++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information contained in this prospectus supplement and the accompanying +
+prospectus is not complete and may be changed. This prospectus supplement and +
+the accompanying prospectus are not an offer to sell these securities, and +
+are not soliciting an offer to buy these securities, in any jurisdiction +
+where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
FILED PURSUANT TO RULE 424(b)(2)
REGISTRATION NO. 333-67850
Subject to Completion. Dated December 10, 2001
Preliminary Prospectus Supplement to Prospectus Dated December 7, 2001
[MICROTUNE, INC. LOGO]
6,500,000 Shares
Common Stock
We are offering 5,000,000 of the shares to be sold in the offering. The
selling stockholders identified in this prospectus supplement are offering an
additional 1,500,000 shares. We will not receive any proceeds from the sale of
the shares being sold by the selling stockholders.
Our common stock is quoted on the Nasdaq National Market under the symbol
"TUNE." The last reported sale price of our common stock on December 7, 2001
was $22.65 per share.
Investing in our common stock involves risks that are described in the "Risk
Factors" section beginning on page 5 of the accompanying prospectus.
-----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
-----------
Per
Share Total
Public offering price............................................ $ $
Underwriting discount............................................ $ $
Proceeds, before expenses, to us................................. $ $
Proceeds, before expenses, to the selling stockholders........... $ $
The underwriters may also purchase up to an additional 975,000 shares from
the selling stockholders at the public offering price, less the underwriting
discount, within 30 days from the date of this prospectus supplement to cover
over-allotments.
The underwriters expect to deliver the shares of common stock on or about
, 2001.
Joint Bookrunning Managers
JPMorgan Salomon Smith Barney
-----------------
SG Cowen Prudential Securities
The date of this prospectus supplement is , 2001.
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement is a supplement to the prospectus that is also
part of this document. This prospectus supplement and the accompanying
prospectus are part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a shelf registration process.
Under this shelf process, we and the selling stockholders may, over the two
years following the date of the accompanying prospectus, sell any combination
of securities described in the accompanying prospectus in one or more
offerings, up to a total dollar amount of $250,000,000, of which this offering
is a part. The accompanying prospectus provides you with a general description
of the securities we and the selling stockholders may offer. This prospectus
supplement provides you with specific information about the common stock we and
the selling stockholders are selling in this offering. Both this prospectus
supplement and the accompanying prospectus include important information about
us and other information you should know before investing. This prospectus
supplement also adds to, updates and changes information contained in the
accompanying prospectus. You should read both this prospectus supplement and
the accompanying prospectus, together with the additional information described
under "Incorporation by Reference," on page S-12 of this prospectus supplement,
before investing in shares of our common stock.
You should rely only on the information contained in or incorporated by
reference into this prospectus supplement and the accompanying prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference into this prospectus
supplement and the accompanying prospectus is accurate only as of its
respective date. Our business, financial condition, results of operations and
prospects may have changed since those dates.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This prospectus supplement and the accompanying prospectus, and the documents
we incorporate by reference into this prospectus supplement and the
accompanying prospectus, contain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. For this purpose, any statements contained in
this prospectus supplement and the accompanying prospectus or incorporated by
reference into this prospectus supplement and the accompanying prospectus that
are not statements of historical fact may be deemed to be forward-looking
statements. We may, in some cases, use words such as "project," "believe,"
"anticipate," "plan," "expect," "estimate," "intend," "should," "will," "could"
or "may" or other words that convey uncertainty of future events or outcomes to
identify forward-looking statements. For a discussion of important factors that
could affect our actual results or cause our actual results to differ
materially from the results anticipated by these forward-looking statements,
please refer to the section entitled "Risk Factors" beginning on page 5 of the
accompanying prospectus. These important factors also include the factors that
we identify in the documents we incorporate by reference. You should read these
risk factors and the other cautionary statements made in this prospectus
supplement, the accompanying prospectus and the documents we incorporate by
reference as being applicable to all related forward-looking statements
wherever they appear.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Prospectus Supplement Summary.............................................. S-1
The Offering............................................................... S-4
Use of Proceeds............................................................ S-5
Selling Stockholders....................................................... S-6
Capitalization............................................................. S-8
Price Range of Common Stock................................................ S-9
Underwriting............................................................... S-10
Legal Matters.............................................................. S-12
Incorporation by Reference................................................. S-12
PROSPECTUS
About this Prospectus...................................................... 1
Microtune, Inc. ........................................................... 2
Recent Developments........................................................ 3
Risk Factors............................................................... 5
Special Note Regarding Forward-Looking Information......................... 18
Ratios of Earnings to Fixed Charges........................................ 19
Use of Proceeds............................................................ 19
The Securities We May Offer................................................ 20
Selling Stockholders....................................................... 21
Description of Capital Stock............................................... 23
Description of Debt Securities............................................. 26
Description of Warrants.................................................... 32
Plan of Distribution....................................................... 34
Validity of Securities..................................................... 36
Experts.................................................................... 36
Incorporation of Certain Documents by Reference............................ 36
Where You Can Find More Information........................................ 37
PROSPECTUS SUPPLEMENT SUMMARY
The following summary contains basic information about the offering. This
summary may not contain all of the information that is important to you. You
should carefully read this entire document and the other documents we refer to
for a more complete understanding of the offering. In addition, we incorporate
important business and financial information into this prospectus supplement by
reference. You may obtain the information incorporated by reference into this
prospectus supplement without charge by following the instructions in "Where
You Can Find More Information" on page 37 of the accompanying prospectus.
Unless otherwise indicated, the information in this prospectus supplement
assumes that the underwriters' over-allotment option has not been exercised.
MICROTUNE, INC.
We are a radio frequency silicon and systems company, providing high-
performance radio frequency tuners, upstream amplifiers and transceivers to the
broadband communications markets. Using proprietary technologies and advanced
design methodologies, we have designed and developed radio frequency integrated
circuits and radio frequency systems, called modules, for a variety of
broadband communications access devices, including cable modems, PC/TVs (which
are multimedia personal computers with broadband reception capabilities), set-
top boxes, digital TVs and other consumer electronic devices. Our radio
frequency products are the gateway devices for reception of video, audio, data
and/or voice over existing broadband communications infrastructures, such as
cable and terrestrial. Our tuners receive and tune radio frequency signals,
transferring a selected signal (or channel) to the rest of the system's
electronics for further operation. Our upstream amplifiers transmit radio
frequency data from the user through the broadband system, amplifying the
signal to levels required by the network. Our transceivers, consisting of both
tuners and upstream amplifiers, enable interactivity by permitting two-way, or
bi-directional, communications. Our latest radio frequency integrated circuit
products offer a high level of integration, resulting in significant cost,
performance, size, reliability and manufacturability benefits. Our radio
frequency module products provide a complete, manufacturing-ready radio
frequency system, eliminating a customer's need for radio frequency design and
manufacturing expertise.
We are a Delaware corporation with our principal executive offices located at
2201 Tenth Street, Plano, Texas 75074. Our telephone number is (972) 673-1600.
Our fiscal year ends on December 31. We maintain a website at
www.microtune.com. The information contained on our website does not constitute
a part of this prospectus. "Microtune," "MicroTune" and the Microtune logo are
our trademarks. All other brand names and trademarks appearing in this
prospectus supplement and the accompanying prospectus are the property of their
holders.
RECENT DEVELOPMENTS
Transilica Acquisition
On November 28, 2001, we acquired Transilica Inc. Transilica was founded in
1998 and designs system-on-chip silicon products for next-generation short-
range wireless applications. The products Transilica is developing consist of
highly integrated solutions incorporating radio transceivers, digital baseband
and software on a single chip, which offer customers low-power consumption and
small form factors. Transilica's initial products will be targeted at the
Bluetooth and 802.11a standards, which are communication protocols for short-
range wireless applications. To date, Transilica's activities have consisted
primarily of product research and development. No significant revenues have
been generated from the sale of these products. Additional research and
development efforts will be required before these products will be available
for commercial use. Transilica is also capable of designing customized system-
on-chip solutions to meet a customer's specific application.
