other instruments served pursuant to the Act and received by the Company relating to shareholders’ rights of appraisal, and (ii) the opportunity to direct all negotiations and

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proceedings in respect of demands for appraisal under the Act.  Neither the Company nor the Surviving Corporation shall, except with the prior written consent of Parent, voluntarily make any payment in respect of, or settle or offer to settle, any such demand for payment.

ARTICLE 3.
Representations and Warranties of Parent and MergerSub

Parent and MergerSub each represent and warrant to the Company as follows (with the understanding that the Company is relying materially on such representations and warranties in entering into and performing this Agreement):

3.1Due Organization.  Each of Parent and MergerSub is a corporation, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite corporate power and authority to own, lease, or otherwise hold its assets and properties and to carry on its business as presently conducted.

3.2Authorization and Effect of Agreement.  Each of Parent and MergerSub has the requisite corporate power to execute and deliver this Agreement and to perform the transactions contemplated hereby to be performed by it.  The execution and delivery of this Agreement by each of Parent and MergerSub and the performance by Parent and MergerSub of their respective obligations hereunder have been duly authorized by all necessary corporate action on the part of Parent and MergerSub and by the sole shareholder of MergerSub.  This Agreement has been duly executed and delivered by each of Parent and MergerSub and, assuming the due execution and delivery of this Agreement by the Company, constitutes a valid and binding obligation of each of Parent and MergerSub, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting the enforcement of creditors’ rights in general and subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).

3.3No Violations; Consents and Approvals.  The execution and delivery of this Agreement by each of Parent and MergerSub does not, and the performance by each of Parent and MergerSub of the transactions contemplated hereby to be performed by it will not (i) conflict with or violate the certificate or articles of incorporation or bylaws of Parent or MergerSub, (ii) conflict with or violate, or constitute a default (with or without notice, lapse of time, or both) under, or give rise to a right of termination, amendment, cancellation, or acceleration of any obligation or to loss of a benefit under, any material contract or permit to which Parent or MergerSub is a party or by which it is bound, or (iii) conflict with or violate any federal, state, local, or foreign law, rule, or regulation (“Law”) applicable to Parent or any order, judgment, decree, writ, or injunction (“Order”) of any Governmental Entity applicable to Parent.  Except for any filings, permits, authorizations, consents, and approvals required under the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”), state securities or blue sky laws, and the filing of the Articles of Merger with the Secretary of State of the State of Oregon, no consent, approval, order, or authorization of, or registration, declaration, or filing with any domestic or foreign court, government, governmental or regulatory agency, authority, entity, or instrumentality or subdivision thereof (each, a “Governmental Entity”) is required to be obtained or made by or in respect of Parent or MergerSub in connection with the execution and delivery of this Agreement by each of Parent

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and MergerSub or the performance by it of the transactions contemplated hereby to be performed by it.

ARTICLE 4.
Representations and Warranties of the Company

The Company hereby represents and warrants to Parent and MergerSub, subject to such exceptions as are specifically disclosed in the disclosure schedules delivered by the Company to Parent with this Agreement, the matters set forth in this Article 4 (with the understanding that Parent and MergerSub are relying materially on each such representation and warranty in entering into and performing this Agreement).  Parent and MergerSub agree that any exception or limitation set forth in one disclosure schedule or section of this Article 4 shall be deemed an exception or limitation to any other Section of this Article 4 if the relevance of such disclosure to such other section is reasonably apparent.

4.1Capitalization; Ownership of Shares; No Liens on Shares.  The authorized capital stock of the Company consists of 10,000,000 shares of Company Common Stock, of which 5,499,334 shares are issued and outstanding as of the close of business on the date hereof.  All of such issued and outstanding shares of Company Common Stock are duly authorized, validly issued, fully paid, and nonassessable.  All of such shares of Company Common Stock are owned of record by the holders as set forth on Schedule 4.1.  None of such shares of Company Common Stock were issued or will be transferred under this Agreement in violation of any preemptive or preferential rights of any person of which the Company has actual notice.  As of the date of this Agreement, 600,666 shares of Company Common Stock are reserved for issuance and issuable or otherwise deliverable in connection with the exercise of outstanding Company Stock Options issued pursuant to the Company Stock Option Plan, and no shares of Company Common Stock are issuable upon exercise of options issued outside the Company Stock Option Plan.  As of the date of this Agreement, the Company has issued no warrants to purchase shares of Company Common Stock.  Except as set forth in the preceding sentences, as of the date hereof, there are no outstanding options, warrants, calls, subscriptions, conversion, exchange, or other similar rights, agreements, or commitments to acquire from the Company any shares of capital stock or any other securities convertible into, exercisable or exchangeable for, or evidencing the right to subscribe for, any shares of capital stock of the Company.  There are no shareholder agreements, voting trusts, or other agreements to which the Company is a party or to which it is bound relating to the voting of any shares of capital stock of the Company (other than the Voting Agreement between Parent and certain shareholders of the Company).  The Company has not issued any stock appreciation rights or other rights related to equity participation, and the Company has no debt instruments outstanding that have any voting rights.  Schedule 4.1 sets forth true and complete information regarding the name of the holder, the term, the current exercise price, the date of grant, the type of option (incentive or nonqualified), and the number of Company Stock Options granted to each holder of Company Stock Options.

4.2Due Organization.  The Company and each of its Subsidiaries is a corporation duly organized and validly existing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to own, lease, or otherwise hold its assets and properties and to carry on its business as presently conducted.  The Company and each Subsidiary is qualified to do business and is in good standing in the jurisdictions set forth on

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Schedule 4.2, which jurisdictions represent every jurisdiction where such qualification is required, except where the failure to be so qualified would not have a Material Adverse Effect.

4.3Subsidiaries.

(a)Schedule 4.3 sets forth (i) the name of each Subsidiary of the Company, (ii) the name of each corporation, partnership, joint venture or other entity (other than Subsidiaries of the Company) in which the Company has, or has the right to acquire, an equity or other ownership interest and (iii) the capitalization of the foregoing and the percentage of equity or other ownership interests therein held by the Company or by any of its Subsidiaries.

(b)All of the outstanding shares of capital stock of each corporate Subsidiary of the Company have been duly authorized and validly issued, are fully paid, and nonassessable, and have not been issued in violation of any preemptive rights or federal or state securities law.  The stock or other ownership interest of each Subsidiary of the Company shown to be owned by the Company or a Subsidiary of the Company on Schedule 4.3 is owned by the Company or such Subsidiary of record and beneficially free and clear of any liens, restrictions, pledges, security interests, claims, rights of another, or encumbrances of any nature whatsoever (“Liens”).

(c)There are no options, warrants, calls, subscriptions, conversion, exchange, or other similar rights, agreements, or commitments obligating any of the Subsidiaries of the Company to issue any additional shares of capital stock or other ownership interests of such Subsidiary or any other securities convertible into or exchangeable for or evidencing the right to subscribe for any shares of such capital stock or other ownership interests or obligating the Company or any of its Subsidiaries to transfer any of their respective shares of capital stock or other ownership interests of such Subsidiary.

(d)“Subsidiary” means, when used with reference to any entity, any corporation or other organization, whether incorporated or unincorporated, (i) of which such party or any other subsidiary of such party is a general or managing partner or (ii) the outstanding voting securities or interests of which having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions in respect of such corporation or other organization are directly or indirectly owned or controlled by such party or by any one or more of its subsidiaries.

4.4Authority; Absence of Conflicts.

(a)The Company has full corporate power and authority to execute, deliver, and perform this Agreement and to consummate the transactions contemplated hereby.  The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly approved by the Board of Directors of the Company, and no other corporate action on the part of the Company is necessary to authorize and approve the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby (other than, in respect of the Merger and this Agreement, the Company Requisite Vote).  This Agreement has been duly and validly executed and delivered by the Company and, assuming the due execution and delivery of this Agreement by each of Parent and MergerSub, constitutes the valid and binding obligation of the Company, enforceable against it in accordance

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with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting the enforcement of creditors’ rights in general and subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity).

(b)The Board of Directors of the Company has taken all corporate actions required to be taken by the Board of Directors of the Company for the consummation of the transactions contemplated hereby (including the Merger).  The affirmative approval of the holders of shares of Company Common Stock representing a majority of the votes that may be cast by the holders of all outstanding shares of Company Common Stock (the “Company Requisite Vote”) are the only votes of the holders of any class or series of capital stock of the Company necessary to adopt this Agreement and approve the transactions contemplated hereby, including the Merger.

(c)Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby, nor compliance with the terms hereof, will (i) materially conflict with or violate or result in a material breach of the articles of incorporation or bylaws of the Company, nor (ii) materially conflict with or violate or result in a material breach of or material default (with or without notice, lapse of time, or both) under, or give rise to a right of termination, amendment, cancellation, or acceleration of any material obligation or to loss of a material benefit under any material agreement, understanding, arrangement, commitment, indenture, contract, lease, sublease, loan agreement, note, or other material document or instrument to which the Company or any of its Subsidiaries is a party or by which it or any of its Subsidiaries is bound or to which it, any of its Subsidiaries or its or any of its Subsidiaries assets are subject, nor (iii) result in the creation of any Liens on the assets, capital stock, or properties of the Company or any of its Subsidiaries other than Permitted Liens, nor (iv) materially conflict with, violate or result in a material breach of or constitute a material default under any Law or Order to which the Company, any of its Subsidiaries or any of the Company’s or any of its Subsidiaries’ assets or properties are subject, nor (v) require the Company or any of its Subsidiaries to give notice to, or obtain an authorization, approval, order, license, franchise, declaration, or consent of, or make a filing with, any third person, including, without limitation, any Governmental Entity, other than such filings as may be required under the Securities Act, state securities or blue sky laws, the filing of the Articles of Merger with the Secretary of State of the State of Oregon, and the consents and approvals identified on Schedule 4.4(c) and such other authorizations, approvals, orders, licenses, franchises, declarations, consents, or filings, the failure to obtain or make which could not reasonably be expected to result in a Material Adverse Effect on the Company.

4.5Financial Statements.

(a)The following financial statements of the Company are attached hereto as Schedule 4.5:

(i)The “Interim Financial Statements,” defined as the unaudited consolidated balance sheet and related statement of income, shareholders’ equity, and cash flows of the Company and its Subsidiaries as of and for the period beginning on the first day of the current fiscal year, and ending

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on the Statement Date (the “Interim Statement Period”).  The “Statement Date” means the last day of the calendar month preceding the date of this Agreement.

(ii)The audited consolidated balance sheet and related statements of income, shareholders’ equity, and cash flows of the Company and its Subsidiaries, as of and for the three most recent fiscal years, together with notes thereto and the report of the Company’s auditor in respect thereof (the “Annual Financial Statements,” and together with the Interim Financial Statements, the “Financial Statements”).

(b)Except for, in respect of the Interim Financial Statements, normally recurring year-end audit adjustments that in the aggregate are immaterial and the omission of footnote disclosures, the Financial Statements (i) fairly present in all material respects the financial position, results of operations, and cash flows of the Company and its Subsidiaries for the respective periods stated therein, (ii) have been prepared from and are consistent with the books and records of the Company and its Subsidiaries, and (iii) have been prepared in accordance with GAAP consistently applied throughout the relevant periods.

4.6Absence of Undisclosed Liabilities.  Except as set forth on Schedule 4.6, neither the Company nor any of its Subsidiaries has any material liabilities or obligations of any nature, whether accrued, absolute, contingent, unliquidated, or otherwise, whether due or to become due and whether arising out of transactions entered into or any condition or state of facts existing on or prior to the date hereof, that would in accordance with GAAP be required to be reflected on, or disclosed in the notes to, a balance sheet, other than (i) liabilities and obligations set forth on the Interim Financial Statements, and (ii) liabilities and obligations that have arisen after the date of the Interim Financial Statements in the ordinary course of business and consistent with past practices, all of which are properly reflected in the books and records of the Company and its Subsidiaries.

4.7Conduct of Business; Certain Actions.  Except as set forth on Schedule 4.7 and for the transactions contemplated by this Agreement, since the Statement Date, each of the Company and its Subsidiaries has conducted its business and operations in the ordinary course and consistent with past practices and neither the Company nor its Subsidiaries has:

(a)paid or declared any dividend or distribution or purchased or retired any indebtedness from any shareholder thereof, or directly or indirectly purchased, retired, or redeemed any capital stock from any shareholder;

(b)increased the compensation of any of the directors, officers, or employees of, or consultants to, the Company or any Subsidiary or, except for wage and salary increases made in the ordinary course of business and consistent with past practices or as required by Law;

(c)made any capital expenditures in excess of $25,000 in the aggregate;

(d)sold any asset (or any group of related assets) to any director, officer, or employee of the Company or any Subsidiary;

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(e)sold any asset to any person other than a director, officer, or employee of the Company or any Subsidiary, in any transaction (or series of related transactions) in which the purchase price for such asset (or group of related assets) exceeded $25,000, except for sales of inventory in the ordinary course of business and consistent with past practices;

(f)leased, licensed, or granted to any third person any rights in any of its assets or properties except in the ordinary course of business and consistent with past practices;

(g)revalued any of its assets;

(h)discharged or satisfied any Lien or paid any obligation or liability, absolute or contingent, other than current liabilities incurred and paid in the ordinary course of business and consistent with past practices;

(i)failed to pay any accounts payable of the Company or any of its Subsidiaries in the ordinary course of business consistent with past practice and in accordance with their terms;

(j)accelerated the collection of, or sold or otherwise transferred, any accounts receivable of the Company or any of its Subsidiaries;

(k)made or guaranteed any loans or advances to any person whatsoever;

(l)canceled, waived, released, or forgiven any debts or obligations of, or rights or claims against, third persons;

(m)amended the articles of incorporation or bylaws of the Company or any of its Subsidiaries;

(n)made or paid any severance or termination payment to any employee or consultant of the Company or any of its Subsidiaries in excess of $5,000 in the aggregate;

(o)made any change in its financial or Tax accounting principles or methods;

(p)made any investment in any person;

(q)made, entered into, amended, or terminated any written employment or consulting contract, created, made, amended, or terminated any bonus, stock option, pension, retirement, profit sharing, or other employee benefit plan or arrangement, or withdrawn from any “multi-employer plan” (as defined in IRC Section 414(f)), so as to create any liability under Article IV of ERISA to any entity;

(r)amended or experienced a termination of any contract, agreement, lease, franchise, or license required to be listed on Schedule 4.15(a) or (b);

(s)agreed to do any acts described in the foregoing clauses (a)-(r) of this Section 4.7;

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(t)suffered any material damage, destruction, or loss (whether or not covered by insurance) to any material assets of the Company or any of its Subsidiaries;

(u)made or revoked any Tax election that could reasonably be expected to have a Material Adverse Effect on the Company or any of its Subsidiaries, or compromised or settled any material Tax liability;

(v)experienced any strike, slowdown, or demand for recognition by a labor organization by or in respect of any of the employees of the Company or any of its Subsidiaries; or

(w)experienced any event or condition that has had or could reasonably be expected to result in a Material Adverse Effect.

4.8Real Property.

(a)Schedule 4.8(a) sets forth a complete list and summary description of all real property leased by the Company or any of its Subsidiaries (the “Leased Real Property”).  The Company owns no real property.  Each of the Company and its Subsidiaries has delivered or made available to Parent and MergerSub true and correct copies of all leases, subleases, abstracts of title, surveys, title opinions, and title insurance policies in the Company’s and its Subsidiaries’ possession, custody, or control relating to the Leased Real Property.

(b)Except as set forth on Schedule 4.8(b), each of the Company and its Subsidiaries has a valid leasehold interest in all Leased Real Property, free and clear of any Lien (other than Permitted Liens).  Each of the Company and its Subsidiaries has good and marketable title to all structures, plants, leasehold improvements, systems, fixtures, and other property located on or about any of the Leased Real Property that is owned by the Company and its Subsidiaries, as reflected in the Interim Financial Statements, free and clear of any Lien except for Permitted Liens.  None of the Leased Real Property or other such assets is subject to any agreement, arrangement, or understanding for its use by any person other than the Company or its Subsidiaries.  As used in this Agreement, the term “Permitted Liens” means (i) Liens for current Taxes not yet due and payable, (ii) covenants, conditions, and restrictions of record, none of which materially impairs the use of such property in the manner currently used or impairs the ability of the Company or any of its Subsidiaries to transfer a valid leasehold interest to such Leased Real Property, (iii) any materialmen’s, mechanic’s, workmen’s, repairmen’s, contractor’s, warehousemen’s, carrier’s, supplier’s, vendor’s or similar lien, if payment is not yet due on the underlying obligation, (iv) Liens in respect of pledges or deposits under workers’ compensation laws or similar legislation, (v) all building codes, zoning ordinances, planning restrictions and other laws, ordinances, regulations, rules, orders or determinations of any federal, state, county, municipal or other governmental authority heretofore, now or hereafter enacted, made or issued by any such authority affecting the property, and (vi) minor defects in title, none of which, individually or in the aggregate, materially interfere with the use of such property.

(c)Each of the leases and subleases relating to the Leased Real Property is in full force and effect, there is no material default by the Company or any Subsidiary (or to the

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knowledge of the Company, by the lessor) under any such lease or sublease, and each such lease and sublease will remain in full force and effect immediately following the Closing without any modification in the rights or obligations of the parties under any such lease or sublease agreed to by the Company or any of its Subsidiaries.

4.9Tangible Personal Property.

(a)Each of the Company and its Subsidiaries has good and marketable title to all machinery and equipment, tools, spare and maintenance parts, furniture, vehicles, and all other tangible personal property (collectively, the “Tangible Personal Property”) owned by the Company and its Subsidiaries, free and clear of any Liens, except for Permitted Liens, and/or pursuant to applicable leases.  All items of Tangible Personal Property currently owned or used by the Company and its Subsidiaries as of the date hereof are in good operating condition and repair in all material respects in light of their respective ages, ordinary wear and tear excepted, are physically located at or about the Company’s place of business and are owned outright by the Company and its Subsidiaries or, to the Company’s knowledge, validly leased.  None of the Tangible Personal Property is subject to any agreement, arrangement, or understanding for its use by any person other than the Company or its Subsidiaries.  The maintenance and operation of the Tangible Personal Property complies in all material respects with all applicable Laws, ordinances, contractual commitments, and obligations.  Schedule 4.9(a) sets forth a brief description of all Tangible Personal Property subject to any conditional sale agreement, installment sale agreement, or title retention or security agreement or arrangement of any kind, and the amount and repayment terms of the underlying obligation.  Schedule 4.9(a) sets forth a complete and correct fixed asset list of the Company and its Subsidiaries dated as of the Statement Date.

(b)Schedule 4.9(b) sets forth a complete and correct list of all material Tangible Personal Property leases to which the Company or any of its Subsidiaries is a party, together with a brief description of the property leased.  Each of the Company and its Subsidiaries has made available to Parent and MergerSub complete and correct copies of each lease (and any amendments thereto) listed on Schedule 4.9(b).  Except as set forth on Schedule 4.9(b):  (i) each such lease is in full force and effect; (ii) all lease payments due to the date hereof on any such lease have been paid, and neither the Company, any of its Subsidiaries, nor (to the knowledge of the Company) any other party is in material default under any such lease, and no event has occurred that constitutes, or with or without notice, lapse of time, or both would constitute, a material default by the Company or any of its Subsidiaries or (to the knowledge of the Company) any other party under such lease; and (iii) there are no disputes or disagreements between the Company or any of its Subsidiaries and any other party in respect of any such lease.

4.10Accounts Receivable.  The accounts receivable and notes receivable (collectively, the “Accounts Receivable”) reflected on the Interim Financial Statements are, and the Accounts Receivable of the Company created from and after the date of the Interim Financial Statements to the Closing Date will be, free and clear of any Liens, other than write-offs, discounts or credits made in the ordinary course of business consistent with past practice.  All Accounts Receivable of the Company and its Subsidiaries (i) arose from bona fide sales of goods or services in the ordinary course of business consistent with past practices, (ii) subject to any reserves for

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doubtful accounts, are accurately and fairly reflected on the Interim Financial Statements or, in respect of Accounts Receivable of the Company and its Subsidiaries created after the date thereof, are accurately and fairly reflected in the books and records of the Company, and (iii) except as set forth on Schedule 4.10, are valid obligations of the makers thereof, and there is no pending or, to the knowledge of the Company, threatened contest, claim, or right of set-off contained in any agreement with any maker of any such Account Receivable relating to the amount or validity thereof.

4.11Accounts Payable.  All accounts payable of the Company and its Subsidiaries (i) arose from bona fide purchases in the ordinary course of business consistent with past practices, and (ii) are accurately and fairly reflected on the Interim Financial Statements or, in respect of accounts payable of the Company and its Subsidiaries created after the date thereof, are accurately and fairly reflected in the books and records of the Company.

4.12Sales Representatives and Other Sales Agents/Sales Offices.  Schedule 4.12 sets forth a complete and correct list of the names and addresses of each sales representative or other sales agent currently engaged by the Company and its Subsidiaries who is not an employee of the Company or its Subsidiaries, and a summary description of the territory assigned to each such person (noting whether such territory is exclusive or non-exclusive).  Schedule 4.12 also sets forth a complete and correct list of all agreements between the Company, its Subsidiaries and any such person, complete and correct copies of which agreements have been provided or made available to Parent and MergerSub.

4.13Inventory.  The inventory of the Company and its Subsidiaries, including, without limitation, raw materials, work in progress, and finished goods, consists only of items of a quality and quantity useful or saleable in the ordinary course of business of the Company and its Subsidiaries and consistent with past practices, other than immaterial portions thereof.  The inventory of the Company and its Subsidiaries was purchased at prices and in quantities consistent with the Company’s custom in the ordinary course of business.  Schedule 4.13 sets forth a complete and correct list of the inventory of the Company and its Subsidiaries as of the Statement Date.

4.14Backlog.  All outstanding customer purchase orders for products of the Company and its Subsidiaries have been entered at prices and upon terms and conditions consistent with the normal practices of the Company and its Subsidiaries, and the completion of such orders will not, to the knowledge of the Company, have a Material Adverse Effect.  Neither the Company nor any of its Subsidiaries has been informed by any customer that any material order included in the Company’s or its Subsidiaries’ backlog is likely to be cancelled or terminated prior to its completion.

4.15Material and Affiliated Contracts.

(a)Schedule 4.15(a) sets forth a complete and correct list of all of the following agreements, to which the Company or any Subsidiary is a party, copies of which the Company has delivered or made available to Parent:

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(i)any agreement, arrangement, or understanding, or series of related agreements, arrangements, or understandings, that involves annual expenditures or receipts by the Company or any of its Subsidiaries of more than $25,000 or that provides for performance, regardless of amounts, over a period in excess of one (1) year after the date of such agreement, arrangement, or understanding;

(ii)any license agreement, whether as licensor or licensee, other than licenses for generally available software used by the Company and its Subsidiaries in the ordinary course of business;

(iii)any agreement with suppliers or customers for discounts or allowances;

(iv)any note, bond, indenture, credit facility, mortgage, security agreement, or other instrument or document relating to or evidencing indebtedness for money borrowed or a security interest in or mortgage on the assets of the Company and its Subsidiaries;

(v)any express warranty, indemnity, or guaranty issued by the Company or any of its Subsidiaries (other than customary product warranties provided by the Company and its Subsidiaries in the ordinary course of business);

(vi)any agreement, arrangement, or understanding granting to any person the right to use any property or property right of the Company or any of its Subsidiaries, including any lease;

(vii)any agreement, arrangement, or understanding restricting the right of the Company or any of its Subsidiaries to engage in any business activity or to compete with any business;

(viii)any joint venture agreement;

(ix)any agreement granting to any person the right to manufacture or distribute products of the Company or any of its Subsidiaries;

(x)any other material agreement, arrangement, or understanding not made in the ordinary course of business and consistent with past practices; or

(xi)any outstanding offer or commitment to enter into any contract or arrangement of the nature described in clauses (i) through (x) of this Section 4.15(a).