S-1
In the Transilica acquisition, we acquired all of the capital stock of
Transilica by issuing 7,206,187 shares of our common stock and assuming options
to acquire 832,125 shares of our common stock (in the aggregate, equivalent to
19.99% of our outstanding shares of common stock as of November 28, 2001). We
also agreed to pay a cash amount based on the cash on the balance sheet of
Transilica less certain liabilities at closing. The acquisition was structured
to be a tax-free reorganization under Section 368 of the Internal Revenue Code.
The acquisition agreement also required that approximately fifteen percent
(15%) of the total shares of our common stock issued in the acquisition be
placed in escrow to secure the indemnification obligations of Transilica under
the acquisition agreement. The escrow shares are to be released periodically,
subject to any escrow claims, at the end of each of the three years following
the closing. We issued the shares in the acquisition pursuant to an exemption
from registration under the Securities Act of 1933. The acquisition agreement
provides the former Transilica shareholders with the right to require us to
register the shares of our common stock that they received in the acquisition
within 20 days after the closing. Despite this registration obligation, certain
former Transilica shareholders who received shares of our common stock and who
executed lock-up agreements with us will not be able to sell their shares of
our common stock until the earlier to occur of Transilica's achievement of
certain product revenue-based milestones or February 28, 2002. After the
earlier of achievement of the milestones or February 28, 2002, the lock-up
agreements provide that each month thereafter, 10% of the shares subject to the
lock-up agreements will be released from the lock-up restrictions.
Securities Litigation
Starting on July 11, 2001, multiple purported securities fraud class action
complaints were filed in the United States District Court for the Southern
District of New York. We are aware of at least three such complaints: Berger v.
Goldman, Sachs & Co., Inc. et al.; Atlas v. Microtune et al.; and Ellis
Investments Ltd. v. Goldman, Sachs & Co., Inc. et al. The complaints are
brought purportedly on behalf of all persons who purchased our common stock
from August 4, 2000 through December 6, 2000. According to the law firm that
filed it, the Atlas complaint names as defendants Microtune, Douglas J. Bartek,
our Chairman and Chief Executive Officer, Everett Rogers, our Chief Financial
Officer and Vice President of Finance and Administration, and several
investment banking firms that served as underwriters of our initial public
offering. Microtune, Mr. Bartek and Mr. Rogers were served with notice on the
Atlas complaint on August 22, 2001; however, they have not been served
regarding the other referenced complaints. The Berger and Ellis Investment Ltd.
complaints assert claims against the underwriters only. The Atlas complaint
includes claims against J.P. Morgan Chase & Co., the parent entity of J.P.
Morgan Securities Inc., a joint bookrunning lead manager of this offering, and
SG Cowen Securities Corporation, a co-manager of this offering, that may lead
to claims for indemnification or contribution between or among such managers
and us. More such lawsuits may be filed. Among other things, the complaints
allege liability under Sections 11 and 15 of the Securities Act of 1933 and
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, on the grounds
that the registration statement for our initial public offering did not
disclose that (1) the underwriters had agreed to allow certain of their
customers to purchase shares in the offering in exchange for excess commissions
paid to the underwriters and (2) the underwriters had arranged for certain of
their customers to purchase additional shares in the aftermarket at pre-
determined prices. We are aware that similar allegations have been made in
lawsuits challenging over 180 other initial public offerings conducted in 1998,
1999 and 2000. No specific amount of damages is claimed in the three complaints
involving our initial public offering. These cases are subject to the Private
Securities Litigation Reform Act of 1995 and we expect that the cases will be
consolidated into a single action. These cases and all of the other lawsuits
filed in the Southern District of New York making similar allegations have been
coordinated before the Honorable Shira A. Scheindlin who is expected to set a
briefing schedule for motions to dismiss. We believe that the allegations
against Microtune, Inc., Mr. Bartek and Mr. Rogers are without merit. We intend
to contest them vigorously including filing a motion to dismiss these cases.
Additionally, we are unable at this time to determine whether the outcome of
the litigation will have a material impact on our results of operations or
financial condition in any future period. Furthermore, there can be no
assurances regarding the outcome of the litigation or any related claims for
indemnification or contribution between or among any of the managers and us.
S-2
Closing of a Filipino Manufacturing Facility
We currently operate two manufacturing facilities for assembly, calibration
and testing of our module products located in Manila, Philippines. The newer
manufacturing facility uses equipment in the manufacturing and testing process
that is more modern and more efficient than the other. As a result, we began
closing our older manufacturing facility during the first part of December 2001
and have started transitioning our manufacturing and testing requirements to
our newer facility. We believe our newer manufacturing facility has the
equipment and labor capacity to handle the manufacturing and testing presently
performed in our older facility. We do not expect any material delays in
implementing this transition. Our new manufacturing facility is QS-9000
qualified and ISO 9002 certified.
S-3
THE OFFERING
Common Stock offered by us................. 5,000,000 shares
Common Stock offered by selling
stockholders.............................. 1,500,000 shares
Shares outstanding after the offering...... 52,596,254 shares
Use of proceeds............................ We estimate that our net proceeds from this
offering will be approximately
$107,087,500, based on an assumed public
offering price of $22.65 per share, after
deducting underwriting discounts and
estimated offering expenses payable by us.
We intend to use these net proceeds for
working capital and other general corporate
purposes, including:
. to finance our growth;
. for capital expenditures made in the
ordinary course of business; and
. for acquisitions of businesses, products
and technologies that complement or
expand our business.
Proceeds to Selling Stockholders........... The net proceeds from the sale by the
selling stockholders of 1,500,000 shares of
common stock in the offering are estimated
to be approximately $32,276,250. We will
not receive any of these proceeds.
Risk factors............................... See "Risk Factors" and other information
included in the accompanying prospectus for
a discussion of factors you should
carefully consider before deciding to
invest in shares of our common stock.
Nasdaq National Market Symbol.............. TUNE
As of December 7, 2001, the number of shares outstanding after the offering
excludes 14,727,855 shares reserved for issuance under our stock option and
stock purchase plans, of which options to purchase 7,299,091 shares at a
weighted average option price of $3.83 have been issued.
S-4
USE OF PROCEEDS
The net proceeds from our sale of 5,000,000 shares of common stock in the
offering are estimated to be approximately $107,087,500, based on an assumed
public offering price of $22.65 per share, after deducting underwriting
discounts and estimated offering expenses payable by us. We will receive no
proceeds from the sale of our common stock by the selling stockholders.
We currently expect to use the net proceeds from the sale of our common stock
for working capital and other general corporate purposes, including:
. to finance our growth;
. for capital expenditures made in the ordinary course of business; and
. for acquisitions of businesses, products and technologies that
complement or expand our business.
Pending any specific application, we may initially invest funds in short-term
marketable securities or apply them to the reduction of short-term
indebtedness.
S-5
SELLING STOCKHOLDERS
The following table sets forth the name of each selling stockholder and its
relationship, if any, with us and:
. the number of shares of our common stock beneficially owned by each
selling stockholder as of December 7, 2001;
. the number of shares of our common stock being offered for sale by each
selling stockholder (assuming that the underwriters' over-allotment
option has not been exercised); and
. the amount and percentage of our common stock to be beneficially owned
by each selling stockholder after the sale of all shares of common stock
that each of the selling stockholders will sell hereunder (assuming that
the underwriters' over-allotment option has not been exercised).
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Except as set forth below, the entities
named in this table have sole voting and investment power with respect to all
shares of common stock shown as beneficially owned by them. The number of
outstanding shares of our common stock as of December 7, 2001 was 47,596,254.
Percentage
Shares of Percentage of Shares of of
Common Stock Common Stock Shares of Common Stock Common Stock
Beneficially Beneficially Common Stock Beneficially Beneficially
Name of Selling Owned Prior Owned Prior Offered Owned After Owned After
Stockholder(1) to Offering to Offering for Sale the Offering the Offering
--------------- ------------ ------------- ------------ ------------ ------------
HMTF Europe Fund Cayman,
L.P.................... 2,280,884 4.79 679,841 1,601,043 3.04
HMTF Europe Private Fund
Cayman, L.P............ 27,276 * 8,129 19,147 *
HM PG Europe I, C.V..... 168,515 * 50,228 118,287 *
HMEU 1-EQ Coinvestors,
L.P.................... 29,288 * 8,730 20,558 *
HMEU 1-P Coinvestors,
L.P.................... 6,059 * 1,804 4,255 *
HMEU 1-EN Coinvestors,
L.P.................... 3,897 * 1,162 2,735 *
HM 1-FOF Coinvestors
Cayman, L.P............ 217 * 61 156 *
HMTF Equity Fund
IV(1999) Cayman, L.P... 2,329,191 4.89 694,241 1,634,950 3.11
HMTF Private Equity Fund
IV (1999) Cayman, L.P.. 16,499 * 4,919 11,580 *
HM 4-EN Coinvestors
Cayman, L.P............ 6,804 * 2,028 4,776 *
HM 4-P Coinvestors
Cayman, L.P............ 1,847 * 550 1,297 *
HM 4-EQ Coinvestors
Cayman, L.P............ 38,072 * 11,347 26,725 *
Hicks, Muse PG-IV
(1999), C.V. .......... 124,004 * 36,960 87,044 *
--------- ----- --------- --------- ----
Total................. 5,032,553 10.57 1,500,000 3,532,553 6.72
========= ===== ========= ========= ====
--------
* Less than 1% of the outstanding shares of our common stock.
(1) Each of the selling stockholders listed above is an affiliate of Hicks,
Muse, Tate & Furst Incorporated, a private investment firm. As of December
7, 2001, Thomas O. Hicks, a partner of Hicks, Muse, Tate & Furst
Incorporated, directly held of record 20,150 shares of common stock and
indirectly held 17,194 shares of common stock. This indirect ownership
includes (i) 3,148 shares held of record as the trustee of certain trusts
for the benefit of Mr. Hicks' children, (ii) 794 shares held of record by
TOH, Jr. Ventures Ltd., a limited partnership whose general partner is TOH
Management Company, LLC, a limited liability company whose sole member is
Mr. Hicks, (iii) 5,954 shares held of record by TOH Investors, L.P., a
limited partnership whose general partner is TOH Management Company, LLC
and (iv) 787 shares held of record by MHH Ventures, Ltd., whose general
partner is TOH Management Company, LLC. Mr. Hicks is also the indirect
general partner of each of the selling stockholders listed above and,
accordingly may be deemed to beneficially own all or a portion of the
shares of common stock owned by those entities. In
S-6
addition, Jack D. Furst, a partner of Hicks, Muse, Tate & Furst
Incorporated, is one of our Class II Directors and, as of December 7, 2001,
did not hold of record any shares of common stock and indirectly held
20,312 shares of common stock. This indirect ownership includes (i) 4,744
shares held of record by JF Investors, L.P. a limited partnership whose
sole general partner is an entity wholly owned by Mr. Furst and (ii) 15,568
shares held of record by the JDF Family Trust, an irrevocable trust where
Mr. Furst is the trustee. Mr. Furst is also an officer of the indirect
general partner of each of the selling stockholders listed above and,
accordingly may be deemed to beneficially own all or a portion of the
shares of common stock owned by those entities. Each of Mr. Hicks and Mr.
Furst disclaims beneficial ownership of all shares not owned by each of
them of record (except to the extent of any pecuniary interest therein). In
addition, Eric Lindberg, an employee of Hicks, Muse, Tate & Furst
Incorporated, was appointed as one of our Class III Directors and a member
of our audit committee in August 2001 and, as of December 7, 2001, directly
held of record 262 shares of our common stock. Messrs. Furst and Lindberg
replaced Lawrence D. Stuart, Jr., a former partner of Hicks, Muse, Tate &
Furst Incorporated, and Philippe von Stauffenberg, an employee of Hicks,
Muse, Tate & Furst Incorporated, respectively, upon their resignation from
our board of directors in August 2001.
In January 2000, we combined with Microtune GmbH (formerly Temic Telefunken
Hochfrequenztechnik GmbH) and its wholly-owned subsidiaries and affiliated
companies, by acquiring HMTF Acquisition (Bermuda), Ltd. In connection with
this combination, we issued 2,898,602 shares of our Series E preferred
stock and a warrant to acquire 966,201 shares of our common stock to HMTF
Temic/Microtune Cayman, L.P., a Cayman Islands limited partnership and an
affiliate of Hicks, Muse, Tate & Furst Incorporated. In addition, in 1999
HMTF Temic/Microtune Cayman, L.P. purchased 833,334 shares of our Series D
preferred stock. In January 2000, we effected a 2-for-1 stock split of our
common stock. Following our stock split, HMTF Temic/Microtune Cayman, L.P.
owned 1,666,668 shares of our Series D preferred stock, 5,797,204 shares of
our Series E preferred stock, and a warrant to acquire 1,932,402 shares of
our common stock. These shares were subsequently converted or exercised
into shares of our common stock and were distributed in a pro rata
distribution without consideration to the selling stockholders listed
above.
S-7
CAPITALIZATION
The following table sets forth our unaudited capitalization as of September
30, 2001 on an actual basis, on a pro forma basis giving effect to the
acquisition of Transilica and on an as adjusted basis. The pro forma column
reflects the issuance of 7,206,187 shares of common stock in connection with
our acquisition of Transilica, which closed on November 28, 2001. The as
adjusted column gives effect to our acquisition of Transilica and our receipt
of the estimated net proceeds of $107,087,500 from the sale of 5,000,000 shares
of common stock we are offering at an assumed public offering price of
$22.65 per share (the closing price per share on December 7, 2001), after
deducting estimated underwriting discounts and commissions and estimated
offering expenses. The outstanding share information in the table below
excludes:
. 15,059,993 shares of common stock reserved for issuance under our stock
option and stock purchase plans, of which 7,023,062 shares were subject
to outstanding options at September 30, 2001; and
. 832,125 shares of common stock issuable under stock options we assumed
in the acquisition of Transilica.
September 30, 2001
----------------------------
Pro As
Actual forma adjusted
-------- -------- --------
(in thousands)
Cash and cash equivalents........................ $ 71,264 $ 75,329 $182,417
======== ======== ========
Long-term debt................................... $ -- $ -- $ --
Stockholders' equity:
Preferred Stock: $0.001 par value; authorized
shares - 25,000,000; issued, outstanding
shares - none................................. -- -- --
Common stock: $0.001 par value; authorized
shares - 150,000,000; issued and outstanding
shares - 39,967,386 actual; 47,173,573 pro
forma; and 52,173,573 as adjusted............. 40 47 52
Additional paid-in capital..................... 194,436 346,029 453,112
Due from stockholders.......................... (35) (90) (90)
Deferred stock compensation.................... (8,700) (39,600) (39,600)
Accumulated other comprehensive loss........... (988) (988) (988)
Accumulated deficit............................ (64,004) (96,404) (96,404)
-------- -------- --------
Total stockholders' equity................... 120,749 208,994 316,082
-------- -------- --------
Total capitalization......................... $120,749 $208,994 $316,082
======== ======== ========
S-8
PRICE RANGE OF COMMON STOCK
Our common stock is listed on the Nasdaq National Market and trades under the
symbol "TUNE." The following table sets forth for the periods indicated the
high and low composite per share closing sales prices as reported by the Nasdaq
National Market.
HIGH LOW
------ ------
FISCAL YEAR ENDED DECEMBER 31, 2001
Fourth quarter (as of December 7, 2001) ....................... $23.65 $10.21
Third quarter.................................................. 21.99 9.07
Second quarter................................................. 22.00 4.81
First quarter.................................................. 17.63 6.84
FISCAL YEAR ENDED DECEMBER 31, 2000
Fourth quarter ................................................ $50.25 $ 9.00
Third quarter (commencing August 7, 2000)...................... 59.25 30.13
On December 7, 2001, the last reported sale price of our common stock as
reported on the Nasdaq National Market was $22.65 per share. As of December 7,
2001, there were approximately 294 holders of record of our common stock.