(b)Schedule 4.15(b) contains a complete and correct list and description of all agreements, arrangements, and understandings (including outstanding indebtedness) that are currently in effect between the Company or its Subsidiaries and any of the following and that

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involve a value of $25,000 or more: (i) each director and officer of the Company or any of its Subsidiaries; (ii) the spouses, children, grandchildren, siblings, parents, grandparents, uncles, aunts, nieces, nephews, or first cousins of any director or officer of the Company or any of its Subsidiaries or their respective spouses (collectively, “near relatives”); (iii) any trust for the benefit of any director or officer of the Company or any of its Subsidiaries or any of their respective near relatives; and (iv) any person owned or controlled by any director or officer of the Company or any of its Subsidiaries or any of their respective near relatives.  The agreements, arrangements, and understandings described in Schedules 4.15(a) and 4.15(b) are collectively referred to herein as “Material Contracts.”

(c)Each of the Company and its Subsidiaries has delivered or made available to Parent and MergerSub complete and correct copies of each written Material Contract (and all amendments thereto).  Except as set forth on Schedule 4.15(c): (i) each Material Contract is in full force and effect; (ii) neither the Company, any of its Subsidiaries, nor, to the knowledge of the Company, any other party is in material default under any such Material Contract, and no event has occurred that constitutes, or that with or without notice, lapse of time, or both would constitute, a material default by the Company or any Subsidiary or, to the knowledge of the Company, by any other party under such Material Contract; and (iii) there are no disputes or disagreements between the Company or any of its Subsidiaries and any other party in respect of any such Material Contract.

4.16Compliance with Laws.  Except as set forth on Schedule 4.16, each of the Company and its Subsidiaries is complying and has complied in all material respects with all Laws and ordinances applicable to its business, properties, and operations, and has secured all necessary permits, authorizations, and licenses issued by any Governmental Entity applicable to its business, properties, and operations, other than such items the failure of which to obtain would not result in a Material Adverse Effect on the Company.  Except in respect of incidents of noncompliance that have been corrected, neither the Company nor any Subsidiary has received any notice alleging a failure to so comply or to secure such a permit, authorization, or license nor, to the knowledge of the Company, is there any inquiry, investigation, or proceeding relating thereto.

4.17Legal Proceedings.  Except as set forth on Schedule 4.17, there are no actions, suits, proceedings (including, without limitation, arbitral and administrative proceedings), claims, or governmental or regulatory investigations or audits pending or, to the knowledge of the Company, threatened, against the Company, any of its Subsidiaries, or its or its Subsidiaries’ properties, assets, or business, or to the knowledge of the Company, pending or threatened against, relating to, or involving any of the officers, directors, employees, or agents of the Company or any of its Subsidiaries in connection with the business of the Company or any of its Subsidiaries.  There are no such actions, suits, proceedings, claims, or investigations pending or, to the knowledge of the Company, threatened, challenging the validity or propriety of, or otherwise relating to or involving, this Agreement or the transactions contemplated hereby.  Except as set forth on Schedule 4.17, there is no Order or award (whether issued by an arbitrator, a Governmental Entity, or otherwise) to which the Company or any of its Subsidiaries is a party, or involving the property, assets, or business of the Company or its Subsidiaries, that is unsatisfied or that requires continuing compliance therewith by the Company or any of its Subsidiaries.  For the purposes of this Agreement, an action, suit, proceeding, claim,

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investigation, dispute, or other matter will be deemed to have been “threatened” if any demand or statement has been made in writing or any notice has been given in writing that such action, suit, proceeding, claim, investigation, dispute, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future.

4.18Ability to Conduct the Business.  Except as set forth on Schedule 4.18, there is no agreement, arrangement, or understanding to which the Company or any of its Subsidiaries is a party, nor any Order of any Governmental Entity directed at the Company or any of its Subsidiaries or in which the Company or any of its Subsidiaries is named nor, to the knowledge of the Company, any other Order that could in any such case materially prevent the use by the Company or any of its Subsidiaries of its or its Subsidiaries’ assets and properties or the conduct by the Company or its Subsidiaries of its or its Subsidiaries business as of the date hereof.  Each of the Company and its Subsidiaries has in force, and has complied in all material respects with, all of the conditions and requirements imposed by, all material permits, licenses, exemptions, consents, authorizations, and approvals used in or required for the conduct of its business as presently conducted.  Neither the Company nor any Subsidiary has received any notice of, and to the knowledge of the Company, there is no intention on the part of any Governmental Entity to cancel, revoke, or modify, or any inquiries, proceedings, or investigations the purpose or possible outcome of which is the cancellation, revocation, or modification of, any such permit, license, exemption, consent, authorization, or approval.  Such permits, licenses, exemptions, consents, authorizations, and approvals will not be adversely affected by the consummation of the transactions contemplated hereby.

4.19Labor Matters.

(a)Neither the Company nor any of its Subsidiaries is a party to any labor or collective bargaining agreement, and no employees of the Company or any of its Subsidiaries are represented by any labor organization.  Within the preceding three years, there have been no representation or certification proceedings, or petitions seeking a representation proceeding, pending or, to the knowledge of the Company, threatened to be brought or filed with the National Labor Relations Board or any other labor relations tribunal or authority.  Within the preceding three years, to the knowledge of the Company, there have been no organizing activities involving Company or any of its Subsidiaries in respect of any group of employees of Company or any of its Subsidiaries.

(b)There are no strikes, work stoppages, slowdowns, lockouts, material arbitrations, or material grievances or other material labor disputes pending or, to the knowledge of the Company, threatened against or involving the Company or any of its Subsidiaries.  There are no unfair labor practice charges, grievances, or complaints pending or, to the knowledge of the Company, threatened by or on behalf of any employee or group of employees of the Company or its Subsidiaries that, if individually or collectively resolved against the Company or its Subsidiaries, would have a Material Adverse Effect.

(c)Each of the Company and its Subsidiaries is in material compliance with all Laws and Orders relating to the employment of labor, including all such Laws and Orders relating to wages, hours, the Worker Adjustment and Retraining Notification Act, as amended (“WARN”), collective bargaining, discrimination, civil rights, safety and health, workers’

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compensation, and the collection and payment of withholding and/or social security Taxes and any similar Tax.

(d)There has been no “mass layoff” or “plant closing” as defined by WARN in respect of the Company or its Subsidiaries within the six months prior to Closing.

(e)Schedule 4.19(e) sets forth the names of all directors and officers of the Company and its Subsidiaries, together with the respective term of office and titles for each such person and all remuneration payable to any such officers and directors.  Schedule 4.19(e) includes, in respect of each employee, director and officer of the Company and its Subsidiaries, such person’s date of employment, the current salary and commission terms of such person, the amount of any bonuses or other cash compensation (other than regular salary or commissions) paid during and since the end of the Company’s most recent fiscal year to such person and a description of all compensation arrangements currently applicable to such person.

4.20Employee Benefit Plans.

(a)List of Benefit Plans and Employee Arrangements.  Schedule 4.20(a) sets forth a complete and correct list of:

(i)all “employee benefit plans,” as defined in Section 3(3) of ERISA, pursuant to which the Company or its Subsidiaries has any obligation or liability, contingent or otherwise (“Benefit Plans”); and

(ii)all employment or consulting agreements, bonus or other incentive compensation, deferred compensation, salary continuation during any absence from active employment for disability or other reasons, severance, supplemental retirement, cafeteria benefits or dependent care, sick days, stock award, stock option, stock purchase, tuition assistance, club membership, employee discount, employee loan, or vacation pay agreements, policies, or arrangements that the Company or any of its Subsidiaries maintains or has any obligation or liability (contingent or otherwise) in respect of any current officer, director, or employee of the Company or its Subsidiaries (the “Employee Arrangements”).

(b)Documents.  In respect of each Benefit Plan and Employee Arrangement, the Company has provided or made available to Parent a complete and correct copy of each of the documents requested.

(c)Multiemployer Plans.  Neither the Company nor any entity under “common control” with the Company (within the meaning of Section 4001 of ERISA) has maintained, contributed to or otherwise had any obligation with respect to any “multiemployer plan” (as defined in Section 3(37) of ERISA).

(d)Tax Qualification.  Each Benefit Plan and its related trust that is intended to be qualified under IRC Sections 401(a) and 501(a) either; (i) is the subject of an unrevoked favorable determination letter from the IRS with respect to such Benefit Plan’s qualified status under the IRC, as amended by the Tax Reform Act of 1986 and all subsequent legislation

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through what is commonly referred to as “GUST,” (ii) has remaining a period of time under the IRC or IRS pronouncements in which to request, and to make any amendments necessary to obtain, such a letter from the IRS, or (iii) if reliance is permitted under IRS Announcement 2001-77, relies on the favorable opinion or advisory letter of the master and prototype or volume submitter plan sponsor of the Benefit Plan.

(e)Contributions.  All contributions or other payments required to have been made by the Company or its Subsidiaries to or under any Benefit Plan or Employee Arrangement by applicable Law or the terms of such Benefit Plan or Employee Arrangement (or any agreement relating thereto) have been timely and properly made or properly accounted for on the Financial Statements.

(f)Compliance with Laws.  The Benefit Plans and Employee Arrangements have been maintained and administered in all material respects in accordance with their terms and all applicable Laws.

(g)Claims.  There are no pending or, to the knowledge of the Company, threatened actions, suits, proceedings, or claims against or relating to any Benefit Plan or Employee Arrangement other than routine benefit claims by persons entitled to benefits thereunder.

(h)Retiree Medical.  Neither the Company nor its Subsidiaries has any obligation or liability under any retiree life or retiree health plans that provide for continuing coverage for current or former officers, directors, or employees of the Company or its Subsidiaries except (i) as may be required under Part 6 of Title I of ERISA and at the sole expense of the participant or the participant’s beneficiary or (ii) a medical expense flexible spending account plan pursuant to IRC Section 125.

(i)Employer Securities.  None of the assets of any Benefit Plan is stock of the Company, its Subsidiaries, or any of their respective affiliates, or property leased to or jointly owned by the Company, its Subsidiaries, or any of their respective affiliates.

(j)Change in Control.  Except in connection with equity compensation, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any material payment becoming due to any employee (current, former, or retired) of the Company or its Subsidiaries, (ii) materially increase any benefits under any Benefit Plan or Employee Arrangement, or (iii) result in the acceleration of the time of payment of, vesting of or other rights in respect of any such benefits.

(k)Underfunded Pension Plans.  Neither the Company nor any Subsidiary has liability (contingent or otherwise) by reason of a transfer of an underfunded pension plan.

4.21Environmental Matters.

(a)Environmental Compliance.  Except as set forth on Schedule 4.21(a), the Company (i) is not aware of any Hazardous Materials that are present in, on, or under any properties owned, leased or used at any time (including both land and improvements thereon) by the Company; (ii) has obtained all applicable and material permits, licenses and other

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authorizations that are required under Environmental Laws (as defined below) for the conduct of its business as currently conducted (“Environmental Permits”) and all such Environmental Permits are valid and in full force and effect; (iii) is in compliance with all material terms and conditions of such Environmental Permits; (iv) is not aware of any event, condition, circumstance, activity, practice, incident, action or plan which constitutes a material violation of any Environmental Law applicable to the Company, any person or entity for which the Company is legally liable or any of the Company’s current or past locations or assets or which could reasonably be expected to form the basis of any material Environmental Claim (as defined below) with respect to the Company or any person or entity whose liability for any Environmental Claim the Company has retained or assumed either contractually or by operation of law; (v) has not disposed of, released, discharged or emitted any Hazardous Materials (as defined below) into the soil, air, surface water, building materials or groundwater at any properties owned or leased at any time by the Company, or at any other property, or exposed any employee or other individual to any Hazardous Materials or condition, in such a manner as would reasonably be expected to result in any material liability to the Company or result in any material Company corrective or remedial action obligation; and (vi) has taken all actions reasonably necessary under Environmental Laws to register any products or materials required to be registered by the Company (or any person for whom Company has legal responsibility) thereunder.  For the purposes of this Section 4.21, “Environmental Claim” means any notice, claim, act, cause of action or investigation by any person alleging potential liability (including potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries or penalties) arising out of, based on or resulting from (a) the presence, or release into the environment, of any Hazardous Materials (b) any violation, or alleged violation, of any Environmental Laws, (c) the exposure of any person to any Hazardous Materials or (d) the use, storage, disposal, discharge, transportation, emission, destruction, remediation or investigation of any Hazardous Materials.  “Environmental Laws” means all federal, state, local and foreign laws and regulations relating to pollution or the environment (including ambient air, surface water, ground water, land surface or subsurface strata) or the protection of human health and worker safety, including, without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of Hazardous Materials, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials.  “Hazardous Materials” means chemicals, pollutants, contaminants, wastes, toxic substances, radioactive and biological materials, asbestos-containing materials (ACM), hazardous substances, petroleum and petroleum products or any fraction thereof or other substance which is or has been designated as a danger or threat to health, reproduction or the environment, excluding, however, Hazardous Materials contained in products typically used for office and janitorial purposes properly, safely and legally maintained in accordance with Environmental Laws.

(b)Hazardous Materials Activities.  The Hazardous Materials Activities (as defined below) of the Company (i) have been conducted in compliance in all material respects with applicable Environmental Laws and (ii) have not resulted in the exposure of any person to any Hazardous Materials in a manner which has caused or could reasonably be expected to cause a material adverse health effect to said person.  For the purpose of the foregoing, “Hazardous Materials Activity” is the transportation, transfer, recycling, storage, use, treatment, manufacture, investigation, removal, remediation, release, exposure of others to, sale or distribution of any Hazardous Materials or any product containing Hazardous Materials.

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(c)Effect of Transaction.  To the knowledge of the Company, no circumstances exist which could cause any Environmental Permit to be revoked, modified, or rendered nonrenewable upon payment of the permit fee or which could impose upon the Company the obligation to obtain any additional Environmental Permit.  All Environmental Permits and all other consents and clearances required by any Environmental Law or any agreement to which the Company is bound as a condition to the performance and enforcement of this Agreement (including without limitation, all so called “ECRA” environmental clearances) which are required by any Governmental Entity in connection with the transactions contemplated by this Agreement have been obtained or will be obtained prior to the Closing at no cost to Parent or the Company.  Schedule 4.21(c) accurately describes all Company Environmental Permits.

(d)Offsite Hazardous Material Disposal.  To the knowledge of the Company, no action, proceeding, liability or claim exists or is threatened, against any disposal site, transporter, recycler or handler used by the Company (“Disposal Site”) or against the Company or any person or entity for which the Company is legally responsible with respect to any transfer or release of Hazardous Materials to a Disposal Site.

(e)Environmental Liabilities.  The Company is not aware of any fact or circumstance which could involve the Company or any person or entity for which the Company is legally responsible in any material environmental litigation or impose upon the Company or any such person or entity any material environmental liability.

(f)Disclosure of Environmental Matters.  The Company has delivered or made available to Parent or made available for inspections by Parent and its agents and employees all records concerning the Hazardous Materials Activities of the Company and all environmental audits and environmental assessments of any current or past Company facility conducted at the request of, or otherwise reasonably available to the Company.  The Company has complied in all material respects with all material environmental disclosure, facility closure and clearance obligations imposed upon the Company with respect to this transaction or otherwise by applicable law.

4.22Warranties; Products Claims.  During the one-year period prior to the date hereof, neither the Company nor its Subsidiaries has experienced any material return or warranty claims, nor are there any pending or, to the knowledge of the Company, threatened, any return or warranty claims in respect of products sold by the Company or its Subsidiaries.

4.23Tax Matters.

(a)Definition of Taxes.  For the purposes of this Agreement, “Tax” or “Taxes” refers to any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities relating to taxes, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts and any obligations under any agreements or arrangements with any other person with respect to

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such amounts and including any liability for taxes of a predecessor entity.  “IRC” means the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder.

(b)Tax Returns and Audits; Taxes.

(i)The Company and each of its Subsidiaries have timely filed (taking into account applicable extensions) all federal and state, local and foreign returns, estimates, information statements and reports (“Returns”) relating to Taxes required to be filed by the Company and each of its Subsidiaries with any Tax authority and such Returns were true and correct in all material respects when filed. All Taxes shown on such Returns as owing by Company or any of its Subsidiaries have been paid.  There are no liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of the Company or any of its Subsidiaries.

(ii)The Company and each of its Subsidiaries as of the Effective Time will have withheld with respect to its employees all federal and state income taxes, Taxes pursuant to the Federal Insurance Contribution Act (“FICA”) and other Taxes required to be withheld.

(iii)There is no Tax deficiency outstanding which has been proposed or assessed in writing against the Company or any of its Subsidiaries, nor has the Company or any of its Subsidiaries executed any unexpired waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax.

(iv)To the Company’s knowledge, no audit or other examination of any Return of the Company or any of its Subsidiaries by any Tax authority is presently in progress.  Neither the Company nor any of its Subsidiaries has been notified of any request for such an audit or other examination.

(v)Neither the Company nor any of its Subsidiaries has any liability for unpaid Taxes which has not been accrued for or reserved on the Financial Statements, whether asserted or unasserted, contingent or otherwise, which is material to the Company, other than any liability for unpaid Taxes that may have accrued since the date of the Financial Statements in connection with the operation of the business of the Company and its Subsidiaries in the ordinary course of business.

(vi)[Reserved.]

(vii)Neither the Company nor any of its Subsidiaries has filed any consent agreement under former IRC Section 341(f) or agreed to have former IRC Section 341(f)(2) apply to any disposition of a subsection (f) asset (as defined in former IRC Section 341(f)(4)) owned by the Company.

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(viii)Neither the Company nor any of its Subsidiaries is party to or has any obligation under any tax-sharing, tax indemnity or tax allocation agreement or arrangement.

(ix)The Company and its Subsidiaries have not been and will not be required to include any material adjustment in taxable income for any Tax period (or portion thereof) pursuant to IRC Section 481 or Section 263A or any comparable provision under state or foreign Tax laws as a result of transactions, events or accounting methods employed prior to the Closing.

(x)None of the Company’s or its Subsidiaries’ assets are tax exempt use property within the meaning of IRC Section 168(h).

(xi)Schedule 4.23 lists (A) any foreign Tax holidays, (B) any intercompany transfer pricing agreements, or other arrangements that have been established by the Company or any of its Subsidiaries with any Tax authority and (C) any expatriate programs or policies affecting the Company or any of its Subsidiaries.

(xii)Neither Company, nor any of its Subsidiaries (A) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was Company), or (B) has any liability for the Taxes of any Person (other than Company or any of its Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any comparable provision under state, local or foreign Tax laws), as a transferee or successor, by contract, or otherwise.

(xiii)Neither Company, nor any of its Subsidiaries, was either a “distributing corporation” or a “controlled corporation” in a distribution of stock qualifying for tax-free treatment under IRC Section 355.

(xiv)Company has delivered or made available to Parent correct and complete copies of all federal income Tax Returns of Company and its Subsidiaries for periods ending after December 31, 2000.

4.24Insurance.  Schedule 4.24 sets forth a complete and correct list and brief summary description of all insurance policies carried by, or covering, the Company and its Subsidiaries in respect of their respective businesses.  Complete and correct copies of each such policy have been made available to Parent and MergerSub, all such policies are in full force and effect, and no notice of cancellation has been given in respect of any such policy.  All premiums due thereon have been paid.  Except as set forth on Schedule 4.24, there are no pending claims or, to the knowledge of the Company, threatened claims under any of the Company’s or its Subsidiaries’ insurance policies.

4.25Minute Books; Stock Record Books.  Complete and correct copies of the Company’s and its Subsidiaries’ minute books and stock record books have been provided to Parent and MergerSub.  The minute books of the Company and its Subsidiaries contain true and complete originals or copies of all minutes of meetings of and actions by the shareholders, Board

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of Directors, and all committees of the Board of Directors of the Company and its Subsidiaries.  The stock record books accurately reflect all transactions in shares of the Company’s and its Subsidiaries’ capital stock.

4.26Brokers’ or Finders’ Fees.  No agent, broker, investment banker, or other person or firm acting on behalf of the Company and its Subsidiaries is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee directly or indirectly from the Company or its Subsidiaries in connection with any of the transactions contemplated by this Agreement.

4.27Material Customers and Suppliers.

(a)Each of the ten largest customers of the Company and its Subsidiaries in terms of amounts invoiced to such customers during the most recent fiscal year, and during the Interim Statement Period, respectively is a “Material Customer.”  No Material Customer has given the Company or its Subsidiaries any notice terminating, suspending, or reducing in any material respect, or specifying an intention to terminate, suspend, or reduce in any material respect in the future, the business relationship between such customer and the Company or its Subsidiaries and, to the Company’s knowledge, there has not been any Material Adverse Effect on the business relationship of the Company or its Subsidiaries with any such customer since the end of the most recent fiscal year.

(b)Each of the ten largest suppliers of the Company and its Subsidiaries in terms of amounts purchased from such suppliers during the most recent fiscal year, and during the Interim Statement Period, respectively is a “Material Supplier.”  No Material Supplier has given the Company or its Subsidiaries any notice terminating, suspending, or reducing in any material respect, or specifying an intention to terminate, suspend, or reduce in any material respect in the future, the business relationship between such supplier and the Company or its Subsidiaries and to the Company’s knowledge, there has not been any Material Adverse Effect on the business relationship of the Company or its Subsidiaries with any such supplier since the end of the most recent fiscal year.

4.28Bank Accounts; Powers of Attorney.  Schedule 4.28 sets forth a complete and correct list showing:  (i) all banks in which the Company and its Subsidiaries maintain a bank account or safe deposit box (collectively, “Bank Accounts”), together with, as to each such Bank Account, the account number, the names of all signatories thereof, and the authorized powers of each such signatory and, in respect of each such safe deposit box, the number thereof and the names of all persons having access thereto; and (ii) the names of all persons holding powers of attorney from the Company or its Subsidiaries, true and correct copies of which have been provided or made available to Parent and MergerSub.

4.29Books and Records.  All of the records, data, information, databases, systems, and controls maintained, operated, or used by the Company and its Subsidiaries in connection with the conduct or administration of their respective businesses (including all means of access thereto and therefrom) are located on the premises of the Company and are under the exclusive ownership or direct control of the Company.

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4.30Intellectual Property Rights.