S-9
UNDERWRITING
We and the selling stockholders intend to offer the shares through the
underwriters named below, for whom J.P. Morgan Securities Inc., Salomon Smith
Barney Inc., SG Cowen Securities Corporation and Prudential Securities
Incorporated are acting as representatives. Subject to the terms and conditions
described in an underwriting agreement among us, the selling stockholders and
the underwriters, we and the selling stockholders have agreed to sell to the
underwriters, and the underwriters severally have agreed to purchase from us
and the selling stockholders, the number of shares listed opposite their names
below.
Number of
Underwriter Shares
----------- ---------
J.P. Morgan Securities Inc. ..........................................
Salomon Smith Barney Inc. ............................................
SG Cowen Securities Corporation.......................................
Prudential Securities Incorporated ...................................
---------
Total............................................................... 6,500,000
=========
The underwriters have agreed to purchase all of the shares sold under the
underwriting agreement if any of these shares are purchased. If an underwriter
defaults, the underwriting agreement provides that the purchase commitments of
the nondefaulting underwriters may be increased or the underwriting agreement
may be terminated.
We and the selling stockholders have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act of
1933 or to contribute to payments the underwriters may be required to make in
respect of those liabilities.
The underwriters are offering the shares to the public, subject to prior
sale, when, as and if issued to and accepted by them, subject to approval of
legal matters by their counsel, including the validity of the shares, and other
conditions contained in the underwriting agreement, such as the receipt by the
underwriters of officers' certificates and legal opinions. The underwriters
reserve the right to withdraw, cancel or modify offers to the public and to
reject orders in whole or in part.
COMMISSIONS AND DISCOUNTS
The following table shows the public offering price, underwriting discount
and proceeds before expenses to us and to the selling stockholders. The
information assumes either no exercise or full exercise by the underwriters of
their over-allotment option.
Per Share Without Option With Option
--------- -------------- -----------
Public offering price.................... $ $ $
Underwriting discount.................... $ $ $
Proceeds, before expenses, to us......... $ $ $
Proceeds, before expenses, to the selling
stockholders............................ $ $ $
The expenses of the offering, not including the underwriting discount, are
estimated at $500,000 and are payable by us.
The underwriters are offering the shares to the public, subject to the prior
sale of the shares, when, as and if such shares are delivered to and accepted
by them. The underwriters will initially offer to sell shares to the public at
the public offering price shown on the cover page of this prospectus
supplement. The underwriters may sell shares to securities dealers at a
discount of up to $ per share from the public offering price. Any such
securities dealers may resell shares to certain other brokers or dealers at a
discount of up to $ per share from the public offering price. If all of the
shares are not sold to the public at the public offering price shown on the
cover page of this prospectus supplement, the underwriters may vary the public
offering price and other selling terms.
S-10
OVER-ALLOTMENT OPTION
The selling stockholders have granted the underwriters an option to purchase
up to 975,000 additional shares at the public offering price less the
underwriting discount. The underwriters may exercise this option for 30 days
from the date of this prospectus supplement solely to cover any over-
allotments. If the underwriters exercise this option, each will be obligated,
subject to conditions contained in the underwriting agreement, to purchase a
number of additional shares proportionate to that underwriter's initial amount
reflected in the above table.
NO SALE OF SIMILAR SECURITIES
We, our executive officers and directors and holders of 5% or greater of our
common stock have agreed, with exceptions, not to sell or transfer any common
stock for 90 days after the date of this prospectus supplement without first
obtaining the written consent of J.P. Morgan Securities Inc. Specifically, we
and these other individuals have agreed not to directly or indirectly:
. offer, pledge, announce the intention to sell, sell or contract to sell
any common stock;
. sell any option or contract to purchase any common stock;
. purchase any option or contract to sell any common stock;
. grant any option, right or warrant to purchase any common stock;
. lend or otherwise dispose of or transfer any common stock;
. request or demand that we file a registration statement related to the
common stock; or
. enter into any swap or other agreement that transfers, in whole or in
part, the economic consequences of ownership of any common stock whether
any such swap or transaction is to be settled by delivery of shares or
other securities, in cash or otherwise.
This lockup provision applies to common stock and to securities convertible
into or exchangeable or exercisable for or repayable with common stock.
QUOTATION ON THE NASDAQ NATIONAL MARKET
The shares are quoted on the Nasdaq National Market under the symbol "TUNE."
PRICE STABILIZATION; SHORT POSITIONS
Until the distribution of the shares is completed, Securities and Exchange
Commission rules may limit underwriters and selling group members from bidding
for and purchasing our common stock. However, the representatives may engage in
transactions that stabilize the price of the common stock, such as bids or
purchases to peg, fix or maintain that price.
If the underwriters create a short position in the common stock in connection
with the offering, i.e., if they sell more shares than are listed on the cover
of this prospectus, the representatives may reduce that short position by
purchasing shares in the open market. The representatives may also elect to
reduce any short position by exercising all or part of the over-allotment
option described above. Purchases of the common stock to stabilize its price or
to reduce a short position may cause the price of the common stock to be higher
than it might be in the absence of such purchases.
Neither we nor any of the underwriters makes any representation or prediction
as to the direction or magnitude of any effect that the transactions described
above may have on the price of the common stock. In addition, neither we nor
any of the underwriters makes any representation that the underwriters or the
lead managers will engage in these transactions or that these transactions,
once commenced, will not be discontinued without notice.
S-11
PASSIVE MARKET MAKING
In connection with this offering, underwriters and selling group members may
engage in passive market making transactions in the common stock on the Nasdaq
National Market in accordance with Rule 103 of Regulation M under the
Securities Exchange Act of 1934 during a period before the commencement of
offers or sales of common stock and extending through the completion of
distribution. A passive market maker must display its bid at a price not in
excess of the highest independent bid of that security. However, if all
independent bids are lowered below the passive market maker's bid, that bid
must then be lowered when specified purchase limits are exceeded.
OTHER RELATIONSHIPS
Some of the underwriters and their affiliates have engaged in, and may in the
future engage in, investment banking and other commercial dealings in the
ordinary course of business with us. They have received customary fees and
commissions for these transactions.
LEGAL MATTERS
The validity of the issuance of the common stock offered by this prospectus
supplement and the accompanying prospectus will be passed upon for us by Gray
Cary Ware & Freidenrich LLP, Austin, Texas. Certain legal matters in connection
with the offering will be passed upon for the underwriters by Vinson & Elkins
L.L.P., Dallas, Texas.
INCORPORATION BY REFERENCE
The Securities and Exchange Commission allows us to incorporate by reference
the information we file with them. This means that we can disclose important
information to you by referring you to another document filed separately with
the Commission. The information incorporated by reference is considered to be
part of this prospectus supplement and the accompanying prospectus, and
information that we file later with the Commission will automatically update
and supersede this information.
We incorporate by reference into this prospectus supplement the documents we
indicate under "Incorporation of Certain Documents by Reference" on page 36 of
the accompanying prospectus. We will provide to each person who so requests, a
copy of these documents from us, at no cost, by contacting us at the address or
telephone number provided in "Where You Can Find More Information" on page 37
of the accompanying prospectus.
You should rely only on the information incorporated by reference or provided
in this prospectus supplement and the accompanying prospectus. We have not
authorized anyone else to provide you with different information. We are not
making an offer of these securities in any jurisdiction where the offer is not
permitted. You should not assume the information in this prospectus supplement
or the accompanying prospectus is accurate as of any date other than the date
on the front of those documents.
S-12
PROSPECTUS
$250,000,000
[MICROTUNE, INC. LOGO]
Common Stock
Preferred Stock
Debt Securities
Warrants
----------------
We and selling stockholders may offer and sell from time to time, in one or
more offerings, up to $250,000,000 of any combination of the common stock,
preferred stock, debt securities or warrants we describe in this prospectus. If
we decide to offer and sell our common stock, selling stockholders may use this
prospectus to offer and sell up to 3.5 million shares of our common stock owned
by them. Before we or any selling stockholders sell any of these securities, we
will provide a supplement to this prospectus. Any prospectus supplement will
inform you about the specific terms of an offering by us or any selling
stockholders and may also add, update or change information contained in this
document. You should read this prospectus and any prospectus supplement
carefully before you decide to invest in our securities.
----------------
INVESTING IN OUR SECURITIES INVOLVES RISKS.
SEE "RISK FACTORS" ON PAGE 5.
----------------
Our common stock trades on the Nasdaq National Market under the symbol
"TUNE."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
----------------
Prospectus dated December 7, 2001.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form S-3 that we
filed with the SEC utilizing a shelf registration process. Under this shelf
registration process, we may sell any combination of the securities described
in this prospectus in one or more offerings. If we decide to offer and sell our
common stock, selling stockholders may use this prospectus to offer and sell up
to 3.5 million shares of our common stock owned by them. The maximum aggregate
dollar amount of securities that may be offered and sold by us and selling
stockholders under this prospectus is $250,000,000. We have provided to you in
this prospectus a general description of the securities we may offer. Each time
we sell our securities, or the selling stockholders sell common stock owned by
them, we or the selling stockholders will provide a prospectus supplement that
will contain specific information about the terms of that offering. For a more
complete understanding of the securities, you should refer to our registration
statement on Form S-3, of which this prospectus is a part, including its
exhibits, together with any information incorporated in this prospectus by
reference. See "Incorporation of Certain Documents By Reference." We may also
add, update or change in the prospectus supplement any of the information
contained in this prospectus.
Neither we nor the selling stockholders have authorized any dealer,
salesperson or other person to give any information or to make any
representation other than those contained or incorporated by reference in this
prospectus and any accompanying prospectus supplement. You must not rely upon
any information or representation not contained or incorporated by reference in
this prospectus or any accompanying prospectus supplement as if we had
authorized it. This prospectus and any accompanying prospectus supplement do
not constitute an offer to sell or the solicitation of an offer to buy any
securities other than the registered securities to which they relate, nor does
this prospectus and any accompanying prospectus supplement constitute an offer
to sell or the solicitation of any offer to buy securities in any jurisdiction
to any person to whom it is unlawful to make such offer or solicitation in such
jurisdiction. You should not assume this prospectus or any prospectus
supplement is correct on any date after their respective dates, even though
this prospectus or any prospectus supplement is delivered or securities are
sold on a later date.
References in this prospectus and any accompanying prospectus supplement to
the terms "we," "us," or "Microtune" or other similar terms refer to Microtune,
Inc. unless we state or the context indicates otherwise.
1
MICROTUNE, INC.
We are a radio frequency silicon and systems company, providing high-
performance radio frequency tuners, upstream amplifiers and transceivers to the
broadband communications markets. Using proprietary technologies and advanced
design methodologies, we have designed and developed radio frequency integrated
circuits and radio frequency systems, called modules, for a variety of
broadband communications access devices, including cable modems, PC/TVs (which
are multimedia personal computers with broadband reception capabilities), set-
top boxes, digital TVs and other consumer electronic devices. Our radio
frequency products are the gateway devices for reception of video, audio, data
and/or voice over existing broadband communications infrastructures, such as
cable and terrestrial. Our tuners receive and tune radio frequency signals,
transferring a selected signal (or channel) to the rest of the system's
electronics for further operation. Our upstream amplifiers transmit radio
frequency data from the user through the broadband system, amplifying the
signal to levels required by the network. Our transceivers, consisting of both
tuners and upstream amplifiers, enable interactivity by permitting two-way, or
bi- directional, communications. Our latest radio frequency integrated circuit
products offer a high level of integration, resulting in significant cost,
performance, size, reliability and manufacturability benefits. Our radio
frequency module products provide a complete, manufacturing-ready radio
frequency system, eliminating a customer's need for radio frequency design and
manufacturing expertise.
We are a Delaware corporation with our principal executive offices located
at 2201 Tenth Street, Plano, Texas 75074. Our telephone number is (972) 673-
1600. Our fiscal year ends on December 31. We maintain a website at
www.microtune.com. The reference to our website does not constitute
incorporation by reference of the information contained at this site.
Microtune, MicroTune and the Microtune logo are our trademarks. All other brand
names and trademarks appearing in this prospectus are the property of their
holders.
2
RECENT DEVELOPMENTS
Transilica Acquisition
On November 28, 2001, we completed the acquisition of Transilica Inc., a
California corporation ("Transilica"), in accordance with the Agreement and
Plan of Merger and Reorganization (the "Merger Agreement") dated as of October
28, 2001.
Under the terms of the Merger Agreement, 7,206,187 shares of Microtune
common stock and 832,125 shares of Microtune common stock issuable under
options assumed by Microtune (in the aggregate, equivalent to 19.99% of
Microtune's outstanding shares of common stock as of November 28, 2001), plus a
cash amount that is based on the cash on the balance sheet of Transilica less
certain liabilities at closing (collectively, the "Merger Consideration"), were
issued, or made available for issuance, and exchanged for all of the
outstanding capital stock of Transilica in an acquisition structured to be a
tax-free reorganization under Section 368 of the Internal Revenue Code (the
"Transilica Acquisition"). The Merger Agreement also provides that
approximately fifteen percent (15%) of the total Merger Consideration in the
form of shares of Microtune common stock are to be placed in escrow for the
purpose of securing the indemnification obligations of Transilica under the
Merger Agreement. The escrow shares are to be released periodically, subject to
any escrow claims, at the end of each of the full three years following the
closing. The shares issued by Microtune pursuant to the Merger Agreement were
issued pursuant to an exemption from registration under the Securities Act. The
Merger Agreement provides the Transilica shareholders with the right to require
Microtune to register their shares of Microtune common stock within twenty (20)
days after the closing. Despite this registration obligation, certain former
Transilica shareholders who received shares of Microtune common stock and who
executed lock-up agreements with Microtune, will not be able to sell their
shares of Microtune common stock until the earlier to occur of Transilica's
achievement of certain product revenue-based milestones or February 28, 2002.
After achievement of the milestones or February 28, 2002, the lock-up
agreements provide that each month thereafter, ten percent (10%) of the shares
subject to the lock-up agreements will be released from the lock-up
restrictions.
Concurrent with the signing of the Merger Agreement, Transilica and
Microtune entered into a Credit Agreement whereby Microtune agreed to make
unsecured loans to Transilica in an aggregate amount not exceeding five million
dollars ($5,000,000.00). Under the Credit Agreement, if Transilica's cash
balance became less than five hundred thousand dollars ($500,000.00) and
subject to certain other conditions more fully described in the Credit
Agreement, Microtune was to make advances to Transilica upon Transilica's
request. In connection with the execution of the Credit Agreement, Transilica
executed a convertible promissory note for five million dollars ($5,000,000.00)
in favor of Microtune, which provided that all outstanding amounts under the
credit facility would bear interest at the rate of 8% per annum. In the event
that the Merger Agreement were terminated prior to closing, all outstanding
amounts under the credit facility would have automatically converted into
Transilica Series B Preferred Stock at a price of $1.6026 per share. The Credit
Agreement also provided that Microtune would have the right to participate on a
pro rata basis in all future rounds of financing undertaken by Transilica.
Microtune closed the Transilica Acquisition on November 28, 2001. As of
November 28, 2001, no advances were made to Transilica by Microtune under the
Credit Agreement. Upon closing the Transilica Acquisition, Microtune had no
further obligation under the Credit Agreement and related promissory note to
make advances to Transilica.