(a)For the purposes of this Agreement, the following terms have the following definitions:

(i)“Intellectual Property” shall mean any or all of the following and all rights in, arising out of, or associated therewith:  (i) all United States and foreign patents and applications therefor and all reissues, divisions, renewals, extensions, provisional, continuations and continuations-in-part thereof (“Patents”); (ii) all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know how, technology, technical data and customer lists, and all documentation relating to any of the foregoing; (iii) all works of authorship, copyrights, copyright registrations and applications therefor and all other rights corresponding thereto throughout the world; (iv) all semiconductor circuit designs; (v) all rights to all mask works and reticules, mask work registrations and applications therefor; (vi) all industrial designs and any registrations and applications therefor throughout the world; (vii) all trade names, logos, common law trademarks and service marks; trademark and service mark registrations and applications therefor and all goodwill associated therewith throughout the world; (viii) all databases and data collections and all rights therein throughout the world; (ix) all computer software including all source code, object code, firmware, development tools, files, records and data, all media on which any of the foregoing is recorded, all Web addresses, sites and domain names; (x) any similar, corresponding or equivalent rights to any of the foregoing; and (xi) all technical, design, end-user and other documentation related to any of the foregoing.

(ii)“Company Intellectual Property” shall mean any Intellectual Property that is owned by, subject to an agreement to assign to, or exclusively licensed to the Company or any of its Subsidiaries.  Without in any way limiting the generality of the foregoing, Company Intellectual Property includes all Intellectual Property owned or exclusively licensed by the Company related to the Company’s products, including without limitation all rights in any design code, documentation, and tooling for packaging of semiconductors in connection with all current products and products in design and development.

(iii)“Registered Intellectual Property” shall mean all United States, international and foreign: (i) patents, patent applications (including provisional applications); (ii) registered trademarks, applications to register trademarks, intent-to-use applications, or other registrations or applications related to trademarks, and any domain name registrations; (iii) registered copyrights and applications for copyright registration; (iv) any mask work registrations and applications to register mask works; and (v) any other Intellectual Property that is the subject of an application,

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certificate, filing, registration or other document issued by, filed with, or recorded by, any state, government or other public legal authority.

(iv)“Company Registered Intellectual Property” means all of the Registered Intellectual Property owned by, or filed in the name of, the Company or any of its Subsidiaries.

(b)Schedule 4.30(b) is a complete and accurate list of all Company Registered Intellectual Property and specifies, where applicable, the jurisdictions in which each such item of Company Registered Intellectual Property has been issued or registered and lists any proceedings or actions before any court, tribunal (including the United States Patent and Trademark Office or equivalent authority anywhere in the world) related to any of the Company Registered Intellectual Property.

(c)Schedule 4.30(c) is a complete and accurate list (by name and version number) of all products and service offerings of the Company or any of its Subsidiaries that have been distributed or provided in the one-year period preceding the date hereof or which the Company or any of its Subsidiaries currently is developing or has developed (“Company Products”).

(d)No Company Intellectual Property or Company Product is subject to any proceeding or outstanding decree, order, judgment, contract, license, agreement, or stipulation restricting in any material manner the use, transfer, or licensing thereof by the Company or any of its Subsidiaries, or which may affect the validity, use or enforceability of such Company Intellectual Property or Company Product.

(e)Each item of Company Registered Intellectual Property is valid and subsisting, all necessary registration, maintenance and renewal fees currently due in connection with such Company Registered Intellectual Property have been made and all necessary documents, recordations and certificates in connection with such Company Registered Intellectual Property have been filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such Company Registered Intellectual Property.

(f)The Company owns and has good and exclusive title (or an exclusive license from a third party) to, each item of Company Intellectual Property free and clear of any material lien or encumbrance (excluding non-exclusive licenses and related restrictions granted in the ordinary course).  Without limiting the foregoing: (i) the Company is the exclusive owner in the relevant markets of all trademarks and trade names used in connection with the operation or conduct of the business of the Company and its Subsidiaries, including the sale, distribution or provision of any Company Products by the Company or its Subsidiaries; (ii) the Company owns exclusively, and has good title to, all copyrighted works that are Company Products or which the Company or any of its Subsidiaries otherwise purports to own; and (iii) except as set forth in Schedule 4.30(f), the Company Products do not infringe any U.S. Patents, or to the Company’s knowledge, any non-U.S. Patents.

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(g)To the extent that any Intellectual Property has been developed or created independently or jointly by a third party for the Company or any of its Subsidiaries or is incorporated into any of the Company Products, the Company has a written agreement with such third party with respect thereto and the Company thereby either (i) has obtained ownership of, and is the exclusive owner of, or (ii) has obtained a perpetual, non-terminable license (sufficient for the conduct of its business as currently conducted, and to the Company’s knowledge, sufficient for the conduct of its business as currently proposed to be conducted) to all such third party’s Intellectual Property in such work, material or invention by operation of law or by valid assignment, to the fullest extent it is legally possible to do so.

(h)Neither the Company nor any of its Subsidiaries has transferred ownership of, or granted any exclusive license with respect to, any Intellectual Property that is or was Company Intellectual Property, to any third party.  To the Company’s knowledge, neither the Company nor any of its Subsidiaries has permitted its rights in any material portion of such Company Intellectual Property to lapse or enter the public domain.

(i)Schedule 4.30(i) lists all contracts, licenses and agreements to which the Company or any of its Subsidiaries is a party: (i) with respect to Company Intellectual Property licensed or transferred to any third party (other than end-user licenses in the ordinary course); or (ii) pursuant to which a third party has licensed or transferred any Intellectual Property to the Company.

(j)All contracts, licenses and agreements relating to either (i) Company Intellectual Property or (ii) Intellectual Property of a third party used in the business of the Company or any of its Subsidiaries, are in full force and effect.  The consummation of the transactions contemplated by this Agreement will neither violate nor result in the breach, modification, cancellation, termination or suspension of such contracts, licenses and agreements.  Each of the Company and its Subsidiaries is in compliance in all material respects with, and has not materially breached any term of any such contracts, licenses and agreements and, to the knowledge of the Company, all other parties to such contracts, licenses and agreements are in compliance in all material respects with, and have not materially breached any term of, such contracts, licenses and agreements.  To the Company’s knowledge, immediately following the Closing, the Surviving Corporation will be permitted to exercise all of the Company’s rights under such contracts, licenses and agreements to the same extent the Company and its Subsidiaries would have been able to had the transactions contemplated by this Agreement not occurred and without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments which the Company would otherwise be required to pay.  Neither this Agreement nor the transactions contemplated by this Agreement, including the assignment to Parent or MergerSub by operation of law or otherwise of any contracts or agreements to which the Company is a party, will result in (i) either Parent’s or the MergerSub’s granting to any third party any right to or with respect to any Intellectual Property right owned by, or licensed to, either of them, (ii) either the Parent’s or the Merger Sub’s being bound by, or subject to, any non-compete or other restriction on the operation or scope of their respective businesses, or (iii) either the Parent’s or the Merger Sub’s being obligated to pay any royalties or other amounts to any third party in excess of those payable by Parent or Merger Sub, respectively, prior to the Closing.

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(k)The operation of the business of the Company and its Subsidiaries as such business currently is conducted, including (i) the Company’s and its Subsidiaries’ design, development, manufacture, distribution, reproduction, marketing or sale of the products or services of the Company and its Subsidiaries (including Company Products) and (ii) to the knowledge of the Company, the Company’s use of any product, device or process for the purpose set forth in clause (i) of this Section 4.30(k), has not and does not infringe or misappropriate the Intellectual Property of any third party or constitute unfair competition or trade practices under the laws of any jurisdiction applicable to the Company’s business.

(l)Neither the Company nor any of its Subsidiaries has received notice from any third party that the operation of the business of the Company or any of its Subsidiaries or any act, product or service of the Company or any of its Subsidiaries, infringes or misappropriates the Intellectual Property of any third party or constitutes unfair competition or trade practices under the laws of any jurisdiction.

(m)To the knowledge of the Company, no person has or is infringing or misappropriating any Company Intellectual Property.

(n)The Company and each of its Subsidiaries has taken reasonable steps to protect the Company’s and its Subsidiaries’ rights in the Company’s confidential information and trade secrets that it wishes to protect or any trade secrets or confidential information of third parties provided to the Company or any of its Subsidiaries, and, without limiting the foregoing, each of the Company and its Subsidiaries has and enforces a policy requiring each employee and contractor to execute a proprietary information/confidentiality agreement substantially in the form provided to Parent and all current and former employees and contractors of the Company and any of its Subsidiaries have executed such an agreement.

4.31Information Furnished.  Neither this Agreement nor the Schedules attached hereto, taken as a whole, contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements herein or therein not misleading.

ARTICLE 5.
Covenants Related to Conduct of the Business

5.1Inspection.  From and after the date hereof and until the Closing, the Company shall, and shall cause its Subsidiaries to: (i) give to each of Parent and MergerSub and its officers, directors, employees, agents, financial, advisors, attorneys, accountants, environmental professionals and other representatives (collectively, “Representatives”) free, full, and complete access on reasonable notice during normal business hours to all books, records, Tax Returns, files, correspondence, personnel, facilities, and properties of the Company and its Subsidiaries; (ii) provide each of Parent and MergerSub and its Representatives all information and material pertaining to the business and affairs of the Company and its Subsidiaries as Parent and MergerSub may deem reasonably necessary or appropriate; (iii) without limiting the generality of the foregoing, permit Parent’s and MergerSub’s accountants to examine the Company’s and its Subsidiaries’ financial statements for any fiscal period; and (iv) use its reasonable efforts to afford each of Parent and MergerSub and its Representatives the opportunity to meet, at mutually agreed times and, at the election of the Company, with a Company representative in attendance,

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with the customers, employees, and vendors of the Company and its Subsidiaries to discuss the business, condition (financial or otherwise), operations, and prospects of the Company and its Subsidiaries, including the status of customer programs and customer relationships.

5.2Financial Statements.  From and after the date hereof and continuing until the Closing, as soon as available, and in any event within 20 days after the end of each calendar month, the Company shall, and shall cause its Subsidiaries to, furnish to Parent and MergerSub an unaudited balance sheet as of the last day of the month during such period and the related statements of income and cash flows of the Company and its Subsidiaries for such month.  Such monthly financial statements shall fairly present in all material respects the financial position, results of operations, and changes in financial position of the Company and its Subsidiaries as of the indicated dates and for the indicated periods and shall be prepared in accordance with GAAP, consistently applied, except as otherwise stated therein, and the omission of footnote disclosure and any year-end adjustment consistent with past practice.

5.3Interim Operations of the Company and its Subsidiaries.

(a)Other than for the transactions contemplated by this Agreement, from the date hereof to the Closing, the Company shall, and shall cause its Subsidiaries to, conduct their respective businesses only in the ordinary course consistent with past practices, and the Company shall not, and shall cause its Subsidiaries not to, unless Parent or MergerSub gives its prior written approval:

(i)amend or otherwise change their articles of incorporation or bylaws, as each such document is in effect on the date hereof;

(ii)issue or sell, or authorize for issuance or sale, additional shares of any class of capital stock or issue, grant, or enter into any subscription, option, warrant, right, convertible or exchangeable security, or other agreement or commitment of any character obligating the Company or its Subsidiaries to issue securities, other than shares issued pursuant to the exercise of Company Stock Options outstanding as of the date hereof;

(iii)declare, set aside, make, or pay any dividend or other distribution in respect of their capital stock;

(iv)redeem, purchase, or otherwise acquire, directly or indirectly, any of their capital stock (other than repurchases of unvested shares in the ordinary course consistent with past practices);

(v)authorize any capital expenditures or sell, pledge, dispose of, or encumber, or agree to sell, pledge, dispose of, or encumber, any assets of the Company or its Subsidiaries except for sales of inventory in the ordinary course of business consistent with past practices;

(vi)acquire (by merger, share exchange, consolidation, combination, or acquisition of stock or assets) any corporation, partnership, or other business organization or division thereof or enter into any contract,

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agreement, commitment, or arrangement in respect of any of the foregoing;

(vii)incur any indebtedness for borrowed money, issue any debt securities, or enter into or modify any contract, agreement, lease, commitment, or arrangement in respect thereof;

(viii)enter into any new material contract, agreement, lease, or commitment, or amend or terminate any existing material contract, agreement, lease, or commitment;

(ix)enter into, amend, or terminate any employment or consulting agreement with any director, officer, consultant, or employee of the Company or its Subsidiaries, enter into, amend, or terminate any employment or consulting agreement or arrangement with any other person or take any action in respect of the grant or payment of any severance or termination pay other than pursuant to policies or agreements of the Company or its Subsidiaries in effect on the date hereof;

(x)enter into, extend, or renew any lease for equipment, office space, or other space;

(xi)fail to pay any accounts payable of the Company or its Subsidiaries in the ordinary course of business consistent with past practice and in accordance with their terms consistent with past practices (although the Company may accelerate the payment of bank loans in order to obtain Lien releases relating to the Company’s assets);

(xii)accelerate the collection of, or sell or otherwise transfer, any accounts receivable of the Company or its Subsidiaries;

(xiii)except as required by applicable Law, adopt, amend, or terminate any bonus, profit sharing, compensation, stock option, pension, retirement, deferred compensation, employment or other employee benefit plan, agreement, trust, fund, or arrangement for the benefit or welfare of any officer or employee of the Company or its Subsidiaries, or withdraw from any multi-employer plan so as to create any liability under Article IV of ERISA to any entity;

(xiv)pay (except for compensation under existing employment arrangements, advances to salesmen in the ordinary course of business, and directors’ fees under standard terms in effect prior to the date hereof), loan, or advance any amount to, or sell, transfer, or lease any assets or properties to, or enter into any agreement or arrangement with, any of their officers or directors or any affiliate, associate, or near relative of any of their officers or directors;

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(xv)write down (or write up) the value of any inventory or write off as uncollectible any Accounts Receivable other than in the ordinary course of business consistent with past practice;

(xvi)cancel any debts or waive any claims or rights of substantial value;

(xvii)dispose of or permit to lapse any rights to the use of any patent, trademark, trade name, copyright, or other intangible asset, or dispose of or disclose to any person any trade secret, formula, process, or know-how not theretofore a matter of public knowledge;

(xviii)change any of the banking or safe deposit arrangements described in Schedule 4.28, except in the ordinary course of business (although the Company may request that the Company’s bank lenders remove Kenneth Lakin as a personal guarantor of the Company’s bank loans);

(xix)grant or extend any power of attorney or act as guarantor, surety, co-signer, endorser, co-maker, indemnitor, or otherwise, in respect of the obligation of any person;

(xx)make any change in financial or Tax accounting methods, principles, or practices or make or cause to be made any elections on Tax Returns of the Company and its Subsidiaries, unless required by GAAP or applicable law;

(xxi)extend credit in the sale of products, collection of receivables, or otherwise, other than in the ordinary course of business consistent with past practice;

(xxii)fail to maintain its books, accounts, and records in the usual, regular, and ordinary manner on a basis consistent with prior years;

(xxiii)adopt or amend in any material respect any collective bargaining agreement, Benefit Plan, or Employee Arrangement other than as required by applicable Law;

(xxiv)grant any increase in compensation, or grant or make any bonus or other compensatory payments, to any director, officer, consultant, or employee of the Company or its Subsidiaries;

(xxv)make or revoke any Tax election that could reasonably be expected to have a Material Adverse Effect on the Company and its Subsidiaries, or compromise or settle any material Tax liability; or

(xxvi)agree, whether in writing or otherwise, to do any of the foregoing.

(b)From the date hereof to the Closing, the Company shall, and shall cause its Subsidiaries to, use their respective commercially reasonable efforts to preserve intact the

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business organization of the Company and its Subsidiaries, to keep available in all material respects the services of their present officers and employees, to preserve intact their banking relationships and credit facilities, to preserve intact in all material respects their relationships with their customers and vendors, to preserve in all material respects the goodwill of those having business relationships with them, and to comply with all applicable laws in all material respects.

ARTICLE 6.
Additional Agreements

6.1Company Shareholder Meeting.  Unless this Agreement has been terminated pursuant to the provisions of Article 8, the Company shall take all lawful action to (i) cause a special meeting of its shareholders (the “Company Shareholder Meeting”) to be duly called and held as soon as practicable after the date of this Agreement for the purpose of voting on the approval and adoption of this Agreement and (ii) solicit proxies from its shareholders to obtain the Company Requisite Vote for the approval and adoption of this Agreement, or alternatively shall obtain the written consent of the holders of outstanding shares of the Company’s stock having not less than the minimum number of votes that would be necessary to approve and adopt this Agreement at a meeting at which all shares entitled to vote thereon were present and voted, in accordance with the Act (the “Shareholder Consent”).

6.2Satisfaction of All Conditions Precedent.  From the date hereof to the Closing, each of the Company, Parent, and MergerSub shall use its commercially reasonable efforts to cause all conditions precedent to the obligations of Parent and MergerSub, in the case of the Company, and the Company, in the case of Parent and MergerSub, hereunder to be satisfied.

6.3Acquisition Proposals. Until the termination of this Agreement, the Company will not, nor will it authorize or permit any Representative of the Company to, directly or indirectly, (i) solicit, initiate, or encourage the submission of any Acquisition Proposal or (ii) participate in any discussions or negotiations regarding, or furnish to any person any information in respect of, or knowingly take any other action to facilitate, any Acquisition Proposal or any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal.  The Company shall notify Parent of any Acquisition Proposal (including the material terms and conditions thereof, any subsequent modifications thereto, and the identity of the person making it) as promptly as practicable after its receipt thereof, and shall provide Parent with a copy of any written Acquisition Proposal or amendments or supplements thereto.  Immediately after the execution and delivery of this Agreement, the Company will, and will use its commercially reasonable efforts to cause its affiliates, and their respective Representatives to, cease and terminate any existing activities, discussions, or negotiations with any parties conducted heretofore in respect of any possible Acquisition Proposal.  The Company shall take all necessary steps to promptly inform the persons referred to in the first sentence of this Section 6.5 of the obligations undertaken in this Section 6.5.  “Acquisition Proposal” means an inquiry, offer, or proposal regarding any of the following (other than the transactions contemplated by this Agreement) involving the Company: (w) any merger, consolidation, share exchange, recapitalization, business combination, or other similar transaction; (x) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition of all or substantially all the assets of the Company in a single transaction or series of related transactions; (y) any tender offer or

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exchange offer for 20% or more of the outstanding shares of Company Common Stock; or (z) any public announcement of a proposal, plan, or intention to do any of the foregoing or any agreement to engage in any of the foregoing.

6.4Notice of Developments.  From the date hereof to the Closing, the Company shall notify Parent and MergerSub of any changes or developments in respect of the business, operations, or prospects of the Company that has had, or could reasonably be expected to result in, a Material Adverse Effect.

6.5Public Announcements.  Each of Parent, MergerSub, and the Company will consult with one another before issuing any press release or otherwise making any statement to any other person in respect of the transactions contemplated by this Agreement, including the Merger, and shall not issue any such press release or make any such statement prior to such consultation, except as may be required by applicable law or by obligations pursuant to any listing agreement with Nasdaq, as determined by Parent, MergerSub, or the Company, as the case may be.

6.6Notice of Breach.  From the date hereof to the Closing, each party hereto shall, promptly upon becoming aware thereof, give detailed written notice to the other parties hereto of the occurrence of, or the impending or threatened occurrence of, any event that would cause or constitute a breach, or would have caused or constituted a breach had such event occurred or been known to such party prior to the date of this Agreement, of any of such party’s covenants, agreements, representations, or warranties contained or referred to herein or in any document delivered in accordance with the terms hereof.

6.7Continuation of Insurance Coverage.  From the date hereof to the Closing, the Company shall keep in full force and effect insurance coverage for the Company and its assets and operations comparable in amount and scope to the coverage now maintained covering the Company and its assets and operations.

6.8Maintenance of Credit Terms.  From the date hereof to the Closing, the Company shall continue to effect sales of its products and services only on the terms that have historically been offered by the Company or on such other terms as market conditions may dictate consistent with commercially reasonable practices.

6.9Updating Schedules.  From the date hereof until the Closing, the Company shall disclose to Parent and MergerSub any material variances from the representations and warranties contained in Article 4 (which are based on the most recent Schedules as delivered by the Company to Parent on or prior to the date of this Agreement) promptly upon discovery thereof.  The Company shall promptly provide Parent and MergerSub with any additional information regarding such disclosure that is reasonably requested.  The applicable Schedule(s) shall be deemed supplemented by (i) any such disclosures that relate to occurrences subsequent to the date of this Agreement and (ii) any such disclosures that relate to occurrences prior to the date of this Agreement but subsequent to the date of the most recent Schedules as delivered by the Company to Parent. In the event the Closing condition in Section 7.2 is satisfied or waived by Parent and MergerSub, the right of Parent or MergerSub to recover under the indemnity provisions of Article 9 shall be determined based upon the Schedules as supplemented as

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provided above, which supplements shall be deemed to cure and correct any breach of the representations and warranties contained in Article 4 that would have existed in the absence thereof.

6.10Third Party Consents.  The Company shall use its commercially reasonable efforts to obtain at the earliest practicable date all consents, waivers and approvals of third persons (including, without limitation, such as are listed on Schedule 4.4(c)) necessary to the consummation of the transactions contemplated hereby (the “Company Consents”) and will provide to Parent and MergerSub copies of each such Company Consent promptly after it is obtained. Parent and MergerSub shall cooperate fully with the Company in connection with the obtaining of the Company Consents; provided, however, that Parent and MergerSub shall not be required to pay any additional sums to secure such Company Consents.

6.11Commercially Reasonable Efforts and Certain Filings.  Subject to the terms and conditions of this Agreement, each of the Company, Parent and MergerSub will use its respective commercially reasonable efforts to maintain the accuracy of its representations and warranties hereunder and to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable to consummate the transactions contemplated by this Agreement.  None of the Company or its Subsidiaries, Parent, or MergerSub will take, agree to take, or knowingly permit to be taken any action or do or knowingly permit to be done anything in the conduct of its business, or otherwise, that would be contrary to or in breach of any of the terms or provisions of this Agreement.

6.12Confidentiality.  Each of the parties hereby agrees to and reaffirms the terms and conditions of the Mutual Nondisclosure Agreement by and between Parent and the Company effective as of November 12, 2003.

6.13FIRPTA. Company shall, prior to the Closing Date, provide Parent with a properly executed Foreign Investment and Real Property Tax Act of 1980 (“FIRPTA) Notification Letter which states that shares of capital stock of Company do not constitute “United States real property interests” under IRC Section 897(c), for purposes of satisfying Parent’s obligations under Treasury Regulations Section 1.1445-2(c)(3).  In addition, simultaneously with delivery of such FIRPTA Notification Letter, Company shall provide to Parent a form of notice to the Internal Revenue Service in accordance with the requirements of Treasury Regulations Section 1.897-2(h)(2), along with written authorization for Parent to deliver such notice form to the Internal Revenue Service on behalf of Company upon the Closing of the Merger.

6.14Contingent Earn-Out Payment. TriQuint and Parent shall use commercially reasonable efforts to maximize the amount of the Contingent Earn-Out Payment.  For the avoidance of doubt, none of TriQuint, Parent, or their affiliates are required to continue operating the Company’s business after the Effective Time or sell any products that incorporate the Company Intellectual Property if such operations or sales are not profitable, cost-effective, or otherwise consistent with TriQuint’s business needs, goals, or strategies.  If TriQuint or Parent sell or otherwise transfer the Surviving Corporation or the Company Intellectual Property to a third party, then TriQuint or Parent (as the case may be) shall ensure that the Contingent Earn-Out Payment obligations set forth in this Agreement are appropriately binding on the third party.

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6.15Benefits for Retained Employees.  To the extent that service is relevant for purposes of eligibility, vesting, allowances, benefit accrual or any other purpose under any employee benefit plan, program, arrangement, policy or practice of Parent or any of its subsidiaries or affiliates extended to Retained Employees (as defined below), Retained Employees shall receive full credit for their service with the Company prior to the Closing with the exceptions outlined below.