Transilica was founded in 1998 and designs system-on-chip silicon products
for next-generation short-range wireless applications. The products Transilica
is developing consist of highly integrated solutions incorporating radio
transceivers, digital baseband and software on a single chip, which offer
customers low-power consumption and small form factors. Transilica's initial
products will be targeted at the Bluetooth and 802.11a standards, which are
communication protocols for short-range wireless applications. To date,
Transilica's activities have consisted primarily of product research and
development and no significant revenues have been earned from the sale of these
products. Additional research and development efforts will be required
3
before these products will be available for commercial use. Transilica is also
capable of designing customized system-on-chip solutions to meet a customer's
specific application.
Securities Litigation
Starting on July 11, 2001, multiple purported securities fraud class action
complaints were filed in the United States District Court for the Southern
District of New York. We are aware of at least three such complaints: Berger v.
Goldman, Sachs & Co., Inc. et al.; Atlas v. Microtune et al.; and Ellis
Investments Ltd. v. Goldman, Sachs & Co., Inc. et al. The complaints are
brought purportedly on behalf of all persons who purchased our common stock
from August 4, 2000 through December 6, 2000. According to the law firm that
filed it, the Atlas complaint names as defendants Microtune, Douglas J. Bartek,
our Chairman and Chief Executive Officer, Everett Rogers, our Chief Financial
Officer and Vice President of Finance and Administration, and several
investment banking firms that served as underwriters of our initial public
offering. Microtune, Mr. Bartek and Mr. Rogers were served with notice on the
Atlas complaint on August 22, 2001, however, they have not been served
regarding the other referenced complaints. The Berger and Ellis Investment Ltd.
complaints assert claims against the underwriters only. More such lawsuits may
be filed. Among other things, the complaints allege liability under Sections 11
and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, on the grounds that the registration statement
for our initial public offering did not disclose that: (1) the underwriters had
agreed to allow certain of their customers to purchase shares in the offering
in exchange for excess commissions paid to the underwriters; and (2) the
underwriters had arranged for certain of their customers to purchase additional
shares in the aftermarket at pre-determined prices. We are aware that similar
allegations have been made in lawsuits challenging over 180 other initial
public offerings conducted in 1998, 1999 and 2000. No specific amount of
damages is claimed in the three complaints involving our initial public
offering. These cases are subject to the Private Securities Litigation Reform
Act of 1995 and we expect that the cases will be consolidated into a single
action. These cases and all of the other lawsuits filed in the Southern
District of New York making similar allegations have been coordinated before
the Honorable Shira A. Scheindlin who is expected to set a briefing schedule
for motions to dismiss. We believe that the allegations against Microtune,
Inc., Mr. Bartek and Mr. Rogers are without merit. We intend to contest them
vigorously including filing a motion to dismiss these cases. We are unable at
this time to determine whether the outcome of the litigation will have a
material impact on our results of operations or financial condition in any
future period.
Closing of a Filipino Manufacturing Facility
Microtune currently operates two manufacturing facilities for assembly,
calibration and testing of its module products located in Manila, Philippines.
One of the two manufacturing facilities is newer than the other and uses
equipment in the manufacturing and testing process that is newer and more
efficient than the other. As a result, we intend to begin closing the older
manufacturing facility in Manila during the first part of December 2001 and to
begin transitioning our manufacturing and testing requirements to our newer
facility. We believe our newer manufacturing facility has the equipment and
labor capacity to handle the manufacturing and testing presently performed in
our older facility. We do not expect any material delays in implementing this
transition. Our new manufacturing facility is also QS-9000 qualified and ISO
9002 certified.
4
RISK FACTORS
This prospectus and each accompanying prospectus supplement contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth below and elsewhere in this prospectus.
If we are unable to migrate our customers over time from our modules using
discrete components to our radio frequency silicon products or our modules that
incorporate our radio frequency silicon products, our operating results could
be harmed.
Currently, most of our revenues are from the sale of our tuner modules using
discrete, third-party components. Our future success will depend on our ability
to successfully migrate our customers from our modules that use discrete
components to our radio frequency silicon products, or MicroModules containing
the MicroTuner and our other silicon products, by convincing leading equipment
manufacturers to select these products for design into their own products. If
we are not able to convince these manufacturers to incorporate our silicon
products our operating results could be harmed.
We have not completed our integration with Microtune KG's operations and we
may be unable to do so effectively. In addition, we may be unable to
effectively integrate operations related to the Transilica Acquisition and any
acquisition that we may complete in the future.
We combined with Microtune KG in January 2000, and we are still in the
process of integrating Microtune KG's German and Philippines operations with
ours. Integrating operations of two ongoing businesses can be difficult,
especially when they are located in different countries. In addition to
integrating the operational aspects of our two companies, we will also face
challenges coordinating and consolidating our financial reporting functions.
For example, our accounting functions utilize different software programs, and
Microtune KG's consolidated financial statements have historically been
prepared based on German generally accepted accounting principles. We may not
be able to complete this integration on a timely and cost-effective basis.
We continually evaluate potential acquisitions of complementary businesses,
products and technologies, including those that are significant in size and
scope. In pursuit of our strategy to acquire complementary businesses and
products, we entered into the Merger Agreement to acquire Transilica on October
28, 2001 and consummated this acquisition on November 28, 2001. The Transilica
Acquisition and future acquisitions may require significant capital infusions
and typically involve a number of special risks, including the inability to
obtain, or meet conditions imposed for governmental approvals for the
acquisition, the diversion of management's attention to the assimilation of the
operations and personnel of acquired businesses, the unpredictability of costs
related to the acquisition and the difficulty of integration of acquired
businesses, products, technologies and employees into our business and product
offerings. Achieving the anticipated benefits of any acquisition will depend,
in part, upon whether integration of the acquired business, products,
technology, or employees is accomplished in an efficient and effective manner,
and there can be no assurance that this will occur. The difficulties of such
integration may be increased by the necessity of coordinating geographically
disparate organizations, the complexity of the technologies being integrated,
and the necessity of integrating personnel with disparate business backgrounds
and combining different corporate cultures. For example, Transilica has
operations in Japan, Taiwan and Singapore and has a corporate culture that may
differ in certain respects from our own. Accordingly, there can be no assurance
that we can successfully integrate the business and personnel of Transilica or
any future acquisitions into our own.
The inability of management to successfully integrate any acquisition that
we may pursue, and any related diversion of management's attention, could have
a material adverse effect on our business, operating results and financial
position. Moreover, there can be no assurance that any products acquired will
gain acceptance in our markets, that we will be able to penetrate new markets
successfully or that we will obtain the anticipated or desired benefits of such
acquisitions. We acquired Transilica in part to incorporate its wireless/LAN
product
5
offerings into our product offerings. Despite our belief that Transilica's
products will be accretive and synergistic to our business, there can be no
assurance that Transilica's products will gain acceptance by our current
customers or that they will enable us to penetrate new markets. Also, acquired
products may contain defects of which we are unaware which may result in
increased and unanticipated development costs. In addition, acquisitions may
materially and adversely affect our results of operations because they may
result in significant one-time accounting charges or could result in increased
debt or contingent liabilities, adverse tax consequences, substantial
depreciation or deferred compensation charges, acquired in-process research and
development expenses, or the amortization of amounts related to deferred
compensation, and intangible assets. Any acquisition that we pursue or
consummate could result in the incurrence of debt and contingent liabilities,
goodwill and other intangibles, other acquisition-related expenses, and the
loss of key employees. Moreover, we cannot predict accounting regulations,
conventions, interpretations and related issues that may emerge in the future
which could have a material adverse effect on our business, operating results
or financial position.
We cannot assure you that we will be able to consummate any pending or
future acquisitions or that we will realize the benefits anticipated from these
acquisitions. We have limited organizational experience in acquiring and
integrating businesses, and we will need to develop the relevant skills if we
are to be successful in realizing the benefits of any future acquisitions. In
the future, we may not be able to find other suitable acquisition opportunities
that are available at attractive valuations, if at all. Even if we do find
suitable acquisition opportunities, we may not be able to consummate the
acquisitions on commercially acceptable terms. In addition, we may need to
issue equity securities that could be dilutive to our existing stockholders in
order to consummate such acquisitions.
The intensive capital and cash requirements of Transilica could have a
material adverse effect on our business, operating results, financial position
or future prospects and could cause a substantial decline in the trading price
of Microtune's common stock.
Transilica is a capital intensive business and we anticipate that Transilica
will require significant cash to fund its operations. The intensive capital and
cash requirements of Transilica could cause a drain on our cash reserves, or
could require us to access the capital markets or pursue private equity or debt
investment by outside third parties to further fund the operation of
Transilica's business. There can be no assurance that our funding of
Transilica's cash requirements will enable Transilica to meet its product
development and sales objectives. Furthermore, the intensive capital and cash
requirements of Transilica could have a material adverse effect on Microtune's
business, operating results, financial position or future prospects and could
cause a substantial decline in the trading price of Microtune's common stock.
Transilica is currently in the research and development phase of its product
development and it does not currently generate significant revenue from the
sales of its products.
Additional research and development expenditures will be necessary before
Transilica's products will be ready for commercial sale to potential customers.
There can be no assurance that if Transilica's products achieve commercial
viability, they will be accepted by our current customers or that such products
will enable us to penetrate new markets. The inability of Transilica's products
to gain acceptance with our current and potential customers could have a
material adverse effect on Microtune's business, operating results, financial
position or future prospects.
As a result of the Transilica Acquisition and any significant future
acquisitions that we complete in which a substantial amount of equity
securities of Microtune are issued, the holders of Microtune common stock will
experience immediate and substantial dilution to their percentage stockholdings
of Microtune.
Upon closing the Transilica Acquisition, Microtune issued or made available
for issuance 7,206,187 shares of Microtune common stock and 832,125 shares of
Microtune common stock issuable under options assumed by Microtune (in the
aggregate, equivalent to 19.99% of Microtune's outstanding shares of common
stock as of November 28, 2001) to the shareholders of Transilica. Upon the
issuance of this stock and the assumption of such options, the holdings of the
current stockholders of Microtune were substantially diluted. The issuance and
registration by Microtune of shares of its common stock in any acquisition may
cause the price of our common
6
stock to decline. A decline in the price of our common stock could also
negatively affect our ability to pursue future acquisitions, or cause future
acquisitions to be more costly.
As a result of the Microtune KG acquisition, we have recorded $36.3 million
of goodwill and acquired intangibles which will be amortized over one to five
years.
This amortization, if continued, would increase our net loss or decrease our
net income by approximately $7.1 million in each of the years 2001 through
2004. However, in June 2001, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards ("SFAS") No. 141, Business
Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for
fiscal years beginning after December 15, 2001. Under the new rules, the
pooling-of-interests method of accounting for business combinations has been
eliminated. Also, the criteria for recognizing acquired intangible assets apart
from goodwill has been changed, and acquired goodwill and intangible assets
recorded having indefinite lives will no longer be amortized, but will be
subject to annual impairment tests in accordance with SFAS No. 141 and SFAS No.
142. Other acquired intangible assets will continue to be amortized over their
useful lives. We will apply the new rules on accounting for goodwill and other
intangible assets recorded as a result of the Microtune KG acquisition
beginning in the first quarter of 2002. During 2002, we will perform the first
of the required impairment tests of goodwill and indefinite lived intangible
assets as of January 1, 2002. We have not yet determined what the effect of
these tests will be on our earnings or financial position. If our investment is
subject to earlier than expected write-offs, our net income or net loss in any
given period could be lower than anticipated and the market price of our stock
could decline.
We are dependent upon third parties, some of whom compete with us, for the
supply of components for our module manufacturing. Our failure to obtain
components for our module manufacturing would seriously harm our ability to
ship modules to our customers in a timely manner.
Many of the components for our modules are sole-sourced, meaning that we
depend upon one supplier for a specific component. At times we have experienced
significant difficulties in obtaining an adequate supply of components
necessary for our manufacturing operations, which have on occasion prevented us
from delivering radio frequency products to our customers in a timely manner.
For example, in 2000, we did not receive our expected allocation of components
from several significant sole-source suppliers which constrained our ability to
meet customer demand. Failure to meet customer demand can result in customers
selecting competitor products. We are not able to quantify the amount of lost
revenues due to our failure to satisfy customer demand, but we believe the loss
of revenue may have been material in 2000, and may be material in the future.
We may experience similar shortages of components in the future.
We usually do not have long-term supply agreements with our suppliers and
instead obtain components on a purchase order basis. Our suppliers typically
have no obligation to supply products to us for any specific period, in any
specific quantity or at any specific price, except as set forth in a particular
purchase order. Our requirements often represent a small portion of the total
production capacity of our suppliers, and our suppliers may reallocate capacity
to other customers even during periods of high demand for our radio frequency
products. In addition, some of our suppliers offer or may offer products that
compete with our radio frequency products. As a result, these suppliers may
preferentially allocate their components to in-house or third party
manufacturers, rather than us.
If our suppliers were to become unable or unwilling to continue
manufacturing or supplying the components that we utilize in our radio
frequency products, our business would be seriously harmed. As a result, we
would have to identify and qualify substitute suppliers or design around the
component. This would be time-consuming and difficult, and may result in
unforeseen manufacturing and operations problems. This may also require our
customers to requalify our parts for their products, which may be a lengthy
process. The loss of a significant supplier or the inability of a supplier to
meet performance and quality specifications or delivery schedules could impede
our ability to meet customer demand for timeliness, performance and quality,
which could harm our reputation and our business.
If we are unable to develop and introduce new radio frequency products
successfully and in a cost-effective and timely manner or to achieve market
acceptance of our new products, our operating results would be substantially
harmed.
7
Our future success depends on our ability to develop new radio frequency
products for existing and new markets, introduce these products in a cost-
effective and timely manner, meet customer specifications and convince leading
equipment manufacturers to select these products for design into their own new
products. Our quarterly results in the past have been, and are expected in the
future to continue to be, dependent on the introduction and market acceptance
of a relatively small number of new products and the timely completion and
delivery of those products to our customers. For example, we believe that
market acceptance of our radio frequency integrated circuits for the cable
modem market will be limited until the time that we introduce radio frequency
integrated circuits with the power requirements that conform to the evolving
specifications of some cable modem manufacturers.
The development of new radio frequency products is highly complex, and from
time to time we have experienced delays in completing the development and
introduction of new products. In addition, some of our new product development
efforts are focused on producing silicon products utilizing architectures and
technologies with which we have no experience and delivering performance
characteristics such as low power consumption at levels that we have not
previously achieved. If we are not able to develop and introduce these new
products successfully and in a cost-effective and timely manner, we will not be
able to penetrate our target markets successfully and our operating results
would be substantially harmed.
We face intense competition in the broadband communications and radio
frequency tuner markets, which could reduce our market share in existing
markets and affect our ability to enter new markets.
The broadband communications and radio frequency tuner markets are intensely
competitive. We expect competition to continue to increase as industry
standards become well known and as other competitors enter our target markets.
We compete with, or may in the future compete with, a number of major domestic
and international suppliers of integrated circuit and system modules in the
cable modem, PC/TV, set-top box, cable telephony, digital TV and automotive
markets. We compete primarily with tuner manufacturers such as Alps, Panasonic,
Philips Electronics, Samsung and Thomson, with semiconductor companies such as
Anadigics, Analog Devices, Broadcom and Maxim, and potentially with companies
such as Conexant and Silicon Wave. Conexant and Silicon Wave have announced
silicon tuner products that are competive with our tuner products. Among other
things, several of our competitors have broader product and service offerings
and could bundle their competitive tuner products with other products and
services they offer. This competition has resulted and may continue to result
in declining average selling prices for our radio frequency products.
Many of our current and potential competitors have advantages over us,
including:
. longer operating histories and presence in key markets;
. greater name recognition;
. access to larger customer bases;
. significantly greater financial, sales and marketing, manufacturing,
distribution, technical and other resources;
. relationships with potential customers as a result of the sales of other
components, which relationships our competitors can leverage into sales
of products competitive with our radio frequency products; and
. broader product and service offerings that may allow them to compete
effectively by bundling their products.