To the extent Parent does not maintain or cause the Surviving Corporation to maintain medical and dental Benefit Plans in place at the Company prior to the Closing, Parent shall waive or shall cause to be waived pre-existing condition limitations and waiting periods with respect to each of the Retained Employees and their spouses and dependents under the Parent’s self-insured medical and dental plans.

For purposes of Parent’s service awards, only service under the Parent is counted.  For purposes of sabbatical, the Parent’s sabbatical policy will remain in effect including past service and pro-ration for service with the Parent of less than 5 years at qualifying Service Anniversaries.

Nothing in this Section 6.15 shall be deemed to limit or otherwise affect the right of Parent and its subsidiaries and affiliates to terminate the employment or change the place of work, responsibilities, status or description of any employee or group of employees.  Parent has the right to amend, modify, terminate, Benefits Plans, programs, arrangements, practices and policies of Retained Employees so long as any amendment, modification or termination applies to other employees of the Parent.  For purposes of this Section 6.15 “Retained Employees” means individuals who were employees of the Company immediately prior to the Closing and who remain employed by the Surviving Corporation, or become employed by Parent of any of its subsidiaries or Affiliates, immediately after the Closing.

ARTICLE 7.
Conditions to Consummation of the Merger

7.1Conditions to Each Party’s Obligation to Effect the Merger.  The respective obligations of each party to consummate the transactions contemplated by this Agreement are subject to the fulfillment at or prior to the Effective Time of each of the following conditions, any or all of which may be waived in whole or in part by the party being benefited thereby, to the extent permitted by applicable law:

(a)The Agreement shall have been approved and adopted by the Company Requisite Vote.

(b)The Company, Parent, and MergerSub shall have timely obtained from each Governmental Entity all approvals, waivers, and consents, if any, necessary for consummation of or in connection with the transactions contemplated hereby.

(c)There shall not be in effect any Law or Order of any Governmental Entity of competent jurisdiction restraining, enjoining, or otherwise preventing consummation of the transactions contemplated by this Agreement.

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7.2Conditions to the Obligations of Parent and MergerSub.  The respective obligations of Parent and MergerSub to consummate the transactions contemplated by this Agreement are subject to the fulfillment at or prior to the Effective Time of each of the following additional conditions, any or all of which may be waived in whole or part by Parent and MergerSub, as the case may be, to the extent permitted by applicable law:

(a)The representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects at and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date, except to the extent that such representations and warranties speak as of an earlier date (in which case they shall be true and correct as of such earlier date); the Company shall have performed and complied in all material respects with all agreements required by this Agreement to be performed or complied with by the Company at or prior to the Closing Date; and Parent, and MergerSub, shall have received a certificate, dated as of the Closing Date, signed by a duly elected officer of the Company to the foregoing effects;

(b)Prior to the Closing, there shall not have occurred any Material Adverse Effect or any material casualty or damage (whether or not insured) to any facility, property, or equipment owned or used by the Company.

(c)The Company shall have delivered to Parent the minute books and stock transfer records of the Company.

(d)All material consents, waivers, and approvals of any Governmental Entity or third person required in connection with the execution, delivery, and performance of this Agreement (including, without limitation, all consents listed on Schedule 4.4(c)) shall have been obtained.

(e)The Company shall have delivered to Parent and MergerSub such good standing certificates and officers’ certificates and similar documents as counsel for Parent and MergerSub shall have reasonably requested prior to the Closing Date.

(f)Holders of no more than 5% of the outstanding shares of Company Common Stock shall have exercised and not withdrawn, forfeited, or otherwise permitted to lapse dissenter’s or similar rights under applicable Law with respect to their shares of Company Common Stock in connection with the Merger.

(g)The Company shall have entered into appropriate agreements with each holder of outstanding Company Stock Options, in form and substance acceptable to Parent, providing that:  subject to the consummation of the Merger and effective immediately prior to the Effective Time, (A) the Company Stock Option shall be exercised in full for shares of Company Common Stock, whether or not exercisable, and whether or not vested, and (B) the holder of the Company Stock Option may elect to pay the exercise price by means of a promissory note that will be repaid by a corresponding deduction as an offset from the payment that would otherwise be made to such holder on account of the Tranche One Payment as set forth in Article 2.  Any per share exercise price that is unpaid upon the exercise of a Company Stock Option is referred to as the “Unpaid Exercise Price.”

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(h)Parent shall have obtained a “key man” life insurance policy covering Kenneth Lakin in the amount of $4,000,000 for up to two years following the Effective Time, on terms and conditions that are reasonable and acceptable to Parent.

(i)The Executive Employment Agreement between the Surviving Corporation and Kenneth Lakin shall have been executed and delivered by Mr. Lakin.

(j)Each of the Stay Bonus Agreements between the Surviving Corporation and each of the employees listed on Schedule 7.2(j) shall have been executed and delivered by such employees.

The decision of Parent and MergerSub to consummate the transactions contemplated by this Agreement without the satisfaction of any of the preceding conditions shall not constitute a waiver of any of the Company’s representations, warranties, covenants, or indemnities herein, except as otherwise provided in Section 6.10.

7.3Conditions to Obligations of the Company.  The obligations of the Company to consummate the transactions contemplated by this Agreement are subject to the fulfillment at or prior to the Effective Time of each of the following additional conditions, any or all of which may be waived in whole or part by the Company, to the extent permitted by applicable law:

(a)The representations and warranties of Parent and MergerSub contained in this Agreement shall be true and correct in all material respects at and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date; all agreements to be performed hereunder by Parent and MergerSub at or prior to the Closing Date shall have been performed in all material respects; and the Company shall have received a certificate, dated as of the Closing Date, signed by an officer of Parent to the foregoing effects.

(b)This Agreement and the Merger shall have been approved by the Company Requisite Vote.

(c)The Executive Employment Agreement between the Surviving Corporation and Kenneth Lakin shall have been executed and delivered by the Surviving Corporation.

(d)Each of the Stay Bonus Agreements between the Surviving Corporation and each of the employees listed on Schedule 7.2(j) shall have been executed and delivered by the Surviving Corporation.

The decision of Company to consummate the transactions contemplated by this Agreement without the satisfaction of any of the preceding conditions shall not constitute a waiver of any of the representations, warranties, covenants, or indemnities of Parent or MergerSub set forth herein.

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ARTICLE 8.
Termination

8.1Termination by Mutual Agreement.  This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the approval of the Merger by the Company Requisite Vote, by mutual written consent of the Company and Parent by action of their respective Boards of Directors.

8.2Termination by Either Parent or the Company.  This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by action of the Board of Directors of either Parent or the Company upon the occurrence of a Termination Event; provided, however, that the right to terminate this Agreement pursuant to this Section 8.2 shall not be available to any party that has breached in any material respect its obligations under this Agreement in any manner that shall have proximately contributed to the occurrence of the failure of the Merger to be consummated.  For the purposes of this Agreement, a “Termination Event” is deemed to occur if:

(a)the Company Requisite Vote shall not have been obtained at the Company Shareholder Meeting or at any adjournment or postponement thereof (and the Shareholder Consent shall not have been obtained); or

(b)any Law or Order permanently restraining, enjoining, or otherwise prohibiting consummation of the Merger shall become final and non-appealable (whether before or after the approval of the Merger by the Company Requisite Vote); or

(c)the Closing shall not have occurred prior to January 31, 2005; provided, however, that the right to terminate this Agreement under this Section 8.2(c) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been the cause of or shall have resulted in the failure of the Closing to occur prior to such date.

8.3Termination by the Company.  This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the approval of the Merger by the Company Requisite Vote, by action of the Board of Directors of the Company if:

(a)there is a breach by Parent or MergerSub of any representation, warranty, covenant, or agreement contained in this Agreement that cannot be cured and would cause a condition set forth in Section 7.3(a) to be incapable of being satisfied as of 120 days following the date of this Agreement (the “Termination Date”); or

(b)the Board of Directors of Parent shall have withdrawn its recommendation of this Agreement in a manner adverse to the Company or shall have resolved to do the foregoing.

8.4Termination by Parent.  This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the approval of the Merger by the Company Requisite Vote, by action of the Board of Directors of Parent if:

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(a)there is a breach by the Company of any representation, warranty, covenant, or agreement contained in this Agreement that cannot be cured and would cause a condition set forth in Section 7.2(a) to be incapable of being satisfied as of the Termination Date; or

(b)the Board of Directors of the Company shall have withdrawn its recommendation of this Agreement in a manner adverse to Parent or shall have resolved to do the foregoing.

8.5Effect of Termination and Abandonment.  In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article 8, this Agreement (other than this Section 8.5, Section 6.12, and Article 10) shall become void and of no effect with no liability on the part of any party hereto (or of any of its Representatives); provided, however, that except as otherwise provided herein, no such termination shall relieve any party hereto of any liability or damages resulting from any willful breach of this Agreement.

8.6Amendment.

(a)Before the Effective Time, this Agreement may be amended by action taken by the Company, Parent, and MergerSub at any time before or after approval of the Merger by the Company Requisite Vote but, after any such approval, no material amendment shall be made that changes any of the terms of this Agreement.  Before the Effective Time, this Agreement may not be amended except by an instrument in writing signed on behalf of Parent, Company, and MergerSub.

(b)After the Effective Time, this Agreement may be amended by action taken by the Surviving Corporation, Parent, and the holders of a majority in interest of the Outstanding Shares outstanding immediately before the Effective Time; provided, however, that any amendment that would adversely affect the amount of Merger Consideration payable to the holders of Company Common Stock immediately prior to the Effective Time will require the consent of the holders in interest of at least 95% of the Outstanding Shares.  After the Effective Time, this Agreement may not be amended except by an instrument in writing signed on behalf of such persons.

8.7Extension; Waiver.  At any time prior to the Effective Time, each party hereto (for these purposes, Parent and MergerSub shall together be deemed one party and the Company shall be deemed the other party) may (i) extend the time for the performance of any of the obligations or other acts of the other party, (ii) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document, certificate, or writing delivered pursuant hereto, or (iii) waive compliance by the other party with any of the agreements or conditions contained herein.  Any agreement on the part of either party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.  The failure of any party hereto to assert any of its rights hereunder shall not constitute a waiver of such rights.

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ARTICLE 9.
Survival of Representations, Warranties, Covenants, and Agreements; Warranty Reserve

9.1Survival of Representations, Warranties, Covenants and Agreements; Warranty Reserve.  Notwithstanding any right of Parent, MergerSub, or the Company (whether or not exercised) to investigate the affairs of Parent, MergerSub, or the Company, each party shall have the right, subject to Section 6.10, to rely fully upon the representations, warranties, covenants, and agreements of the other party contained in this Agreement or in any instrument required to be delivered pursuant to Article 7.  The covenants and agreements of the Company, Parent, and MergerSub contained in this Agreement or in any instrument delivered pursuant to this Agreement that by their terms apply or are to be performed in whole or in part after the Effective Time shall survive the Effective Time.  The representations and warranties of the Company, Parent, and MergerSub contained in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Merger and continue until the first anniversary of the Closing Date, provided, however, that the representations and warranties of Company contained in Section 4.23 shall survive the Merger and shall continue in full force and effect until 30 days following the expiration of the applicable statutes of limitations (including any extensions thereof) (the “Expiration Date”).  Except for the representations and warranties contained in this Agreement, none of Parent, MergerSub, or the Company has made any representations or warranties and, except for the representations and warranties contained in this Agreement, each of Parent, MergerSub, and the Company acknowledges that no representations or warranties have been made by, and it has not relied upon any representations or warranties made by, any of the parties hereto or any of their respective Representatives in respect of this Agreement and the transactions contemplated hereby, and the documents and instruments referred to herein, notwithstanding the delivery or disclosure to such party or its Representatives of any documentation or other information in respect of any one or more of the foregoing.  The inclusion of any entry on the Schedules attached hereto shall not constitute an admission by, or agreement of, the Company that such matter is material to the Company.  Without limiting the generality of the foregoing, the Company makes no representation or warranty to Parent or MergerSub with respect to any projections, estimates, plans, or budgets delivered to or made available to Parent or any Representative thereof of future revenues, expenses or expenditures, or future results of operations or performance of the Company or its business.

9.2Warranty Reserve.

(a)Establishment of the Warranty Reserve.  ”Warranty Reserve” means $700,000 to be reserved by Parent from the Tranche Two Payment pool.

(b)Recourse to the Warranty Reserve.  The Warranty Reserve shall be available (and except only for claims relating to the representations and warranties of Company contained in Section 4.23, to the extent made after the first anniversary of the Effective Time, shall be the sole and exclusive remedy of Parent and MergerSub after the Effective Time) to compensate Parent for any and all Losses (whether or not involving a Third Party Claim) incurred or sustained by Parent as a result of any inaccuracy or breach of any representation, warranty, covenant, or agreement of the Company contained in this Agreement or any instrument required to be delivered pursuant to Article 7 that survives the Effective Time in accordance with this Agreement; provided, however, that Parent may not make any claims against the Warranty

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Reserve unless and until the aggregate Losses incurred or sustained by Parent exceed $50,000 (the “Threshold Amount”), in which event Parent may make claims against the Warranty Reserve only for Losses in excess of the Threshold Amount (thus excluding the Threshold Amount as a deductible).  No shareholder of the Company will be liable to Parent with respect to any such Losses beyond such shareholder’s respective pro rata share (based on the number of shares of Company Common Stock held thereby prior to the Effective Time) of the Warranty Reserve.

(c)Reserve Period; Distribution of Warranty Reserve upon Termination of Reserve Period.  Subject to the following requirements, the Warranty Reserve shall be in existence immediately following the Effective Time and shall terminate at 5:00 P.M., Portland, Oregon time, on the Expiration Date (the period from the Effective Time through and including the Expiration Date is referred to as the “Reserve Period”); and subject to Section 2.1(b)(ii), the Warranty Reserve shall be distributed by Parent to the Paying Agent for the holders of the Company’s Common Stock immediately prior to the Effective Time in proportion to each shareholders’ respective contributions to the Warranty Reserve; provided, however, that the Reserve Period shall not terminate in respect of such amount (or some portion thereof) that is necessary in the reasonable judgment of Parent, subject to the objection of the Shareholder Agent and the subsequent resolution of the matter in the manner as provided in Section 9.2(e), to satisfy any unsatisfied written claims under this Section 9.2 concerning facts and circumstances existing prior to the termination of such Reserve Period which claims are specified in any Officer’s Certificate delivered to the Shareholder Agent prior to termination of such Reserve Period.  Upon resolution of each individual claim described above and subject to Section 2.1(b)(ii), Parent shall deliver the remaining amount, if any, of the portion of the Warranty Reserve designated for such individual claim after the resolution of such claim to the Paying Agent for the holders of the Company’s Common Stock immediately prior to the Effective Time as part of the Tranche Two Payment.

(d)Claims Upon Warranty Reserve.

(i)Upon delivery by Parent to the Shareholder Agent, at any time on or before the last day of the Reserve Period of a certificate signed by any officer of Parent (an “Officer’s Certificate”): (A) stating that Parent has paid or properly accrued or, with respect to a Third Party Claim, reasonably anticipates that it will have to pay or accrue Losses as a result of any inaccuracy or breach of any representation, warranty, covenant, or agreement of the Company contained herein, and (B) specifying in reasonable detail the individual items of Losses included in the amount so stated, the date each such item was paid or properly accrued or the basis for such anticipated liability, and the nature of the misrepresentation or breach of warranty, agreement, or covenant to which such item is related (including the specific provision breached), Parent shall, subject to the provisions of Section 9.2(e) and the Threshold Amount, reduce the amount of the Warranty Reserve in an amount equal to such Losses.

(ii)For purposes of this Agreement, “Losses” means all losses, expenses (including reasonable attorneys’ fees and expenses), damages,

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liabilities, fines, penalties, judgments, actions, claims, and costs. In no event shall Losses include special, indirect, incidental, or consequential damages.

(iii)Payments pursuant to this Article 9 shall be limited to the amount of any Loss that remains after deducting therefrom (A) any indemnity, contribution, or other similar payment recoverable by Parent or any affiliates thereof from any person with respect thereto, any other savings that would reduce the impact of the Losses upon Parent or any such affiliates and (B) any reserve provided for the item in question in the Financial Statements.

(iv)Notwithstanding anything contained herein to the contrary, Parent shall not be entitled to make any claim against the Warranty Reserve to the extent (but only to the extent) that Parent fails to take commercially reasonable action to mitigate any such Loss reasonably promptly after obtaining knowledge thereof.

(e)Objections to Claims.  For a period of 30 days after delivery of such notice to the Shareholder Agent, Parent shall make no reduction to the Warranty Reserve pursuant to Section 9.2(d) unless Parent shall have received written authorization from the Shareholder Agent to make such reduction.  After the expiration of such 30-day period, Parent shall make the reduction to the Warranty Reserve pursuant to Section 9.2(d); provided, however, that no such payment or delivery may be made if the Shareholder Agent shall object in a written statement to the claim made in the Officer’s Certificate, and such statement shall have been delivered to Parent prior to the expiration of such 30-day period.

(f)Resolution of Conflicts.  In the event the Shareholder Agent timely objects in writing to any claim or claims made in any Officer’s Certificate, the Shareholder Agent and Parent shall attempt in good faith to agree upon the rights of the respective parties in respect of each of such claims.  If the Shareholder Agent and Parent are unable to reach agreement with respect to any such contested claim within 45 days after the delivery of the Shareholder Agent’s objection, the matter shall be settled by binding arbitration in Portland, Oregon as set forth below.  All claims shall be settled in accordance with the Commercial Arbitration Rules then in effect of the American Arbitration Association (the “AAA Rules”), although the parties shall not be required to use AAA arbitrators.  The Shareholder Agent and Parent shall mutually appoint a single arbitrator within 15 days after the termination of such 45 day period. The Shareholder Agent and Parent shall cause the arbitrator to decide the matter to be arbitrated pursuant hereto within 60 days after the arbitrator’s appointment.  The decision of the arbitrator shall relate to whether Parent is entitled to reduce the Warranty Reserve for the disputed claim, or the disputed portion thereof, pursuant to the applicable terms of this Agreement.  The final decision of the arbitrator shall be furnished to the Shareholder Agent and Parent in writing and shall constitute the conclusive determination of the issue in question binding upon all parties hereto, and shall not be contested by any of them.  Such decision may be used in a court of law only for the purpose of seeking enforcement of the decision of the arbitrator.  All the fees and expenses of the arbitrator shall be paid by the party who does not prevail in the arbitration.

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9.3Shareholder Agent of the Shareholders; Power of Attorney.

(a)Shareholder Agent.  In the event that the Merger is approved by the shareholders of the Company, effective upon such vote, and without further act of any shareholder, Kenneth Lakin shall be appointed as the agent and attorney-in-fact (the “Shareholder Agent”), for each shareholder of the Company, including all persons receiving shares of Company Common Stock upon exercise of Company Stock Options (except such shareholders, if any, as shall have perfected their dissenters’ rights under the Act), for and on behalf of shareholders of the Company, to give and receive notices and communications, to authorize reductions of the Warranty Reserve in satisfaction of claims by Parent, to object to such reductions, to agree to, negotiate, enter into settlements and compromises of, and demand litigation or arbitration and comply with orders and awards of courts and arbitrators in respect of such claims, and to take all actions necessary or appropriate in the judgment of the Shareholder Agent for the accomplishment of the foregoing.  Such agency may be changed by the shareholders of the Company from time to time upon not less than 30 days’ prior written notice to Parent; provided, however, that the Shareholder Agent may not be removed unless the holders of at least a two-thirds’ interest in the Warranty Reserve agree to such removal and to the identity of the substituted shareholder agent.  Any vacancy in the position of Shareholder Agent may be filled by approval of the holders of a majority in interest of the Warranty Reserve.  No bond shall be required of the Shareholder Agent, and the Shareholder Agent shall not receive compensation for his services.  Notices or communications to or from the Shareholder Agent shall constitute notice to or from each of the shareholders of the Company.

(b)Exculpation.  The Shareholder Agent shall not be liable for any act done or omitted hereunder as Shareholder Agent while acting in good faith and in the exercise of reasonable judgment.

(c)Actions of the Shareholder Agent.  A decision, act, consent, or instruction of the Shareholder Agent shall constitute a decision for all of the shareholders of the Company for whom a portion of the funds otherwise issuable to them are deposited in the Warranty Reserve, and shall be final, binding, and conclusive upon each of such shareholders, and the Depositary Agent and Parent may rely upon any such decision, act, consent, or instruction of the Shareholder Agent as being the decision, act, consent, or instruction of every such shareholder of the Company.  Parent is hereby relieved from any liability to any Person for any acts done by it in accordance with such decision, act, consent, or instruction of the Shareholder Agent.

9.4Third-Party Claims.  In the event Parent or the Surviving Corporation receives written notice of a third-party claim (a “Third Party Claim”) that Parent reasonably expects may result in a demand against the Warranty Reserve, Parent shall provide the Shareholder Agent with prompt written notice thereof.  The Shareholder Agent, as representative for the shareholders of the Company, shall have the right to participate in or, by giving written notice to Parent, to assume the defense of any Third Party Claim at the expense of the Warranty Reserve and by counsel selected by the Shareholder Agent (which counsel must be reasonably satisfactory to Parent), and Parent will cooperate in good faith (and shall be permitted to participate at Parent’s expense) in such defense; provided, however, that the Shareholder Agent shall not be entitled to assume control of the defense of any Third Party Claim that (i) could reasonably be expected to have any impact on the ongoing operations or goodwill of the

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Surviving Corporation or Parent or (ii) could reasonably be expected to result in Losses in excess of the Warranty Reserve.  Parent shall have the right to settle any Third Party Claim contemplated by clause (i) or (ii) above with consent of the Shareholder Agent, which consent shall not be unreasonably withheld.  In the event that the Shareholder Agent has consented to any such settlement, the Shareholder Agent shall have no power or authority to object under any provision of this Article 9 to the amount of any claim by Parent against the Warranty Reserve with respect to the amount of Losses incurred by Parent in such settlement as consented to by the Shareholder Agent.

9.5Remedies.  Parent hereby acknowledges and agrees that its sole and exclusive remedy with respect to any and all claims relating to the subject matter of this Agreement shall be pursuant to the provisions set forth in this Article 9.  In furtherance of the foregoing, Parent hereby waives, to the fullest extent permitted under applicable law, any and all rights, claims and causes of action it may have against any other party hereto arising under or based upon any federal, state or local statute, law, ordinance, rule or regulation (including any such rights, claims or causes of action arising under or based upon common law or otherwise).  Parent further acknowledges and agrees that no breach of any representation, warranty, covenant or agreement contained herein or in any instrument required to be delivered pursuant to Article 7 shall give rise to any right on the part of Parent or MergerSub, after the Closing, to rescind this Agreement or any of the transactions contemplated hereby.

ARTICLE 10.
Miscellaneous

10.1Collateral Agreements.  This Agreement (together with the documents delivered pursuant hereto) supersedes all prior documents, understandings, and agreements, oral or written, relating to this transaction (other than the Mutual Nondisclosure Agreement referenced in Section 6.12) and constitutes the entire understanding among the parties hereto in respect of the subject matter hereof.

10.2Successors and Assigns.  Neither the rights nor obligations of the Company, Parent, or MergerSub under this Agreement may be assigned or delegated, in whole or in part, without the written consent of the other parties hereto, which will not be unreasonably withheld; provided, however, that the rights and obligations of Parent, MergerSub, and the Surviving Corporation hereunder may be assigned or delegated freely among TriQuint, Parent, and their affiliates; and provided further that the holders of Company Common Stock immediately prior to the Effective Time may assign their rights hereunder at any time following the Closing to such holders’ near relatives or to a trust for the benefit of such holders or any of their respective near relatives.  Any assignment in violation of the preceding sentence shall be null and void.  Subject to the preceding sentences of this Section 10.2, the provisions of this Agreement (and, unless otherwise expressly provided therein, of any document delivered pursuant to this Agreement) shall be binding upon and inure solely to the benefit of the parties hereto and their respective legal representatives, successors, and permitted assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any rights, benefits, or remedies of any nature whatsoever under or by reason of this Agreement; provided, however, that the holders of the Company Common Stock immediately prior to the Effective Time (and their respective successors, heirs, legal representatives, and permitted assigns) shall, after the Closing,

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be deemed third party beneficiaries of this Agreement and shall be entitled to enforce the terms of this Agreement as if parties hereto.

10.3Guaranty. TriQuint Semiconductor, Inc. (“TriQuint”) hereby guarantees absolutely and unconditionally the obligations of Parent to make payment of the Merger Consideration pursuant to Article 2.  This is a continuing guaranty and shall remain in force and effect until the Merger Consideration has been paid pursuant to Article 2.

10.4Expenses.  Except as otherwise expressly provided herein, the Company shall be solely responsible for the broker or finder, legal, accounting, and other fees and expenses incurred by the Company in connection with the execution of this Agreement and the consummation of the transactions contemplated hereby, and Parent and MergerSub shall be solely responsible for the broker or finder, legal, accounting, and other fees and expenses incurred by Parent and MergerSub in connection with execution of this Agreement and the consummation of the transactions contemplated hereby.

10.5Severability.  If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws, such provision shall be fully severable, this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by such illegal, invalid, or unenforceable provision or by its severance from this Agreement.

10.6Notices.  Any notices required or permitted to be given under this Agreement (and, unless otherwise expressly provided therein, under any document delivered pursuant to this Agreement) shall be given in writing and shall be deemed received (i) when personally delivered to the relevant party at such party’s address as set forth below, (ii) if sent by mail (which must be certified or registered mail, postage prepaid) or overnight courier, when received or rejected by the relevant party at such party’s address indicated below, or (iii) if sent by facsimile, when confirmation of delivery is received by the sending party:

Parent/MergerSub:	Sawtek Inc.
	c/o TriQuint Semiconductor, Inc.
	2300 NE Brookwood Parkway
	Hillsboro, Oregon 97124
	Facsimile No.: (503) 615-8901
	Attention: Chief Financial Officer
with a copy to:	Ater Wynne LLP
	222 SW Columbia Street, Suite 1800
	Portland, Oregon 97201
	Facsimile No: (503) 226-0079
	Attention: Bill Campbell

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The Company:	TFR Technologies, Inc.
	63140 Britta Street, Suite C-106
	Bend, Oregon 97701
	Facsimile No.: (541) 382-7783
	Attention: President
with a copy to:	Perkins Coie LLP
	1120 N.W. Couch Street
	Tenth Floor
	Portland, Oregon 97209-4128
	Facsimile No.: (503) 727-2222
	Attention: David Matheson
Shareholder Agent:	Kenneth Lakin
	[    ]
	[    ]

Each party hereto may change its address or facsimile number for purposes of this Section 10.6 by providing notice to the other parties in accordance with this Section 10.6.

10.7Further Assurances.  Each party to this Agreement shall (i) furnish upon request to the other parties such further information, (ii) execute and deliver to the other parties such other documents, and (iii) do such other acts and things as the other parties reasonably request for the purpose of carrying out the intent of this Agreement and the documents and instruments referred to herein.

10.8Specific Performance.  The parties recognize that if the Company refuses to perform under the provisions of this Agreement, monetary damages alone will not be adequate to compensate Parent for its injury.  Parent shall therefore be entitled, in addition to any other remedies that may be available, to obtain specific performance of the terms of this Agreement.  If any action is brought by Parent to enforce this Agreement, the Company shall waive the defense that there is an adequate remedy at law.  In the event of litigation pertaining to any controversy, claim, or dispute between the parties hereto arising out of or relating to this Agreement or the breach of any provision thereof, the prevailing party shall be entitled to recover from the non-prevailing party reasonable expenses, attorneys’ fees, and costs.

10.9Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Oregon.

10.10Remedies Not Exclusive.  Except to the extent otherwise expressly provided herein with respect to Parent, the rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law or equity.

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10.11Counterparts.  This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same agreement.

10.12Titles and Headings.  Titles and headings to articles and sections herein are inserted for convenience of reference only, and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

10.13Certain Interpretive Matters and Definitions.

(a)Unless the context otherwise requires, (i) all references to Articles, Sections, Exhibits, or Schedules are to Articles, Sections, Exhibits, or Schedules of or to this Agreement, (ii) each term defined in this Agreement has the meaning assigned to it, (iii) “or” is disjunctive but not necessarily exclusive, (iv) words in the singular include the plural and vice versa, and (v) the term “affiliate” has the meaning given to it in Rule 12b-2 of Regulation 12B under the Exchange Act.  All references to “$” or dollar amounts will be to lawful currency of the United States of America.

(b)No provision of this Agreement will be interpreted in favor of, or against, any of the parties hereto by reason of the extent to which any such party or its counsel participated in the drafting thereof or by reason of the extent to which any such provision is inconsistent with any prior draft hereof or thereof.

(c)“Material Adverse Effect” means, as to any person, any event, circumstance, condition, fact, effect, or other matter that has had or would reasonably be expected to have a material adverse effect (i) on the business, assets, financial condition, or results of operations of such person, taken as a whole, or (ii) on the ability of such person to perform on a timely basis any material obligation under this Agreement or to consummate the transactions contemplated hereby, excluding, in each of clauses (i) and (ii), the effects of changes to the extent related to (x) conditions in the United States or global economy or financial or capital markets generally, (y) general changes in conditions (including changes in legal, regulatory or business conditions or changes in GAAP) in or otherwise affecting the industries or businesses in which the Company operates (except, in the case of (x) or (y), to the extent that such changes materially disproportionately affect the Company compared to the manner in which the changes affect the industries or businesses in which the Company operates), or (z) this Agreement, the announcement or performance hereof and the transactions and obligations contemplated hereby.

(d)The phrase “to the knowledge of the Company” means the actual knowledge of the officers, directors, and senior management of the Company.

(e)“persons” means an individual, corporation, limited liability company, partnership, association, trust, unincorporated organization, other entity or group (as defined in the Exchange Act).

(f)The Exhibits and Schedules attached hereto are incorporated herein by reference as though fully set forth herein.

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Parent, MergerSub, and the Company have executed and delivered this Agreement as of the date set forth above.

SAWTEK INC.
By:	/s/ RALPH G. QUINSEY
Name:	Ralph G. Quinsey
Title:	President and CEO
TFR TECHNOLOGIES, INC.
By:	/s/ KENNETH LAKIN
Name:	Kenneth Lakin
Title:	President and CEO
TFR ACQUISITION, INC.
By:	/s/ RALPH G. QUINSEY
Name:	Ralph G. Quinsey
Title:	President and CEO

55

By execution of this signature page, TriQuint confirms that it is bound by the applicable provisions of this Agreement and Plan of Reorganization to which this page is attached, effective as of the effective date of this Agreement.

TRIQUINT SEMICONDUCTOR, INC.
By:	/s/ RALPH G. QUINSEY
Name:	Ralph G. Quinsey
Title:	President and CEO

By execution of this signature page, Shareholder Agent confirms that it is bound by the applicable provisions of this Agreement and Plan of Reorganization to which this page is attached, effective as of the effective date of this Agreement.

Shareholder Agent:
By:	/s/ KENNETH LAKIN
Name: Kenneth Lakin

By execution of this signature page, Paying Agent confirms that it is bound by the applicable provisions of this Agreement and Plan of Reorganization to which this page is attached, effective as of the effective date of this Agreement.

Paying Agent:
By:	/s/ KENNETH LAKIN
Name: Kenneth Lakin

56

EXHIBITS

Exhibit A	Articles of Merger
Exhibit B	Articles of Incorporation of Surviving Corporation
Exhibit C	Bylaws of Surviving Corporation

GLOSSARY OF DEFINED TERMS

Accounts Receivable	15
Acquisition Proposal	34
Act	1
affiliate	49
Agreement	1
Annual Financial Statements	12
Articles of Merger	2
Bank Accounts	26
Benefit Plans	20
Certificates	5
Closing	2
Closing Date	2
Company	1
Company Common Stock	1
Company Consents	36
Company Intellectual Property	27
Company Products	28
Company Registered Intellectual Property	28
Company Requisite Vote	11
Company Shareholder Meeting	34
Company Stock Option	4
Company Stock Option Plans	5
Contingent Earn-Out Payment	3
Disposal Site	23
Dissenting Shareholders	7
Dissenting Shares	7
Distribution Amount	4
Effective Time	2
Employee Arrangements	20
Environmental Claim	22
Environmental Laws	22
Environmental Permits	22
Exchange Act	8
Expiration Date	42
Financial Statements	12
Governmental Entity	8
Hazardous Materials	22
Hazardous Materials Activity	22
Initial Payment	3
Intellectual Property	27
Interim Financial Statements	11
Interim Statement Period	12

IRC	24
Law	8
Leased Real Property	14
Liens	10
Losses	43
Material Adverse Effect	49
Material Contracts	18
Material Customer	26
Material Supplier	26
Merger	2
Merger Consideration	3
MergerSub	1
near relatives	18
Officer’s Certificate	43
Order	8
Outstanding Shares	3
Parent	1
Patents	27
Paying Agent	5
Payment Fund	5
Permitted Liens	14
persons	49
Qualifying Products	4
Registered Intellectual Property	27
Representatives	30
Reserve Period	43
Retained Employees	37
Returns	24
Securities Act	8
Shareholder Agent	45
Shareholder Consent	34
Statement Date	12
Subsidiary	10
Surviving Corporation	2
Tangible Personal Property	15
Tax	23
Termination Date	40
Termination Event	40
Third Party Claim	45
threatened	19
Threshold Amount	43
to the knowledge of the Company	49
Tranche One Payment	3
Tranche Two Payment	3
TriQuint	47
Unpaid Exercise Price	38

WARN	19
Warranty Reserve	42

EXHIBIT A

(Articles of Merger)

	Phone:		(503) 986-2200
	Fax :		(503) 378-4381			Articles of Merger
	Secretary of State			Check the appropriate box below:
	Corporation Division			ý MULTI ENTITY MERGER
	255 Capitol St. NE, Suite 151			(Complete only 1, 2, 3, 4, 10, 11)
	Salem, OR 97310-1327			o FOR PARENT AND 90% OWNED SUBSIDIARY
	FilingInOregon.com			WITHOUT SHAREHOLDER APPROVAL
				(Complete only 5, 6, 7, 8, 9, 10, 11)
SURVIVOR					FILED
REGISTRY NUMBER:		258985-86			JAN 05 2004
					OREGON
					SECRETARY OF STATE

In accordance with Oregon Revised Statute 192.410-192.490, the information on this application is public record.

We must release this information to all parties upon request and it will be posted on our website.For office use only

Please Type or Print Legibly in Black Ink.  Attach Additional Sheet if Necessary.

1) NAMES AND TYPES OF THE ENTITIES PROPOSING TO MERGE

NAME	TYPE	REGISTRY NUMBER
TFR Technologies, Inc.	OR Corp.	258985-86
TFR Acquisition, Inc.	OR Corp.	257071-91

2) NAME AND TYPE OF THE SURVIVING ENTITY	TFR Technologies, Inc., an Oregon corporation
o Check here if there is a name change in this plan of merger.

3) A COPY OF THE MERGER PLAN IS ATTACHED. See ORS 60.481(2)

THE PLAN OF MERGER WAS DULY AUTHORIZED AND APPROVED BY EACH ENTITY THAT IS A PARTY TO THE MERGER.

ý A copy of the vote required by each entity is attached.

FOR PARENT AND 90% OWNED SUBSIDIARY WITHOUT SHAREHOLDER APPROVAL.

5) NAME OF PARENT CORPORATION

Oregon Registry Number

6) NAME OF SUBSIDIARY CORPORATION

Oregon Registry Number

7) NAME OF SURVIVING CORPORATION

8) COPY OF PLAN

o A copy of the plan of merger setting forth the manner and basis of converting shares of the subsidiary into shares, obligations, or

other securities of the parent corporation or any other corporation or into cash or other property is attached.

9) CHECK THE APPROPRIATE BOX
o A copy of the plan of merger or summary was mailed to each shareholder of record of the subsidiary corporation on or before
	Date

o The mailing of a copy of the plan or summary was waived by all outstanding shares.

10) EXECUTION

Signature	Printed Name	Title
/s/ Ralph Quinsey	Ralph Quinsey	President & CEO

11) CONTACT NAME (To resolve questions with the filing.)

Kelly Mecklem	FEES
DAYTIME PHONE NUMBER (Include area Code.)	Required Processing Fee $50 - Conformation Copy (Optional) $5
	Processing Fees are nonrefundable.
(503) 226-1191	Please make check payable to “Corporation Division.”
	NOTE:
	Fees may be paid with VISA or MasterCard. The card number and expiration date should be submitted on a seperate sheet for your protection.

137 (Rev. 1/04)

Attachment to Articles of Merger

Shareholder Approval.   Shareholder approval of the Plan of Merger was required as follows:

A.TFR Acquisition, Inc.

(1)100 shares of Common Stock were outstanding and entitled to vote on the Plan of Merger, voting as a single class.

(2)100 shares of Common Stock were voted FOR the Plan of Merger, and 0 shares of Common Stock were voted against the Plan of Merger.

B.TFR Technologies, Inc.

(1)5,499,334 shares of Common Stock were outstanding and entitled to vote on the Plan of Merger, voting as a single class.

(2)5,449,334 shares of Common Stock were voted for FOR the Plan of Merger and 0 shares of Common Stock were voted against the Plan of Merger.

Attachment to Articles of Merger

EXHIBIT B

(Articles of Incorporation of Surviving Corporation)

[Not Yet Drafted]

EXHIBIT C

(Bylaws of Surviving Corporation)

[Not Yet Drafted]

EX-10.47.1

Exhibit 10.47.1

AMENDMENT

TO

AGREEMENT AND PLAN OF REORGANIZATION

This Amendment to Agreement and Plan of Reorganization (this “Amendment”) is made as of January 6, 2005, by and among Sawtek, Inc., a Florida corporation (“Parent”), TFR Technologies, Inc., an Oregon corporation (the “Company”), and the undersigned former shareholders of the Company.

RECITALS

A.Parent, TFR Acquisition, Inc., an Oregon corporation and wholly owned subsidiary of Parent (“MergerSub”), and the Company are parties to the Agreement and Plan of Reorganization dated as of December 14, 2004 (the “Agreement”), pursuant to which, on January 5, 2005, MergerSub was merged with and into the Company, with the Company continuing as the surviving corporation, and all of the issued and outstanding shares of common stock of the Company being converted into the right to receive an aggregate amount of cash equal to the amount set forth in the Agreement, in accordance with the calculations and payable at the times set forth therein.

B.Parent, the Company and the undersigned former shareholders of the Company desire to amend the Agreement as set forth herein, pursuant to Section 8.6(b) of the Agreement.

C.Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned thereto in the Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the covenants and agreements set forth herein and in the Agreement, the parties hereby agree as follows:

1.Amendment of Agreement and Plan of Reorganization

The parties hereby modify and amend the Agreement as follows:

1.1By amending Section 9.2(b) of the Agreement by adding the following clause to the end of the proviso in the first sentence of such Section:

; and, provided further, that, notwithstanding the foregoing, the Threshold Amount shall not apply for any claims made against the Warranty Reserve for any Losses relating to claims made against the Company, the Surviving Corporation and/or their respective affiliates by Gerald Kline (“Kline Claims”)

1

1.2By amending Section 9.2(d) of the Agreement by deleting clause (i)(B) thereof in its entirety and by inserting in lieu thereof the following clause (i)(B):

(B) specifying in reasonable detail the individual items of Losses included in the amount so stated, the date each such item was paid or properly accrued or the basis for such anticipated liability, and the nature of the misrepresentation or breach of warranty, agreement, or covenant to which such item is related (including the specific provision breached), Parent shall, subject to the provisions of Section 9.2(e) and the Threshold Amount, if applicable, reduce the amount of the Warranty Reserve in an amount equal to such Losses.

1.3By amending Section 9.4 of the Agreement by deleting such Section in its entirety and by inserting in lieu thereof the following Section 9.4:

9.4Third-Party Claims.  In the event Parent or the Surviving Corporation receives written notice of a third-party claim (a “Third Party Claim”) that Parent reasonably expects may result in a demand against the Warranty Reserve, Parent shall provide the Shareholder Agent with prompt written notice thereof.  The Shareholder Agent, as representative for the shareholders of the Company, shall have the right to participate in or, by giving written notice to Parent, to assume the defense of any Third Party Claim at the expense of the Warranty Reserve and by counsel selected by the Shareholder Agent (which counsel must be reasonably satisfactory to Parent), and Parent will cooperate in good faith (and shall be permitted to participate at Parent’s expense) in such defense; provided, however, that, other than with respect to any Kline Claim, the Shareholder Agent shall not be entitled to assume control of the defense of any Third Party Claim that (i) could reasonably be expected to have any impact on the ongoing operations or goodwill of the Surviving Corporation or Parent or (ii) could reasonably be expected to result in Losses in excess of the Warranty Reserve.  Parent shall have the right to settle any Third Party Claim contemplated by clause (i) or (ii) above with consent of the Shareholder Agent, which consent shall not be unreasonably withheld.  In the event that the Shareholder Agent has consented to any such settlement, the Shareholder Agent shall have no power or authority to object under any provision of this Article 9 to the amount of any claim by Parent against the Warranty Reserve with respect to the amount of Losses incurred by Parent in such settlement as consented to by the Shareholder Agent.  Parent shall not be entitled to settle any Kline Claim without the consent of the Shareholder Agent, which may be granted or denied in the Shareholder Agent’s sole discretion.  The Shareholder Agent will not settle any Kline Claim without the consent of Parent, which consent shall not be unreasonably withheld.

1.4By adding the following as Section 9.6 of the Agreement:

9.6Agent Indemnification.  The Shareholder Agent and the Paying Agent shall not be liable to the Company’s shareholders for any error of judgment, or any

2

action taken or omitted to be taken hereunder except in the case of its bad faith, gross negligence or willful misconduct.

The Shareholder Agent and the Paying Agent shall not be paid any fee for services to be rendered hereunder.  All reasonable fees and expenses incurred by the Shareholder Agent and the Paying Agent in performing their duties hereunder shall be borne severally and on a pro rata portion basis by the Company’s shareholders (based on the number of Outstanding Shares held thereby immediately prior to the Effective Time); provided, however, that, to the extent practical, the Shareholder Agent and the Paying Agent shall deduct such fees and expenses from the amounts otherwise distributable to the Company’s shareholders under this Agreement.  In particular and without limitation, the Paying Agent shall holdback the sum of $50,000 from amounts otherwise distributable to the Company’s shareholders as part of the Tranche Two Payment payable under this Agreement (the “Holdback”), to be used and/or held to reimburse the Shareholder Agent and the Paying Agent for anticipated administrative expenses incurred by them after the Closing.  At such time that the Shareholder Agent or the Paying Agent believes, in its sole discretion, that no such additional administrative expenses will be incurred, the Shareholder Agent or the Paying Agent shall distribute any remaining funds from the Holdback to the Company’s shareholders on a pro rata portion basis.

The Company’s shareholders agree severally and on a pro rata portion basis (based on the number of Outstanding Shares held thereby immediately prior to the Effective Time) to indemnify and hold the Shareholder Agent and Paying Agent harmless against any and all losses, claims, damages, liabilities, and expenses (including, without limitation, reasonable costs of investigation, attorneys’ fees and disbursements) that may be imposed on or incurred by the Shareholder Agent or Paying Agent or incurred by the Shareholder Agent or Paying Agent in connection with the performance of its duties under this Agreement, including any litigation arising from this Agreement or involving its subject matter, unless such loss, liability, claim or expense shall have been determined by a court of competent jurisdiction to be a result of the Shareholder Agent’s or Paying Agent’s bad faith, gross negligence or willful misconduct.  Anything in this Agreement to the contrary notwithstanding, in no event shall the Shareholder Agent or Paying Agent be liable to the Company’s shareholders for special, indirect or consequential loss or damage of any kind whatsoever, even if the Shareholder Agent or Paying Agent has been advised of the likelihood of such damages and regardless of the form of action.

2.Effect on Agreement and Plan of Reorganization

Except as specifically amended and modified by this Amendment, the terms and provisions of the Agreement remain unchanged and in full force and effect.  All references in the Agreement or otherwise to the Agreement shall hereinafter refer to the Agreement as amended by this Amendment.

3

3.Effective Date; Further Documentation

Notwithstanding the date of this Amendment, the parties agree that its effective date shall be December 14, 2004, the date of the Agreement.

4.Miscellaneous

(a)This Amendment shall be governed by, and construed in accordance with, the laws of the State of Oregon applicable to contracts executed in and to be performed in that state.

(b)The descriptive headings contained in this Amendment are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Amendment.

(c)This Amendment may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

[Remainder of This Page Intentionally Left Blank]

4

IN WITNESS WHEREOF, the parties have caused this Amendment to Agreement and Plan of Reorganization to be duly executed by their respective representatives hereunto authorized as of the day and year first above written.

SAWTEK INC.
By:		/s/ RALPH G. QUINSEY
Title: President and CEO
TFR TECHNOLOGIES, INC.
By:	/s/ KENNETH LAKIN
Title: President and CEO

5

IN WITNESS WHEREOF, the parties have caused this Amendment to Agreement and Plan of Reorganization to be duly executed by their respective representatives hereunto authorized as of the day and year first above written.

FORMER SHAREHOLDER OF
TFR TECHNOLOGIES, INC.

/s/ KENNETH LAKIN

Name:

6

EX-10.48

Exhibit 10.48

PURCHASE AND SALE AGREEMENT

BETWEEN

TRIQUINT OPTOELECTRONICS, INC.

AS SELLER,

AND

ANTHEM PARTNERS, LLC

AS PURCHASER

Date:  As of March 7th, 2005

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is made as of this 7^th day of March, 2005 (the “Effective Date”) by and between TRIQUINT OPTOELECTRONICS, INC., a Delaware corporation (the “Seller”), and ANTHEM PARTNERS, LLC, a Pennsylvania limited liability company, or its nominee or assignee (the “Purchaser”).

ARTICLE I.
PURCHASE AND SALE

Section 1.1Agreement of Purchase and Sale.  Subject to the terms and conditions hereinafter set forth, on the Closing Date (as defined in Section 4.1) Seller agrees to sell and convey to Purchaser, and Purchaser agrees to purchase from Seller, the following:

(a)the property commonly known as 9999 Hamilton Boulevard, Breinigsville, Pennsylvania, containing approximately 137.34 acres (the “Land”), which Land is more particularly described in Exhibit A attached hereto and incorporated herein by this reference, together with all of the buildings located thereon (collectively, the “Building”), containing approximately 850,000 +/- square feet in the aggregate, and any other improvements and fixtures located thereon and all rights, privileges and appurtenances pertaining thereto including all of Seller’s right, title and interest in and to all rights-of-way and easements and strips and gores of land adjacent thereto (herein collectively called the “Real Property”);

(b)any and all of Seller’s right, title and interest in and to all tangible personal property and equipment specifically described on Schedule 1.1(b) attached hereto (the “Personal Property”);

(c)any and all of Seller’s right, title and interest in and to the following (to the extent they are in effect on the Closing Date):

(i)all service contracts and agreements (collectively, the “Contracts”) relating to the upkeep, repair, maintenance or operation of the Real Property or the Personal Property to the extent Purchaser has agreed to assume such Contracts pursuant to Section 3.2).  Any Contracts entered into after the Effective Date in accordance with Section 5.2(c) hereof shall be deemed for purposes of this Agreement to constitute Contracts, and the defined term Contracts as used herein shall be deemed to have been revised to include and incorporate any such Contracts;

(ii)all warranties and guaranties (express or implied) issued to, and held in the name of, Seller in connection with the Real Property or the Personal Property (the “Warranties”); and

(iii)all permits, licenses, approvals and authorizations issued by any governmental authority in favor of Seller in connection with the Real Property (the property described in this Section 1.1(b) being sometimes herein referred to collectively as the “Intangibles”).

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The term “Property” shall mean the Real Property, the Personal Property, the Warranties and the Intangibles.

Section 1.2Purchase Price. Seller is to sell, and Purchaser is to purchase, the Property for the sum of Nine Million Three Hundred Thousand Dollars ($9,300,000.00) (the “Purchase Price”).

Section 1.3Payment of Purchase Price.  The Purchase Price, as increased or decreased by prorations and adjustments as herein provided, shall be payable in full at the Closing (as defined in Section 4.1) in cash by wire transfer of immediately available funds to a bank account designated by Seller in writing to Purchaser prior to the Closing Date (as defined in Section 4.1).  Notwithstanding the foregoing, Seller may use any portion of any payments due to Seller under this Agreement to satisfy any lien or encumbrance against the Property or for such other purpose as Seller may determine.

Section 1.4Deposit.  Prior to 5:00 p.m. EST on the first business day following the date of execution hereof, Purchaser shall deposit, with Coventry Abstract, agent for First American Title Insurance Company, 1401 Morris Road, Blue Bell, Pennsylvania 19422 (the “Escrow Agent,” and sometimes referred to herein as the “Title Company”), the sum of Three Hundred Fifty Thousand Dollars ($350,000.00) (the “Deposit”) in good funds, either by certified bank or cashier’s check or by federal wire transfer.  The Escrow Agent shall hold the Deposit in an interest-bearing strict joint order escrow account in accordance with the terms and conditions of this Agreement and the terms and provisions of a separate escrow agreement with the Escrow Agent.  All interest and income earned on the Deposit shall become a part of the Deposit.

ARTICLE II.
TITLE AND SURVEY

Section 2.1Title Objections.  On or after the Effective Date, Purchaser shall request the Title Company to issue its title insurance commitment for the Real Property (the “Title Commitment”) and shall engage a licensed surveyor to prepare an ATLA/ACSM survey of the Property (the “Survey”). No later than twenty (20) days after the Effective Date, Purchaser shall have the right to notify Seller in writing of its objection to any matters disclosed by the Title Commitment or the Survey (collectively, the “Title Objections”).  Upon receipt of any such timely written notice of Title Objections from Purchaser, Seller may, but shall not be obligated to, cure the Title Objections on or before the Closing Date.  Seller shall notify Purchaser within five (5) days of receiving the Title Objections as to its decision to either cure or not to cure the Title Objections.  Notwithstanding the foregoing, in the event that the Title Objection is a monetary lien, charge or encumbrance intentionally placed against the Property by Seller which is able to be removed by the payment of a certain sum or a judgment or mechanics’ lien caused by the acts of Seller, then Seller shall be required to cure the Title Objection by paying the certain sum or the sum required to remove the judgment or mechanics’ lien on or prior to the Closing Date.

(a)If Seller elects by notice at any time not to cure any Title Objection (except as provided in the last sentence of subparagraph (a) above, as to which Seller shall be obligated to cure), then Purchaser’s sole right and remedy shall be, on the terms

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and conditions set forth below, either:  (x) to elect not to purchase the Property, in which event this Agreement shall be terminated, and the Deposit shall be returned to Purchaser; or (y) to complete the transactions contemplated hereby in accordance with this Agreement subject to such Title Objection without reduction in or abatement of the Purchase Price.

(b)Purchaser shall exercise its option pursuant to clause (x) of Section 2.1(a) above by written notice given to and received by Seller within five (5) days after the receipt by Purchaser of Seller’s notice that Seller will not cure the Title Objections.  If Purchaser shall fail to send a written notice to Seller exercising Purchaser’s option set forth under clause (x) of Section 2.1(a) within the applicable period, then Purchaser shall conclusively be deemed to have exercised the option set forth in clause (y) of Section 2.1(a) above.

Section 2.2Permitted Exceptions.  For purposes of this Agreement, the term “Permitted Exceptions” shall mean all title exceptions and survey matters pertaining to the Property which: (i) are disclosed by the Title Commitment and/or Survey and are not the subject of a Title Objection made by Purchaser pursuant to this ARTICLE II, or (ii) constitute valid Title Objections made by Purchaser which Seller shall has elected not to cure (or cause the Title Company to endorse over), and which Purchaser has elected (or is deemed to have elected) to accept pursuant to this ARTICLE II, or (iii) are otherwise expressly stated in this Agreement as being Permitted Exceptions.

Section 2.3Conveyance of Title.  At Closing, Seller shall convey and transfer to Purchaser, and Purchaser shall accept, fee simple title to the Real Property (subject only to the Permitted Exceptions) by execution and delivery of the Deed (as defined in Section 4.2(a)) from Seller to Purchaser.  The legal description appearing on the Survey shall govern any Closing hereunder.

Section 2.4PREI Claim.  Without limiting anything in this Article II, Purchaser acknowledges that Preferred Real Estate Investments, Inc. has asserted claims related to the Property (the “PREI Claims”).  If the PREI Claims are included as an exception to the Title Commitment, the same shall be addressed by the parties in accordance with the procedures set forth in Section 2.1.

ARTICLE III.
DUE DILIGENCE INVESTIGATION; ACCESS

Section 3.1Delivery of Due Diligence Documents.  No later than five (5) days after the Effective Date, time being of the essence, and thereafter through the date of Closing, Seller shall make available to Purchaser at the Real Property for Purchaser’s review and copying, at Purchaser’s expense, all of Seller’s files relating to the Property, including, without limitation, the following items to the extent in possession of Seller or reasonably available to Seller at no additional expense of Seller (collectively the “Due Diligence Documents”):

(a)Copies of the latest title commitment and title policy with respect to the Property which are in Seller’s possession;

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(b)The latest as-built plans or surveys of the Property prepared by a registered and licensed surveyor which are in Seller’s possession;

(c)All Contracts;

(d)Copies of all leases, licenses and other similar agreements;

(e)Copies of any appraisals of the Property in Seller’s possession;

(f)Copies of the two (2) most recent ad valorem tax statements for the Real Property and any tax statement relating to the Personal Property;

(g)Copies of any zoning letters;

(h)All equipment and building warranties and guaranties;

(i)All insurance policies covering the Property, together with a history of claims for the last two (2) calendar years;

(j)Operating income/expense statements for the Property for last two calendar years, together with current year-to date, as well as tenant billings and utility billings for the last calendar year;

(k)Detailed general ledger for the Property for last two calendar years, together with current year-to date;

(l)Operating and Capital Budgets for the Property for last two calendar years, together with current year-to date;

(m)Copies of the floor plans of all buildings on the Property;

(n)Summary of tenant improvements and other capital improvements or repairs to the Property for the past two (2) years, including a history of repairs and replacements to the HVAC and the roof;

(o)Copies of any documents relating to any pending lawsuits relating to the Property; and

(p)Any and all site plans, building plans and specifications, engineering plans, architectural reports, environmental reports (including, asbestos and mold), geological reports, eddy current wind and earthquake tests, owner’s association manual, maintenance reports, ADA compliance reports, certificates of occupancy, certificates of compliance of, on or affecting the Property (including, OSHA, fire and health).

Section 3.2Review and Approval of Contracts.  On or before the Approval Date, Purchaser shall notify Seller in writing as to which of the Contracts, if any, Purchaser elects to assume at Closing.  Unless such notice is given by Purchaser, Purchaser shall at and as of the Closing assume such Contracts (except to the extent that such Contracts are to be retained

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by Seller as tenant under the Lease as hereinafter set forth).  Those Contracts not assumed by Purchaser shall be terminated by Seller as of the Closing Date, except to the extent that Seller elects to keep such Contracts in effect as the tenant under the Lease, in which event Seller shall have no obligation to terminate such Contracts at Closing provided that such Contracts can be terminated without penalty and without cost to Purchaser on or prior to the expiration of the Lease.

Section 3.3Purchaser’s Right to Terminate Agreement Prior to Approval Date. As used herein, the term “Due Diligence Period” shall mean the period expiring at 6:00 p.m. local time on the date which is the thirtieth (30^th) day after the Effective Date, and the last day of the Due Diligence Period is referred to herein as the “Approval Date”.  Purchaser shall have the sole, exclusive, and unilateral right to terminate this Agreement and its obligations hereunder, for any or no reason whatsoever by providing written notice to Seller of such termination from Purchaser on or before the Approval Date.  In the event that Purchaser fails to deliver written notice to Seller terminating this Agreement on or before to the Approval Date, such failure shall be deemed to be an election of Purchaser to proceed to Closing and to purchase the Property pursuant to the terms and conditions herein contained.  If Purchaser timely terminates this Agreement pursuant to this Section 3.3, then the Escrow Agent is directed to release the Deposit to Seller within three (3) days of receipt of written notice of such termination and neither party shall have any further obligations or liability hereunder; provided, however, in the event Purchaser so terminates this Agreement due to the fact that its due diligence review during the Due Diligence Period discloses environmental contamination of the Real Property or structural damage or capital improvements (including major repair or replacement of building mechanical, electrical, or plumbing systems necessary for the operation of the Buildings as designed) required to meet governmental code or regulations to the Building (except for any roof damage) that will reasonably cost in excess of Five Hundred Thousand Dollars ($500,000.00) in aggregate to remedy or repair, the Deposit shall be returned to Purchaser.  Purchaser shall promptly provide to Seller copies of all reports, documents, or other materials (i) that show that such $500,000 threshold would be exceeded, or (ii) were prepared or obtained as part of its due diligence review.  In addition, if Purchaser terminates this Agreement in accordance with the provisions of this Section then, upon the request of either party, Purchaser and Seller agree to execute a written release of this Agreement.

Section 3.4Access.  Seller agrees to provide Purchaser access to the Property following the Effective Date for the purpose of performing, at Purchaser’s sole cost and expense, studies, appraisals, physical inspections, investigations and tests on the Property (the “Tests”) provided (i) that no Tests shall be conducted in a manner as to disturb or unreasonably interfere with the current use of the Property, and (ii) that no Phase II or other invasive testing shall be conducted without the prior approval of Seller.  Upon completion of such Tests, Purchaser agrees at its sole cost to restore the Property to substantially the condition it was in immediately prior to such Tests.  Purchaser shall indemnify, defend (with counsel reasonably satisfactory to Seller), protect, and hold Seller harmless from and against any and all liability, loss, cost, damage, or expense (including, without limitation, attorney’s fees and costs) which Seller may sustain or incur for damage to property or injury to persons by reason of or in connection with any Tests made by Purchaser or Purchaser’s agents or contractors relating to or in connection with the Property, or entries by Purchaser or its agents or contractors onto the Property.  Notwithstanding any provision to the contrary in this Agreement, the indemnity obligations of Purchaser under

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this Agreement shall survive any termination of this Agreement or the delivery of the deed and the transfer of title pursuant to this Agreement.

Section 3.5Lease Negotiation.  Both parties’ obligations under this Agreement are contingent upon the parties’ mutual agreement, on or before the twentieth (20^th) day after the Effective Date (the “Lease Approval Date”), on the form of the Lease of a portion of the Real Property more particularly described in Section 10.1(c) hereof.  The parties agree to negotiate the final form of the Lease in good faith, which shall incorporate the terms set forth in Section 10.1 hereof, and shall otherwise contain such other terms as are customarily contained in commercial leases of this nature, taking into consideration the size, use, and location of the Leased Premises, as well as such other terms as may be mutually agreed upon by the parties.  If, despite such good faith efforts, the parties have not agreed on the form of the Lease on or before the Lease Approval Date, either party may give written notice to the other party of the need to finalize the form of the Lease.  In the event the parties are still unable, despite their continued good faith efforts, to agree upon the form of the Lease within five (5) business days of such notice, either party may terminate this Agreement by written notice to the other party, whereupon the Deposit shall be refunded to Purchaser and the parties shall thereafter have no further obligations hereunder (except as set forth in Section 3.4 hereof).

ARTICLE IV.
CLOSING; CLOSING ADJUSTMENTS AND COSTS; CONDITIONS

Section 4.1Time and Place.  The consummation of the transactions contemplated hereby (the “Closing”) shall be held in escrow with the Title Company on the earlier of any date selected by Purchaser after the Approval Date or April 1, 2005 (“Closing Date”).  Purchaser shall have the right to extend the Closing Date an additional sixty (60) days upon (i) delivery of written notice of such extension to Seller on or before March 25, 2005, and (ii) payment to the Escrow Agent on or before said date the amount of Two Hundred Thousand Dollars ($200,000), which shall be immediately released by the Escrow Agent to Seller and shall be non-refundable in all instances (except for Seller’s default), but shall be credited to the Purchase Price at Closing.  At Closing, Seller and Purchaser shall perform the obligations set forth in, respectively, Section 4.2 and Section 4.3, the performance of which obligations shall be concurrent conditions.

Section 4.2Seller’s Obligations at Closing. At the Closing, Seller shall:

(a)deliver to Purchaser a duly executed special warranty deed (the “Deed”) in the form attached hereto and made a part hereof as Exhibit B;

(b)deliver to Purchaser a duly executed bill of sale (the “Bill of Sale”) in the form attached hereto and made a part hereof as Exhibit C;

(c)if applicable, deliver to Purchaser a duly executed assignment and assumption agreement (the “Assignment and Assumption of Contracts”) in the form attached hereto and made a part hereof as Exhibit D;

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(d)deliver to Purchaser a certificate stating that Seller is not a “foreign person” in the form attached hereto and made a part hereof as Exhibit E duly executed by Seller;

(e)join Purchaser in the execution of the Lease;

(f)deliver to Purchaser the original Contracts which are assigned by Seller and assumed by Purchaser hereunder (to the extent originals are available and, if not, certified copies thereof), together with such leasing and property files and records which are located at the Property;

(g)subject to the terms of the Lease, deliver to Purchaser possession of the Property in the condition required by Section 4.8 hereof, together with all keys to all locks on the Property; and

(h)deliver such additional documents as Title Company shall reasonably require to consummate the transaction contemplated in this Agreement (including, but not limited to, organizational documents of Seller, a good standing of Seller, and a standard form ALTA Statement.

Section 4.3Purchaser’s Obligations at Closing. At the Closing, Purchaser shall:

(a)pay to Seller the full amount of the Purchase Price, as increased or decreased by prorations and adjustments as herein provided, in the manner set forth in Section 1.3 hereof less the amount of the Deposit which shall be delivered to Seller plus any other fees, costs, expenses and amounts set forth as Purchaser’s obligations in Section 4.4 and Section 4.5;

(b)join Seller in the execution of the Assignment and Assumption of Contracts;

(c)join Seller in the execution of the Lease;

(d)deliver to Seller such evidence as the Title Company may reasonably require as to the authority of the person or persons executing documents on behalf of Purchaser; and

(e)deliver such additional documents as shall be reasonably required by the Title Company to consummate the transaction contemplated by this Agreement.

Section 4.4Credits and Prorations.  The following adjustments to the Purchase Price paid hereunder shall be made between Seller and Purchaser and shall be prorated (as applicable) as of the Closing Date:

(a)Operating Expenses.  Except for any utilities or other operating expenses that Seller will continue to pay pursuant to the Lease (see Section 10.1(f) hereof), all utilities or other apportionable charges or expenses pertaining to the Property, if any, shall be prorated between Purchaser and Seller as of the Closing Date.  Purchaser shall take all steps

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necessary to effectuate the transfer of all utilities (other than those that will continue to be paid by Seller under the Lease) to its name as of the Closing Date, and where necessary, post deposits with the utility companies.  Seller shall ensure that all utility meters (other than those that will continue to be paid by Seller under the Lease) are read as of the Closing Date.  Seller shall be entitled to recover any and all deposits held by any utility company as of the Closing Date.  To the extent that utility meters cannot be read as of the Closing Date, then a proration estimation shall be made based on the most recently available readings, with adjustments to be made after the Closing in accordance with Section 4.4(c).

(b)Taxes and Assessments.  Real estate taxes and assessments imposed by governmental authority that are not yet due and payable shall be prorated as of the Closing Date based upon the most recent ascertainable assessed values and tax rates.  Seller shall receive a credit for any taxes and assessments paid by Seller and applicable to any period after the Closing.  All refunds or tax savings relating to real estate taxes shall inure to the benefit of Seller if such refunds or tax savings relate to any period for which Seller owned the Property.  Purchaser shall have no obligation to pursue any such refunds or savings, but shall cooperate with Seller in its efforts to pursue the same.

(c)Final Adjustment After Closing.  If final prorations cannot be made at Closing for any item being prorated under this section, then Purchaser and Seller agree to allocate such items on an accrual basis as soon as invoices or bills are available and applicable reconciliation with tenants have been completed, with final adjustment to be made no later than ninety (90) days after the Closing Date.  Income and expenses shall be received and paid by the parties on an accrual basis with respect to their period of ownership.  Payments in connection with the final adjustment shall be due within thirty (30) days of written notice of such final adjustment amount.  Each party shall have reasonable access to, and the right to inspect and audit the other party’s supporting documentation to confirm the final prorations.

(d)Insurance.  The fire, hazard, and other insurance policies relating to the Property shall be cancelled by Seller as of the Closing Date and shall not, under any circumstances, be assigned to Purchaser.  All unearned premiums for fire and any additional hazard insurance premium or other insurance policy premiums with respect to the Property shall be retained by Seller.

The provisions of this Section 4.4 shall survive Closing.

Section 4.5Transaction Taxes and Closing Costs.

(a)Seller shall pay for the following fees, costs and expenses:

(i)the fees of any counsel representing Seller in connection with this transaction;

(ii)one-half of any and all realty transfer taxes imposed in connection with the transfer of the Property;

(iii)the cost or fee for such insurance or endorsement over any Title Objection cured by Seller pursuant to Section 2.1 hereof;

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(iv)one-half of any escrow charges incurred hereunder;

(v)any real estate commissions arising from the sale of the Property; and

(vi)all other closing costs incurred by Seller on Seller’s behalf in connection with this transaction.

(b)Purchaser shall pay the following fees, costs and expenses:

(i)the fees of any counsel representing Purchaser in connection with this transaction;

(ii)one-half of any and all realty transfer taxes imposed in connection with the transfer of the Property;

(iii)the recording fees for the Deed;

(iv)(A) the cost of the premium for an ALTA owner’s/lender’s title insurance policy for the Property and (B) any other fees or premiums for extended coverage or any endorsements requested by Purchaser (excluding, however, any cost or fee for such insurance or endorsement over any Title Objection cured by Seller pursuant to Section 2.1);

(v)all costs and expenses incurred in connection with the preparation of the Survey requested by Purchaser;

(vi)one-half of any escrow charges incurred hereunder; and

(vii)all other closing costs incurred by Purchaser on Purchaser’s behalf in connection with this transaction.

Section 4.6Conditions Precedent to Obligation of Purchaser.  The obligation of Purchaser to consummate the transaction hereunder shall be subject to the fulfillment on or before the Closing Date of all of the following conditions, any or all of which may be waived by Purchaser in its sole discretion:

(a)Seller shall have delivered or made available to Purchaser all of the items required to be delivered or made available to Purchaser pursuant to the terms of this Agreement, including but not limited to, those provided for in Section 3.1 or Section 4.2;

(b)the representations and warranties of Seller contained in this Agreement shall have been true and correct in all material respects as of the Effective Date and shall be true and correct in all material respects as of the Closing Date;

(c)Seller shall have performed and observed, in all material respects, all covenants and agreements of this Agreement to be performed and observed by Seller as of the Closing Date;

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(d)The Title Company shall be irrevocably committed to deliver an ALTA owner’s policy of title insurance (excluding extended coverage and any endorsements thereto) in the amount of the Purchase Price insuring the Property subject only to the Permitted Exceptions and otherwise in form and manner reasonably acceptable to Purchaser, provided that Purchaser shall have performed its obligations hereunder in connection with the payment of any fees or premiums and the delivery of any documents required by the Title Company; and

(e)Subject to Sections 7.1 and 7.2 below (relating to casualty and condemnation), the physical condition of the Real Property shall be substantially the same on the Closing Date as on the Effective Date, except for changes thereto which result from or are attributable to reasonable or normal wear and tear.

Section 4.7Conditions Precedent to Obligation of Seller.  The obligation of Seller to consummate the transaction hereunder shall be subject to the fulfillment on or before the Closing Date of all of the following conditions, any or all of which may be waived by Seller in its sole discretion:

(a)Seller shall have received the Purchase Price as adjusted as provided herein, and the Deposit, pursuant to and payable in the manner provided for in this Agreement;

(b)Purchaser shall have delivered to Seller all of the items required to be delivered to Seller pursuant to the terms of this Agreement, including but not limited to, those provided for in Section 4.3;

(c)All of the representations and warranties of Purchaser contained in this Agreement shall have been true and correct in all material respects as of the Effective Date and shall be true and correct as of the Closing Date; and

(d)Purchaser shall have performed and observed, in all material respects, all covenants and agreements of this Agreement to be performed and observed by Purchaser as of the Closing Date.

Section 4.8Condition of Property.  Seller shall have a period of six (6) months after Closing in which to remove its furniture, fixtures, and equipment from the Property (except that no such removal shall be required for the Leased Premises until the end of the Lease term).  Upon such removal, Seller shall leave all disconnected electrical supply lines in a condition that complies with applicable code requirements and shall deliver the Property to Purchaser in broom clean condition.

ARTICLE V.
REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 5.1Representations and Warranties of Seller.  Seller hereby makes the following representations and warranties to Purchaser as of the Effective Date and as of the date of Closing:

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(a)Organization and Authority.  Seller has been duly organized and is in good standing under the laws of the state of its incorporation and state in which the Real Property is located.  Seller has the full right and authority to enter into this Agreement and to transfer all of the Property and to consummate or cause to be consummated the transaction contemplated by this Agreement.  The persons signing this Agreement on behalf of Seller are authorized to do so.

(b)Agreement Binding.  This Agreement constitutes a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights and by general principles of equity (whether applied in a proceeding at law or in equity).  All Related Documents executed by Seller at the Closing will be duly authorized, executed, and delivered by Seller, are or at the Closing will be legal, valid, and binding obligations of Seller, are sufficient to convey title, and do not violate any provisions of any agreement to which Seller is a party or to which it is subject.  The term “Related Documents” shall mean any document or instrument executed and/or delivered by Seller or Purchaser in connection with or pursuant to the Closing of the transaction contemplated by this Agreement including, without limitation, the Deed, Bill of Sale, Assignment and Assumption of Contracts and the FIRPTA Certificate.

(c)Agreements.  Except for the PREI Claims, no understanding, agreement (either express or implied), or alleged expectancy of agreement with respect to sale, lease or other transfer of the Property exists between Seller and any third party, and Seller is in no way restricted from negotiating and entering into an agreement with Purchaser and selling the Property to Purchaser.

(d)Leases.  There are no leases at the Real Property and, except for the Lease, there shall be no leases at or affecting the Real Property on the Closing Date.

(e)Condemnation.  To Seller’s knowledge, Seller has not received notice (written or otherwise) of any condemnation proceedings having been instituted or threatened against any of the Property.

(f)Bankruptcy.  Seller has not made a general assignment for the benefit of creditors, filed any voluntary petition in bankruptcy or suffered the filing of an involuntary petition by its creditors, suffered the appointment of a receiver to take possession of substantially all of its assets, suffered the attachment or other judicial seizure of substantially all of its assets, admitted its inability to pay its debts as they come due, or made an offer of settlement, extension or composition to its creditors generally.

(g)No Pending Actions.  Except for the PREI Claims, to Seller’s knowledge, Seller has not received any written notice of:  (i) any pending (and to Seller’s knowledge there is no threatened) action, suit, arbitration, unsatisfied order or judgment which could materially and adversely affect the use and operation or the value of the Property; or (ii) any government investigation or proceeding pending against Seller or the Real Property which, if adversely determined, could materially interfere with the consummation of the transaction

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contemplated by this Agreement; or (iii) any pending (or to Seller’s knowledge, threatened) condemnation, taking or eminent domain proceedings against the Real Property.

(h)No Violations.  To Seller’s knowledge, Seller has not received written notice of any material violations of any laws enacted by any federal, state, local or other governmental agency or regulatory body with respect to the Property which remain uncured and could materially and adversely affect the use and operation or the value of the Property or materially and adversely interfere with the consummation of the transaction contemplated by this Agreement.

(i)Non-Foreign Status.  Seller is not a “foreign person” as defined in the Federal Foreign Investment in Real Property Tax Act of 1980.

(j)Completeness and Accuracy.  To Seller’s knowledge, the documents made available by Seller to Purchaser pursuant to Section 3.1 are the material documents in the possession of Seller or its representative and agents relating to the Property and used by Seller in its operation of the Property.

For purposes of the representations and warranties of Seller contained herein, the term “knowledge” shall mean the current actual knowledge of Mr. Glen Riley, Vice President, and Mr. Ray Link, Chief Financial Officer, of TriQuint Semiconductor, Inc. (“TQS”), Seller’s parent corporation, who Seller represents are the individuals who are the most knowledgeable about the Property and the representations and warranties contained herein.  The foregoing individuals shall not have any personal liability by virtue of the foregoing representations and warranties. Except for the representations and warranties of Seller contained in this Agreement, Seller does not make any other representations or warranties with respect to the Property, express or implied, and Purchaser acknowledges that, except for the representations and warranties of Seller contained in this Agreement, Purchaser is purchasing the Property in its “AS IS, WHERE IS” condition without any other representation of warranty of Seller.

Section 5.2Covenants of Seller from Effective Date to Closing.  Seller hereby covenants with Purchaser as follows:

(a)From the Effective Date hereof until the Closing or earlier termination of this Agreement, Seller shall use commercially reasonable efforts to operate and maintain the Property in a manner generally consistent with the manner in which Seller has operated and maintained the Property prior to the date hereof;

(b)From the Effective Date hereof until the Closing or earlier termination of this Agreement , Seller shall not enter into any leases, licenses or other similar agreements with respect to the Real Property or negotiate with any other parties with respect to any lease or sale of the Real Property.

(c)Except as provided below, a copy of any amendment or renewal of any Contract or any new Contract (collectively, the “New Contracts” and individually “New Contract”) which Seller wishes to execute between the Effective Date and the Closing Date will be submitted to Purchaser.  Purchaser shall have the right to approve any such New Contract which Seller desires to enter into between after the Due Diligence Period expires and the Closing

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Date.  With respect to any such New Contract which Purchaser has the right to approve, Purchaser shall notify the Seller in writing within five (5) business days (“New Contract Approval Period”) after its receipt thereof (and any additional information reasonably requested by Purchaser from Seller relating to any of the New Contracts) of either its approval or disapproval thereof.  In the event Purchaser notifies Seller in writing within the New Contract Approval Period that Purchaser does not approve any such New Contract, then Seller shall not enter into such New Contract.  In the event Purchaser fails to notify Seller in writing of its approval or disapproval within the New Contract Approval Period, Purchaser shall be deemed not to have approved any such New Contract.  Notwithstanding the foregoing, nothing contained in this Section 5.2(c) or this Agreement shall prohibit Seller from entering into any Contract which either (i) expires on or before the Closing Date, (ii) is terminable without penalty and without cost or expense to Purchaser upon no more than thirty (30) days written notice from Seller to the other party to such Contract, or (iii) Seller will retain as the tenant under the Lease provided the same can be terminated without penalty and without cost or expense to Purchaser prior to the expiration of the Lease.

(d)From the Effective Date hereof until the Closing or earlier termination of this Agreement, Seller shall not modify or change the zoning classifications of the Property without Purchaser’s consent.

Section 5.3Survival of Seller’s Representations and Warranties.  The representations and warranties of Seller set forth in Section 5.1, shall survive for a period of twelve (12) months after the Closing. Notwithstanding the foregoing, Purchaser shall not be entitled to assert any claim against Seller with respect to the inaccuracy of any representation or warranty made by Seller, or failure by Seller to perform its covenants, agreements and conditions under this Agreement, to the extent that Purchaser has actual knowledge of such inaccuracy or failure at or prior to the time of Closing, it being the intent and agreement of the parties that Purchaser shall not have the right or ability to consummate the Closing and thereafter assert a claim for breach of a warranty, representation, covenant, agreement or condition by Seller which Purchaser had actual knowledge of at or prior to Closing; provided, however, that Seller has promptly notified Purchaser prior to Closing in writing of any such inaccuracy or failure of which Seller had actual knowledge.

Section 5.4Representations and Warranties of Purchaser.  Purchaser hereby makes the following representations and warranties to Seller as of the Effective Date and as of the Closing Date:

(a)Organization and Authority of Purchaser. Purchaser has been duly organized and is in good standing under the laws of the Commonwealth of Pennsylvania ..  Purchaser has the full right and authority to enter into this Agreement, to purchase all of the Property and to consummate or cause to be consummated the transaction contemplated by this Agreement.  The persons signing this Agreement on behalf of Purchaser is authorized to do so;

(b)Pending Actions.  To Purchaser’s knowledge, there is no action, suit, arbitration, unsatisfied order or judgment, government investigation or proceeding pending against Purchaser which, if adversely determined, could individually or in the aggregate

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materially interfere with the consummation of the transaction contemplated by this Agreement; and

(c)Agreement Binding.  This Agreement constitutes a legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with the terms hereof, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights and by general principles of equity (whether applied in a proceeding at law or in equity).

Section 5.5Survival of Purchaser’s Representations and Warranties.  The representations and warranties of Purchaser set forth in Section 5.4 shall survive the Closing for a period of twelve (12) months.  Notwithstanding the foregoing, Seller shall not be entitled to assert any claim against Purchaser with respect to the inaccuracy of any representation or warranty made by Purchaser, or failure by Purchaser to perform its covenants, agreements and conditions under this Agreement, to the extent that Seller has actual knowledge of such inaccuracy or failure at or prior to the time of Closing, it being the intent and agreement of the parties that Seller shall not have the right or ability to consummate the Closing and thereafter assert a claim for breach of a warranty, representation, covenant, agreement or condition by Purchaser which Seller had actual knowledge of at or prior to Closing; provided, however, that Purchaser has promptly notified Seller in writing of any such inaccuracy or failure of which Purchaser had actual knowledge.

ARTICLE VI.
DEFAULT

Section 6.1Default by Purchaser.  In the event of any material default by Purchaser under this Agreement that is not cured within five (5) days after Purchaser’s receipt of notice thereof (but in no event later than the time and date of Closing), Seller shall be entitled, as its sole and exclusive remedy, to terminate this Agreement and receive the Deposit as liquidated damages for the breach of this Agreement, it being agreed between the parties hereto that the actual damages to Seller in the event of such a material breach are impractical to ascertain and the stated amount of the Deposit is a reasonable estimate thereof.  Seller’s receipt of the Deposit pursuant to the terms of this Section 6.1 shall release Purchaser from any and all liability relating to this Agreement, except for any surviving liability of Purchaser under Section 3.4 above.

Section 6.2Default by Seller.  In the event of any material default by Seller under this Agreement that is not cured within five (5) days after Seller’s receipt of notice thereof (but in no event later than the time and date of Closing), Purchaser shall be entitled, as its sole and exclusive remedy, to either (i) receive the return of the Deposit and the reimbursement from Seller for all of Purchaser’s documented out-of-pocket expenses incurred by Purchaser in connection with this Agreement and its purchase of the Property, which receipt shall operate to terminate this Agreement and release Seller from any and all liability hereunder or (ii) enforce specific performance.

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ARTICLE VII.
RISK OF LOSS

Section 7.1Casualty.  Subject to the provisions of this Section 7.1, Seller shall bear the risk of any damage to the Property between the Effective Date and the Closing Date.  From the Effective Date to the Closing Date, Seller shall keep and maintain all insurance policies necessary for the operation for the operation of the Property.  If the Property is damaged by fire, storm, flood, or any other casualty between the Effective Date and Closing Date, Seller and Purchaser shall obtain an estimate of the cost of repairing the damage from an established contractor selected by Seller and reasonably approved by Purchaser.

(a)If the estimated cost to repair such damage is less than $250,000, then the Closing shall be held in accordance with the terms of this Agreement and Seller shall assign its rights to any and all insurance proceeds to Purchaser or, if the insurance proceeds have been received by Seller, credit the Purchase Price the amount of such proceeds.  If the estimated cost to repair such damage is equal to or more than $250,000, then either Purchaser or Seller may elect to terminate this Agreement upon written notice to the other given within five (5) business days after receipt of notice of the estimated cost of repair.  If this Agreement is terminated by Purchaser or Seller within such five (5) business day period, the Deposit shall be returned to Purchaser and neither Seller nor Purchaser shall have any further rights, claims or obligations against one another arising out of this Agreement.  If this Agreement is not so terminated, then the Closing shall be held in accordance with the terms of this Agreement and, at Purchaser discretion, Seller shall assign its right to all insurance proceeds to Purchaser or repair the damage at Seller’s sole cost and expense.

(b)All repairs to be performed by Seller pursuant to this Section 7.1 shall be done in a good and workmanlike manner consistent with the original construction of the Property.

Section 7.2Condemnation.

(a)If prior to the Closing any part of the Property is condemned or taken pursuant to any governmental or other power of eminent domain, or if written notice of taking or condemnation is issued with respect to any portion of the Property, or if proceedings are instituted or threatened in writing to be instituted by any governmental or other authority having the power of eminent domain with respect to any portion of the Property (any such event, a “Taking”), Seller shall immediately notify Purchaser as soon as Seller receives written notice of any such Taking.  If the Taking is of all of the Real Property, or of a portion of the Real Property which would materially and adversely affect the Property or the use or value thereof or access thereto, then either Seller or Purchaser shall have the right, to be exercised within five (5) business days after receiving such notification, to terminate this Agreement effective upon written notice to the other party.

(b)If this Agreement is terminated within such five (5) business day period, the Deposit shall be returned to Purchaser and, neither Seller nor Purchaser shall have any further rights, claims or obligations against one another arising out of this Agreement.

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(c)If neither Seller or Purchaser has right to terminate or, if they have such right, they do not elect to terminate within the five (5) business day period, then Purchaser shall accept the Property net of the portion taken by the Taking.  In such event, if the condemnation award in respect of the Taking is paid to Seller prior to the Closing, the Purchase Price shall be reduced by an amount equal to the proceeds of the award received by, or on behalf of, Seller.  If the award has not been paid to Seller as of the Closing Date, then Seller shall assign to Purchaser, without recourse, at the Closing, by documents reasonably satisfactory to Purchaser, all rights of Seller to the award, in which case there shall be no adjustment in the Purchase Price by reason of the Taking.

ARTICLE VIII.
COMMISSIONS

Section 8.1Brokerage Commissions.  With respect to the transaction contemplated by this Agreement, Seller and Purchaser each represent to the other that no broker, licensed or otherwise, brought about this transaction, nor has any possible claim to any commission, except for CB Richard Ellis and Colliers L & A on behalf of Seller, and The Flynn Company on behalf of Purchaser.  Seller shall be responsible to pay any commission owed to such parties per a separate agreement, which shall be shared by said brokers as they may agree.  Purchaser acknowledges that The Flynn Company may not receive one-half of the total commission paid.  Each party hereto agrees that if any person or entity, other than the above-named brokers, makes a claim for brokerage commissions or finders fees related to the sale of the Property by Seller to Purchaser, and such claim is made by, through or on account of any acts or alleged acts of said party or its representatives, said party will protect, indemnify, defend and hold the other party free and harmless from and against any and all loss, liability, cost, damage and expense (including reasonable attorneys’ fees) in connection therewith.  The provisions of this Section 8.1 shall survive the Closing or any termination of this Agreement.

ARTICLE IX.
MISCELLANEOUS

Section 9.1Assignment.  Subject to the provisions of this Section 9.1, the terms and provisions of this Agreement are to apply to and bind the permitted successors and assigns of the parties hereto.  Purchaser may not assign its rights under this Agreement without first obtaining Seller’s written approval, which approval may not be unreasonably withheld, conditioned or delayed; provided, however, Purchaser shall have the right to assign this Agreement to an affiliate of Purchaser without the prior written consent of Seller.

Section 9.2Notices.  Any notice pursuant to this Agreement shall be given in writing by (a) personal delivery, (b) reputable overnight delivery service with proof of delivery, or (c) legible facsimile transmission, sent to the intended addressee at the address set forth below, or to such other address or to the attention of such other person as the addressee shall have designated by written notice sent in accordance herewith, and shall be deemed to have been given upon receipt or refusal to accept delivery, or, in the case of facsimile transmission, as of the date of the facsimile transmission (if such is received by 5:00 p.m. local time of the recipient) provided that an original of such facsimile is also sent to the intended addressee by means

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described in clauses (a), or (b) above.  Unless changed in accordance with the preceding sentence, the addresses for notices given pursuant to this Agreement shall be as follows:

If to Seller:  TriQuint Optoelectronics, Inc. c/o TriQuint Semiconductor, Inc. 2300 NE Brookwood Parkway Hillsboro, OR 97124	If to Purchaser: Anthem Partners, LLC 120 W. Germantown Pike, Suite 200 Plymouth Meeting, PA 19462
Attn: Ray Link, Chief Financial Officer Tel: (503)615-9435 Fax: (503)615-8900	Attn: Lawrence Stuardi Tel: 610-238-0500 Fax: 610-238-0140
With a copy to: Randal A. Johnson Ater Wynne LLP 222 SW Columbia, Suite 1800 Portland, Oregon 97201-6618
Phone (503) 226-8611 Fax(503) 226-0079 e-mail raj@aterwynne.com

Section 9.3Modifications.  This Agreement cannot be changed orally, and no executory agreement shall be effective to waive, change, modify or discharge it in whole or in part unless such executory agreement is in writing and is signed by the parties against whom enforcement of any waiver, change, modification or discharge is sought.

Section 9.4Entire Agreement  This Agreement, including the exhibits and schedules hereto and the documents contemplated hereby, contains the entire agreement between the parties hereto pertaining to the subject matter hereof and fully supersedes all prior written or oral agreements and understandings between the parties pertaining to such subject matter.

Section 9.5Further Assurances.  Each party agrees that it will execute and deliver such other documents and take such other action, whether prior or subsequent to the Closing, as may be reasonably requested by the other party to consummate the transaction contemplated by this Agreement.

Section 9.6Counterparts.  This Agreement may be executed in counterparts, all such executed counterparts shall constitute the same agreement, and the signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart.

Section 9.7Severability.  If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall nonetheless remain in full force and effect; provided that the invalidity or unenforceability

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of such provision does not materially adversely affect the benefits accruing to any party hereunder.

Section 9.8Applicable Law.  This Agreement and the Related Documents shall be governed by and construed in accordance with the internal laws of the Commonwealth of Pennsylvania without regard to conflicts of law principles.  The parties hereto agree that the provisions of this Section 9.8 shall survive the Closing or any termination of this Agreement.

Section 9.9No Third-Party Beneficiary  The provisions of this Agreement and of the documents to be executed and delivered on the Closing Date are and will be for the benefit of Seller, Purchaser, and Escrow Agent only and, subject to the provisions of Section 9.1, are not for the benefit of any third party, and accordingly, no third party shall have the right to enforce the provisions of this Agreement or of the documents to be executed and delivered on the Closing Date.

Section 9.10Captions.  The section headings appearing in this Agreement are for convenience of reference only and are not intended, to any extent and for any purpose, to limit or define the text of any section or any subsection hereof.

Section 9.11Construction.  The parties acknowledge that the parties and their counsel have reviewed and revised this Agreement and that any normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any exhibits or amendments hereto.

Section 9.12Internal Revenue Service Reporting Requirement.  Each party shall execute, acknowledge and deliver to the other party such instruments, and take such other actions, as such other party may reasonably request in order to comply with Section 6045(e) of the Internal Revenue Code of 1986, as amended, or any successor provision or any regulations promulgated pursuant thereto (the “Code”), insofar as the same requires reporting of information in respect of real estate transactions.  The provisions of this Section 9.12 shall survive the delivery of the deed hereunder.

Section 9.13Tax Free Exchange.

(a)Notwithstanding any terms in the Agreement to the contrary, each party shall have the right to consummate the transactions contemplated by this Agreement in a manner which qualifies as a tax-deferred exchange, in whole or in part, under the provisions of Section 1031 of the Code.

(b)Upon request of either party (the “Requesting Party”) and at the expense of the Requesting Party, the other party agrees to cooperate with the Requesting Party with respect to any tax-deferred exchange pursuant to the provisions of Section 1031 of the Code and the Treasury Regulations thereunder and to execute any and all documents reasonably requested by the Requesting  Party in connection therewith, provided that (i) the other party shall not incur additional costs or expenses attributable to the exchange, including reasonable attorneys’ fees, deed excise taxes and recording fees; (ii) the Requesting Party agrees to indemnify and hold the other harmless from and against all liability arising from any tax deferred exchange relating to the Property conducted by the Requesting Party, (iii) the other party shall

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not be required to purchase or take title to any replacement property in connection with any such deferred exchange (the “Replacement Property”) and (iv) the Closing Date shall not be altered as a result of any such exchange.

(c)Each party acknowledges that the other party shall not be deemed an agent of the Requesting Party in connection with said exchange.  Each party further acknowledges that all agreements in connection with performing the exchange shall be prepared at the Requesting Party’s expense by its counsel.

(d)Without limiting the foregoing, the Requesting Party shall have the right to transfer all or any portion of its interests under the Agreement to a qualified intermediary (the “Intermediary”) in accordance with the provisions of Section 1031 of the Code and the Treasury Regulations thereunder (and, as a result of the transfer, the Intermediary will acquire an equitable interest in the title to the Property); provided, the Requesting Party shall not be released from its obligations hereunder as a result of such transfer.

Section 9.14Attorneys’ Fees.  In the event any dispute between the parties hereto regarding this Agreement or any Related Documents should result in litigation, the prevailing party in such litigation shall be reimbursed for all reasonable costs, including, without limitation, reasonable attorneys’ fees.

Section 9.15Confidentiality.  Each party agrees that, except as otherwise set forth in this Agreement or required by law or legal process, it shall:  (i) keep the contents of this Agreement and any information related to the transaction contemplated hereby confidential (except that Purchaser and Seller may disclose such data and information to their respective employees, lenders, consultants, accountants and attorneys, provided that such persons agree to treat such data and information confidentially); and (ii) refrain from generating or participating in any publicity statement, press release or other public notice regarding this transaction without the prior written consent of the other party unless required under applicable law or by legal process; provided, however, that Purchaser and Seller may at or following the Closing publicly announce the sale of the Property and the identity of the new owner thereof.  The provisions of this Section 9.15 shall survive the Closing.

ARTICLE X.
LEASEBACK TO SELLER

Section 10.1Negotiation of Lease.  As a condition to the parties’ obligations hereunder, Seller and Purchaser (or their assignees hereunder) shall execute at Closing a lease agreement for the following-described portions of the Real Property (the “Lease”), with the Seller as the tenant and Purchaser as the landlord thereunder, under the following general terms and conditions:

(a)Initial Term:  Twenty-four (24) months from the Closing Date; provided, however, that if the Closing Date is extended by Purchaser in accordance with Section 4.1 hereof, the term of the Lease may, at Seller’s option, be shortened by the same number of days that Closing is extended past April 1, 2005.

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(b)Annual Base Rent:  [***]

(c)Leased Premises:  The following portions of the Real Property, as depicted on Schedule 10.1(c) attached hereto:

(i)all of Building 2; and

(ii)the manufacturing (not office) portion of Building 4 (the “Building 4 Space”), which includes the portion of said premises used by Seller for chip fabrication that is depicted on Schedule 10.1(c) hereto (the “Chip Fab Space”).

(d)Recapture of Building 4:  Purchaser shall have the right to recapture all or portions of the Building 4 Space.  For those portions of the Building 4 Space not included in the Chip Fab Space, Purchaser shall give Seller no less than sixty (60) days written notice of Purchaser’s intent to recapture such premises.  For the Chip Fab Space, Purchaser shall give Seller no less than eighteen (18) weeks written notice of its intent to recapture such space.  Seller may extend such notice period for recapture of the Chip Fab Space an additional four (4) weeks by written notice to Purchaser given within the initial eighteen (18) week period.  Upon expiration of the applicable notice period (as the same may be extended), Seller shall deliver possession of the recaptured premises to Purchaser in the condition required by Section 4.8, hereof and the lease of such premises shall thereupon terminate.

(e)Access and Use Rights:  Seller shall have the right to reasonable use of other portions of the Buildings as necessary to access the Leased Premises.  Seller shall also have the right to access the Central Utilities Plant and the Command Center in order to operate the Leased Premises and to perform its obligations under the Lease, which space shall be considered common area.  Seller shall also have the right to reasonable use, in common with Purchaser and other tenants, the dock area and the auditorium in Building 1, and shall coordinate such use with Purchaser.  Seller’s access and use rights generally set forth herein shall be subject to further refinement and clarification, and to reasonable rules and restrictions concerning the joint use thereof by the parties and future tenants of the Buildings, as may be set forth in the Lease.The intention of these access and use rights is to permit Seller (or its assignee) to continue to use the Leased Premises in substantially the same manner as is currently the case and as is reasonably necessary to operate its business.

(f)Utilities/Operating Expenses:  Seller shall pay for all utilities and services directly relating to its use and occupancy of the Leased Premises during the Lease term.  Landlord shall be responsible for all other utilities and services for the remainder of the Buildings.  The parties agree to reasonably cooperate with each other in an effort to minimize utility and other operating costs.  Anything to the contrary in the foregoing notwithstanding, the parties agree to allocate the utility and other operating costs as set forth on Schedule 10.1(f) attached hereto (the “Cost Allocation”).  Each party shall be responsible for the total amount of

*** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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all cost items allocated to it on the Cost Allocation, which shall not be limited by the estimated amounts set forth thereon.  For the “Shared Costs” set forth on the Cost Allocation, Seller shall be responsible for such costs during the initial Lease term, subject to payment by Purchaser of its fixed allocated amount of $13,388 per month ($160,656 annually) (“Purchaser’s Allocation”), which shall be paid by Purchaser to Seller in the form of a credit against monthly Base Rent payable under the Lease; provided, however, that in the event Seller (i) occupies any portion of the Building 4 Space, or (ii) has not removed its furniture, fixtures, or equipment from the Property (except for the Leased Premises) in accordance with Section 4.8 hereof, six (6) months following the Closing Date, Purchaser’s Allocation shall be reduced to $0 until such time as Seller vacates all of the Building 4 Space and/or removes such furniture, fixtures, and equipment, as the case may be, at which time Seller shall again receive the monthly credit for Purchaser’s Allocation.  Upon occupancy of any portion of the Buildings by a tenant other than Seller, Seller’s allocated share of the Shared Costs shall be equitably apportioned between Seller and such tenant(s), considering the nature and extent of their respective use of such utilities or services.  Upon occupancy of any portion of the Buildings by a tenant other than Seller, Purchaser or Seller shall have the right to separately meter any utilities serving the Leased Premises, at its sole cost and expense, in which event Seller shall only be responsible for the cost of such metered utilities actually used in the Leased Premises, and not the amount allocated for such utilities by the Cost Allocation.

(g)Maintenance and Repair: Seller shall maintain and repair, at its sole cost and expense, the HVAC systems serving the Leased Premises (including all special air handling equipment used in connection with its processing activities on the Leased Premises), and all damage caused by Seller to the Leased Premises during the term of the Lease.  Except as set forth in the Cost Allocation, Purchaser shall maintain, repair, and replace, at its sole cost and expense, the following items during the Lease term, the cost of which shall not be passed through to Seller under the Lease (except during any renewal term(s)): (a) all structural elements and the foundation of the Leased Premises; (b) the roof; and (c) all other maintenance, repair, and replacement expenses not specifically allocated to Seller herein.

(h)Insurance:  Seller shall at all times during the Lease term maintain general commercial liability insurance in an amount not less than $2,000,000 per occurrence.  Purchaser shall at all times be responsible to maintain, at its sole cost and expense, casualty insurance coverage on the Leased Premises for the full replacement cost thereof.

(i)Taxes:  Purchaser shall be responsible for all taxes due on the Property (including the Leased Premises) from and after the Closing Date (except during any renewal term(s)).  Seller shall have the right, at its sole cost and expense, to pursue any refund of any charges applicable to periods prior to the Closing Date.  Purchaser agrees to reasonably cooperate with Seller, at no cost or expense to Purchaser, with respect to the same.  Should any tax appeal be successful or any other cost saving measure as it pertains to the Property be achieved for periods prior to the Closing Date, such savings will inure solely to the benefit of Seller.

(j)Renewal Options:  Provided that Seller (or its assignee of the Lease) is not then in default under the Lease and has not failed to timely pay (after any applicable grace or notice period) any installment of Base Rent during the initial Lease term,

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Seller (or its assignee) shall have one of the following two renewal options with respect to the Leased Premises:

(1)One (1), five (5) year renewal option, exercisable on six (6) months advance written notice, on the same terms set forth above except that rent, utilities, and operating expenses payable during such renewal term shall be as follows:

1st Year	[***]/sq. ft. NNN
2nd Year	[***]/sq. ft NNN
3rd Year	[***]/sq. ft. NNN
4th Year	[***]/sq. ft. NNN
5th Year	[***]/sq. ft. NNN.

OR

(2)five (5), two (2) year renewal options, exercisable on six (6) months advance written notice, on the same terms set forth above except that rent, utilities, and operating expenses payable during such renewal term(s) shall be as follows:

1st Renewal Term	[***]/sq. ft. NNN
2nd Renewal Term	[***]/sq. ft NNN
3rd Renewal Term	[***]/sq. ft. NNN
4th Renewal Term	[***]/sq. ft. NNN
5th Renewal Term	[***]/sq. ft. NNN.

The foregoing notwithstanding, Seller (or its assignee) shall have the right to convert the third (3^rd), fourth (4^th), and fifth (5^th) two (2) year renewal options set forth above to one (1) year options, upon giving Purchaser twelve (12) months notice prior to exercising each such one (1) year option.  Upon Seller’s conversion of any of the third (3^rd), fourth (4^th), or fifth (5^th) options to a one (1) year option, each successive option shall thereafter automatically be converted to a one (1) year option.

(k)Surrender of Leased Premises:  Upon the expiration or earlier termination of the Lease, Seller shall surrender the Leased Premises in the condition required by Section 4.8 hereof, free and clear of all equipment, trade fixtures and personal property of Seller (and Seller shall repair any damage caused by the removal of such items).  The foregoing notwithstanding, Seller shall have a reasonable period of time after Purchaser’s recapture of any portion of the Leased Premises in accordance with Section 10.1(d) hereof in which to remove its furniture, fixtures, and equipment from the recaptured premises.

(l)Assignment:  Seller shall have the absolute right to assign the Lease in connection with the sale of Seller’s optoelectronics business without the consent of, but

*** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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upon notice to, Purchaser.  Seller’s assignee may further assign the Lease only upon Purchaser’s prior written consent, which consent shall not unreasonably be withheld, conditioned, or delayed.

(m)Negotiation of Lease:  Seller and Purchaser shall negotiate in good faith the form of Lease within the Lease Approval Period as contemplated by Section 3.5 hereof, which form shall incorporate the terms set forth above and shall otherwise contain such other terms as are customarily contained in commercial leases of this nature, taking into consideration, the size, use and location of the premises, as well as such other terms as may be mutually agreed upon by the parties.  Upon approval of the form of Lease, the parties shall designate their approval thereof in writing and the form shall be attached as Exhibit F hereto.

(n)Guaranty:  Seller’s obligations to pay Base Rent under the Lease for the initial twenty-four month term thereof shall be guaranteed by TQS.  Upon any assignment of the Lease, Purchaser agrees to release TQS from such guaranty, provided that the Lease assignee or any other guarantor has a net worth equal to or greater than that of TQS as of the Closing Date.  TQS shall not guaranty any obligations under the Lease during any renewal term(s).

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the Effective Date.

SELLER:				PURCHASER:
TRIQUINT OPTOELECTRONICS, INC.				ANTHEM PARTNERS, LLC
By:	/s/ RAYMOND A. LINK			By:		/s/ LAWRENCE J. STUARDI
Name:			Raymond A. Link	Name:			Lawrence J. Stuardi
Title:		V.P Finance and Administration and CFO		Title:	President

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LIST OF EXHIBITS

EXHIBITS

EXHIBIT A	-	Legal Description of the Real Property
EXHIBIT B	-	Form of Special Warranty Deed
EXHIBIT C	-	Form of Bill of Sale
EXHIBIT D	-	Form of Assignment and Assumption of Contracts
EXHIBIT E	-	Form of FIRPTA Certificate
EXHIBIT F	-	Form of Lease

EXHIBIT A

Legal Description of the Real Property

ALL THAT CERTAIN tract of land located in Upper Macungie Township, Lehigh County, Pennsylvania, known as LOT 3 as shown on and described in accordance with a Minor Subdivision Plan for Agere Systems, Inc., prepared by Barry Isett & Associates, Inc., Trexlertown, Pennsylvania, dated October 22, 2001, last revised February 20, 2002 and recorded in Lehigh County Document ID No. 7025857; Document ID No. 7025858; Document ID No. 7025859, on August 28, 2002 and Document ID No. 7049646 on Dec. 13, 2002, bounded and described as follows to wit:

BEGINNING at the intersection of the northerly ultimate right-of-way line of  S.R. 0222 (100 foot right-of-way and the easterly property line of Lot 1 as shown on aforesaid Minor Subdivision Plan; thence along the lands of said Lot 1 the following seven (7) courses and distances (1) North 16 degrees 30 minutes 00 seconds East, 177.27 feet; (2) Along a circular curve to the right, having a radius of 530.00 feet and a central angle of 28 degrees 10 minutes 08 seconds (chord bearing and distance of North 30 degrees 35 minutes 04 seconds East, 257.95 feet), the arc length of 260.57 feet; (3) North 44 degrees 40 minutes 08 seconds East, 55.66 feet (4) Along a circular curve to the right, having a radius of 418.06 feet and a central angle of 38 degrees 58 minutes 58 seconds (chord bearing and distance of North 25 degrees 51 minutes 23 seconds West 278.75 feet), the arc length of 284.20 feet; (5) North 06 degrees 22 minutes 55 seconds West, 105.56 feet; (6) Along a circular curve to the left, having a radius of 275.00 feet and a central angle of 87 degrees 16 minutes 23 seconds (chord bearing and distance of North 50 degrees 01 minute 06 seconds West, 379.55 feet), the arc length of 418.88 feet; (7) North 03 degrees 39 minutes 18 seconds West, 50.00 feet to the southerly ultimate right-of-way line of Haas Hill Road (60 foot right-of-way); thence along said southerly ultimate right-of-way line of Haas Hill Road the following sixteen (16) courses and distances; (1) North 86 degrees 20 minutes 42 seconds East, 558.25 feet; (2) North 86 degrees 35 minutes 18 seconds East, 572.50 feet; (3) Along a circular curve to the right, having a radius of 1,155.00 feet and a central angle of 06 degrees 51 minutes 26 seconds (chord bearing and distance of South 89 degrees 58 minutes 59 seconds East, 138.15), the arc length of 138.23 feet; (4) South 86 degrees 33 minutes 16 seconds East, 348.58 feet (5) Along a circular curve to the left, having a radius of 830.00 feet and a central angle of 03 degrees 29 minutes 59 seconds (chord bearing and distance of South 88 degrees 18 minutes 16 seconds East, 50.69 feet), the arc length of 50.70 feet; (6) South 89 degrees 56 minutes 44 seconds East, 206.85 feet; (7) Along a circular curve to the right, having a radius of 755.00 feet and a central angle of 24 degrees 08 minutes 38 seconds (chord bearing and distance of South 77 degrees 58 minutes 57 seconds East, 315.80 feet), the arc length of 318.15 feet (8) South 65 degrees 54 minutes 39 seconds East, 682.47 feet; (9) Along a circular curve to the left, having a radius of 1,280.00 feet and a central angle of 02 degrees 13 minutes 29 seconds (chord bearing and distance of South 67 degrees 01 minutes 24 seconds East, 49.70 feet), the arc length of 49.70 feet; (10) South 68 degrees 08 minutes 09 seconds East, 431.15 feet, (11) Along a circular curve to the right, having a radius of 230.00 feet and a central angle of 34 degrees 33 minutes 46 seconds (chord bearing and distance of South 50 degrees 51 minutes 14 seconds East, 136.65 feet), the arc length of 138.74 feet; (12) Along a circular curve to the left, having a radius of 318.34 feet and a central angle of 29 degrees 51 minutes 07 seconds (chord bearing and distance of South 48 degrees 29 minutes 53 seconds East, 163.99 feet); the arc length

of 165.86 feet; (13) South 63 degrees 25 minutes 27 seconds East, 406.25 feet; (14) South 62 degrees 09 minutes 53 seconds East, 329.07 feet; (15) Along a circular curve to the left, having a radius of 2,130.00 feet and a central angle of 03 degrees 43 minutes 28 seconds (chord bearing and distance of South 64 degrees 01 minute 37 seconds East, 138.43 feet), the arc length of 138.46 feet; (16) South 65 degrees 53 minutes 21 seconds East, 191.84 feet to the westerly property line of lands of Ralph C. Derr; thence along said lands of Ralph C. Derr the following five (5) courses and distances; (1) South 24 degrees 44 minutes 28 seconds West, 168.94 feet; (2) South 66 degrees 31 minutes 26 seconds East 70.70 feet; (3) South 24 degrees 57 minutes 00 seconds West, 89.86 feet; (4) South 71 degrees 58 minutes 50 seconds East, 92.88 feet; (5) North 70 degrees 46 minutes 14 seconds East, 173.55 feet to the westerly property line of Lot 2 as shown on aforesaid Minor Subdivision Plan; thence along said property line of Lot 2, South 16 degrees 29 minutes 13 seconds West, 971.56 feet to the aforesaid northerly ultimate right-of-way line of S.R. 0222 (100 foot right-of-way); thence along said northerly ultimate right-of-way line of S.R. 0222, North 73 degrees 30 minutes 47 seconds West, 457.51 feet to the easterly property line of lands of Verna A. Seagreaves; thence along said lands of Verna A. Seagreaves the following three (3) courses and distances; (l) North 16 degrees 29 minutes 04 seconds East, 130.01 feet; (2) North 73 degrees 29 minutes 16 seconds West, 193.10; (3) South 03 degrees 12 minutes 45 seconds West, 134.01 feet to the aforesaid northerly ultimate right-of-way line of S.R. 0222, thence along said right-of-way line, North 73 degrees 30 minutes 00 seconds West 3717.44 feet to the point of beginning.

Together with those certain rights of ways and easements set forth in Deed dated 1/4/1985 and recorded 6/6/1986 in Deed Book 1373 page 296 and in Deed dated 8/10/1972 and recorded 8/18/1972 in Misc. Book 361 page 625.

EXHIBIT B

Form of Special Warranty Deed

[Not Yet Drafted]

EXHIBIT C

Form of Bill of Sale

KNOW ALL MEN BY THESE PRESENTS, that                                                      , a                                                              (the “Seller”), for and in consideration of the sum of Ten Dollars and other valuable consideration to it in hand paid by,                                               (the “Purchaser”), the receipt and sufficiency of which are hereby acknowledged, hereby sells, assigns, transfers and conveys unto said Purchaser any and all of Seller’s right, title and interest in and to the Personal Property, AS IS, WHERE IS, and without representation of any kind, without warranty of title or use, and without warranty, express or implied, of merchantability or fitness for a particular purpose, except as set forth in the Purchase and Sale Agreement dated as of [                            ], 2005, between Seller and Purchaser.  Terms used herein, which are not otherwise defined herein, shall have the meaning set forth in the Purchase and Sale Agreement.

TO HAVE AND TO HOLD all of said Personal Property unto Purchaser, its successors and assigns, to its own use forever.

IN WITNESS WHEREOF, Seller has executed this Bill of Sale as of the              day of                       , 2005.

	,
a
By:
Name:
Title:

EXHIBIT D

Form of Assignment and Assumption of Contracts and Intangibles

This ASSIGNMENT AND ASSUMPTION OF CONTRACTS (the “Assignment’) is made as of the              day of                   , 2005, between                                                   (the “Assignor”), and                                                                       (the “Assignee”)

For and in consideration of the sum of Ten Dollars ($10.00) and other valuable consideration to it in hand paid by Assignee to Assignor, the conveyance by Assignor to Assignee of all that certain real property commonly known as                                                           (the “Property”), and the mutual covenants herein contained, the receipt and sufficiency of the foregoing consideration being hereby acknowledged by the parties hereto, Assignor hereby assigns, transfers, sets over and conveys to Assignee all of Assignor’s right, title and interest, to the extent assignable, in, to and under the contracts set forth on the attached Schedule 1 (the “Assumed Contracts”), the Warranties and Intangibles. Terms used herein, which are not otherwise defined herein, shall have the same meaning as set forth in the Purchase and Sale Agreement dated as of                                           , 2004, by and between Assignor and Assignee.

Effective only from and after the date hereof and by acceptance hereof, Assignee assumes and agrees to be bound by and agrees to perform all of Assignor’s obligations solely as the same are set forth in writing in the Assumed Contracts.

Assignee shall indemnify and hold Assignor harmless from and against any actions, suits, proceedings or claims, and all costs and expenses (including, without limitation, reasonable attorneys’ fees incurred in connection therewith), based upon or arising out of any breach or alleged breach of any of the Assumed Contracts or out of any other statement of facts connection with the Assumed Contracts occurring or alleged to have occurred after the date hereof. Assignor shall indemnify and hold Assignee harmless from and against any actions, suits, proceedings or claims, and all costs and expenses (including, without limitation, reasonable attorneys’ fees incurred in connection therewith), based upon or arising out of any breach or alleged breach of any of the Contracts or out of any other statement of facts connected with the Contracts occurring or alleged to have occurred up to and including the date hereof.

This Assignment shall be binding upon and inure to the benefit of Assignor and Assignee and their respective heirs, executors, administrators, successors and assigns.

This Assignment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, Assignor and Assignee have each executed this Assignment as of the date first written above.

ASSIGNOR:	ASSIGNEE:
By:	By:
Name:	Name:
Title:		Title:

EXHIBIT E

Form of FIRPTA Certificate
CERTIFICATE REGARDING FOREIGN INVESTMENT
IN REAL PROPERTY TAX ACT

(ENTITY TRANSFEROR)

Section 1445 of the Internal Revenue Code provides that a transferee (purchaser) of a U.S. real property interest must withhold tax if the transferor (seller) is a foreign person.  To inform the transferee (purchaser) that withholding of tax is not required upon the disposition of a U.S. real property interest by                                                                        , a                                                               (“Transferor”) Transferor hereby certifies:

1.  Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations).

2.  Transferor’s Federal Employer Identification Number is                                                .

3.  Transferor’s office address is:                                                                                                           .

4.  The address or description of the property which is the subject matter of the disposition is                                                                             .

Transferor understands that this certification may be disclosed to the Internal Revenue Service by transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

Transferor declares that it has examined this certification and to the best of its knowledge and belief, it is true, correct and complete, and further declares that the individual executing this certification on behalf of Transferor has full authority to do so.

	, a
By:
Name:
Title:

EXHIBIT F

Form of Lease

[Not Yet Drafted]

EX-12.1

Exhibit 12.1

COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
For the Years Ended December 31, 2004, 2003 and 2002
(in thousands)

	For the Years Ended December 31,
	2004			2003			2002
Net loss before taxes	$	(28,629	)	$	(74,522	)	$	(124,319	)
Add: Fixed charges, net capitalized interest	11,520			12,805			13,335
Earnings (loss) before fixed charges	(17,109		)	(61,717		)	(110,984		)
Fixed charges:
Interest expense including amortization of debt issuance costs	$	11,520		$	12,805		$	13,335
Capitalized interest	—			—			—
Total fixed charges	11,520			12,805			13,335
Ratio of earnings to fixed charges(1)	—			—			—

⁽¹⁾For the years ended December 31, 2004, 2003 and 2002, the Company had a deficiency of earnings compared to its fixed charges of $28,629, $74,522 and $124,319, respectively.

EX-21.1

Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

NAME OF SUBSIDIARY	STATE OR OTHER JURISDICTION OF INCORPORATION
Sawtek, Inc.	Florida
Sawtek Far East, Inc.	Florida
Sawtek Korea Branch	South Korea
TriQuint Japan YK	Japan
TriQuint Shanghai Trading Company	China
Sawtek Sweden AB	Sweden
TriQuint Hungary Holding Ltd.	Hungary
Sawtek S.R.L.	Costa Rica
Sawtek Tianjin	China
TriQuint Semiconductor GmbH	Germany
TriQuint Texas General Holding Company	Delaware
TriQuint Texas Limited Holding Company	Delaware
TriQuint Semiconductor Texas, LP	Texas
TriQuint Optoelectronics, Inc.	Delaware
TriQuint Technology Holding Co.	Delaware
TriQuint International Holding Co.	Delaware
TriQuint International Holding LLC	Delaware
TriQuint de Mexico	Mexico

EX-23.1

Exhibit 23.1

Report and Consent OF Independent REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
TriQuint Semiconductor, Inc.:

The audits referred to in our report dated March 14, 2005, with respect to the consolidated financial statements of TriQuint Semiconductor, Inc. and Subsidiary, included the related financial statement schedule as of December 31, 2004, and for each of the years in the three-year period ended December 31, 2004, as contained in the annual report in Form 10-K for the year 2004. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.

We consent to the incorporation by reference in the registration statement (Nos. 33-75464, 333-02166, 333-08893, 333-08891, 333-31585, 333-39732, 333-48883, 333-66707, 333-74617, 333-81273, 333-39730, 333-61582, 333-65850, 333-89242, 333-102085, 333-105701, 333-15809 and 333-120407) on Form S-8 of our reports dated March 14, 2005, with respect to the consolidated balance sheets of TriQuint Semiconductor, Inc as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders’ equity, cash flows, and comprehensive income for each of the years in the three-year period ended December 31, 2004, and the related financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2004 and the effectiveness of internal control over financial reporting as of December 31, 2004, which reports appear in the December 31, 2004 annual report on Form 10-K of TriQuint Semiconductor.

/s/ KPMG LLP  

Portland, Oregon
March 14, 2005

EX-24.1

Exhibit 24.1

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ralph Quinsey and Raymond A. Link, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

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

	Signature		Title		Date
/s/ RALPH G. QUINSEY		President and Chief Executive Officer		March 15, 2005
Ralph G. Quinsey		(Principal Executive Officer)
/s/ RAYMOND A. LINK		Vice President, Finance and Administration,		March 15, 2005
Raymond A. Link		Chief Financial Officer and Secretary
		(Principal Financial and Accounting Officer)
/s/ STEVEN J. SHARP		Chairman of the Board		March 15, 2005
Steven J. Sharp
/s/ FRANCISCO ALVAREZ		Director		March 15, 2005
Francisco Alvarez
/s/ PAUL A. GARY		Director		March 15, 2005
Paul A. Gary
/s/ NICOLAS KAUSER		Director		March 15, 2005
Nicolas Kauser
/s/ WALDEN C. RHINES		Director		March 15, 2005
Walden C. Rhines
/s/ EDWARD F. TUCK		Director		March 15, 2005
Edward F. Tuck
/s/ WILLIS C. YOUNG		Director		March 15, 2005
Willis C. Young

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Ralph G. Quinsey, certify that:

1.     I have reviewed this annual report on Form 10-K of TriQuint Semiconductor, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ RALPH G. QUINSEY
	Ralph G. Quinsey
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: March 15, 2005

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Raymond A. Link, certify that:

1.     I have reviewed this annual report on Form 10-K of TriQuint Semiconductor, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ RAYMOND A. LINK
	Raymond A. Link
	Vice President, Finance and Administration,
	Chief Financial Officer and Secretary
	(Principal Financial and Accounting Officer)
Date: March 15, 2005

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION
1350 OF CHAPTER 63 OF TITLE 18
OF THE UNITED STATES CODE AS
ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Annual Report on Form 10-K of TriQuint Semiconductor, Inc. (“TriQuint”) for the year ended December 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (“the Report”), each of the undersigned officers of TriQuint, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1)   The Report complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of TriQuint.

The undersigned have executed this Certification effective as of March 15, 2005.

/s/ RALPH G. QUINSEY

Ralph G. Quinsey

President and Chief Executive Officer

(Principal Executive Officer)

/s/ RAYMOND A. LINK

Raymond A. Link

Vice President, Finance and Administration,

Chief Financial Officer and Secretary

(Principal Financial and Accounting Officer)