As a result, our competitors may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements and may be able to
devote greater resources to the development, promotion and sale of their
products.
Consolidation by industry participants, including in some cases,
acquisitions of some of our customers or suppliers by our competitors, or
acquisitions of our competitors by our customers or suppliers, could create
entities with increased market share, customer base, technology and marketing
expertise in markets in which we compete. In fact, some of our suppliers offer
or may offer products that compete with our radio frequency products. These
developments may significantly and adversely affect our current markets, the
markets we are seeking to serve and our ability to compete successfully in
those markets, thereby harming our results of operations.
8
The average selling price of our products will likely decrease over time. If
the selling price reductions are greater than we expect, our operating results
will be harmed.
Historically, the average selling price of our products has decreased over
the products' lives. In addition, as the markets for radio frequency integrated
circuit products and transceivers mature, we believe that it is likely that the
average unit prices of our radio frequency products will decrease in response
to competitive pricing pressures, increased sales discounts, new product
introductions and product bundling. To offset these decreases, we rely
primarily on achieving yield improvements and other cost reductions for
existing products and on introducing new products that can often be sold at
higher average selling prices.
Although we will seek to increase the sales of our higher margin products,
our sales, product and process development efforts may not be successful. Our
new products or processes may not achieve market acceptance. To the extent we
are unable to reduce costs or sell our higher margin products, our results of
operations would suffer.
We expect our quarterly operating results to continue to fluctuate.
Our quarterly results of operations have fluctuated significantly in the
past and may fluctuate significantly in the future due to a number of factors,
many of which are not in our control. These factors include:
. timing, cancellation and rescheduling of significant customer orders,
which result in revenues being shifted from one quarter to another;
. the ability of our customers to procure the necessary components for
their end-products that utilize our radio frequency tuners to conduct
their operations as planned for any quarter;
. pricing concessions on volume sales to particular customers for
established time frames;
. slowdowns in customer demand and related industry-wide increases in
inventories;
. our inability to predict our customers' demand for our products;
. changes in our product and customer mix between quarters;
. labor disputes at our manufacturing facilities in the Philippines, which
may cause temporary slowdowns or shutdowns of operations; and
. quality problems with our radio frequency tuners that result in
significant returns.
Our manufacturing operations could be adversely impacted and our financial
performance harmed if we fail to successfully transition manufacturing
operations from our union facility to our newer facility.
Microtune currently operates two manufacturing facilities in Manila,
Philippines for the assembly, calibration and testing of its module products.
One of the two manufacturing facilities is newer than the other and uses newer
and more efficient equipment in the manufacturing and testing process. As a
result, we intend to begin closing the older manufacturing facility in Manila
during the first part of December 2001 and to begin transitioning our
manufacturing and testing requirements to our newer facility. We believe our
newer manufacturing facility has the equipment and labor capacity to handle the
manufacturing and testing presently performed in our older facility. If we are
unable to successfully transition the manufacturing operations of our older
union facility to our newer facility, we may not meet our manufacturing and
testing requirements which could cause a significant delay in our ability to
deliver our products. Any delay caused by such a disruption could require us to
seek an alternate manufacturer at increased expense and cost. As a result, a
disruption or delay in the transition from our older facility to our newer
facility could have a material negative impact on our business operations and
our financial results.
Our dependence on a single manufacturing facility could jeopardize our
operations.
Upon closing of our older manufacturing facility in Manila, Philippines, our
manufacturing operations will be conducted at a single, newer facility in
Manila, Philippines. Our reliance on a single manufacturing facility exposes us
to higher manufacturing risks, which may include risks caused by labor
disputes, terrorism, process
9
abnormalities, human error, theft, government intervention or a natural
disaster such as a fire, earthquake or flood. As a result of our dependence on
a single manufacturing facility, and if we encounter any significant delays or
disruptions, we may not be able to meet our manufacturing and testing
requirements which could cause a significant delay in our ability to deliver
our products. Any delay caused by such a disruption could require us to seek an
alternate manufacturer at increased expense and cost. As a result, any
disruption or delay in procuring an alternate manufacturing facility could have
a negative impact on our business operations and our financial results.
We believe that transitioning our silicon products to higher performance
process technologies will be important to our future competitive position. If
we fail to make this transition efficiently, our competitive position could be
seriously harmed.
We continually evaluate the benefits, on a product-by-product basis, of
migrating to higher performance process technologies in order to produce more
efficient and higher performance integrated circuits. We believe this migration
is required to remain competitive. Other companies in the industry have
experienced difficulty in migrating to new process technologies and,
consequently, have suffered reduced yields, delays in product deliveries and
increased expense levels. We may experience similar difficulties.
Moreover, we are dependent on our relationships with foundries to
successfully migrate to higher performance processes. Our foundry suppliers may
not make higher performance process technologies available to us on a timely or
cost-effective basis, if at all. If our foundry suppliers do not make higher
performance process technologies available to us on a timely or cost-effective
basis or if we experience difficulties in migrating to these advanced
processes, our competitive position and business prospects could be seriously
harmed.
Because we depend on a few significant customers for a substantial portion
of our revenues, the loss of a key customer could seriously harm our business.
We have derived a substantial portion of our revenues from sales to a
relatively small number of customers. As a result, the loss of any significant
customer could significantly harm our revenues. Sales to DaimlerChrysler
accounted for approximately 19% of our consolidated net revenues for the year
ended December 31, 2000 and 22% of consolidated net revenues for the nine
months ended September 30, 2001. Sales to our twenty largest customers,
including sales to their respective manufacturing subcontractors, accounted for
approximately 77% of our total sales for the year ended December 31, 2000 and
88% of our total sales for the three months ended September 30, 2001. We
believe that our future operating results will continue to depend on the
success of our largest customers and on our ability to sell existing and new
products to these customers in significant quantities. The loss of a key
customer or a reduction in our sales to any key customer could harm our
revenues and consequently our financial condition.
If we are unable to continue to sell existing and new products to our key
customers in significant quantities or to attract new significant customers,
our future operating results could be harmed.
We may not be able to maintain or increase sales to our key customers or to
attract new significant customers for a variety of reasons, including the
following:
. most of our customers can stop purchasing our radio frequency products
with limited notice to us without incurring any significant contractual
penalty;
. most of our customers typically buy our radio frequency products through
a purchase order, which does not require them to purchase a minimum
amount of our radio frequency products;
. many of our customers and potential customers have pre-existing
relationships with our current or potential competitors, which may
affect their decision to purchase our radio frequency products;
. some of our customers or potential customers offer or may offer products
that compete with our radio frequency products; and
. our longstanding relationships with some of our larger customers may
also deter other potential customers who compete with these customers
from buying our radio frequency products.
10
If we do not maintain or increase sales to existing customers or attract
significant new customers, our revenues would diminish and consequently our
business would be harmed.
The sales cycle for our radio frequency products is long, and we may incur
substantial non-recoverable expenses and devote significant resources to sales
that may not occur when anticipated or at all.
Our customers typically conduct significant evaluation, testing,
implementation and acceptance procedures before they purchase our radio
frequency products. As a result, we may expend significant financial and other
resources to develop customer relationships before we recognize any revenues
from these relationships, and we may never recognize any revenues from these
efforts. Our customers' evaluation processes are frequently lengthy and may
range from three months to one year or more. In many situations, our customers
design their products to specifically incorporate our radio frequency
products, and our radio frequency products must be designed to meet their
stringent specifications. This process can be complex and may require
significant engineering, sales, marketing and management efforts on our part.
This process becomes more complex if we simultaneously qualify our products
with multiple customers.
Uncertainties involving the ordering and shipment of our radio frequency
products could harm our business.
Our sales are typically made pursuant to individual purchase orders, and we
generally do not have long-term supply arrangements with our customers,
including our most significant customers in terms of volume of sales. Our
sales orders typically provide that our customers may cancel orders until 90
days prior to the shipping date and may reschedule shipments up to 30 days
prior to the shipping date; however, in the past, we have permitted customers
to cancel orders less than 90 days before the expected date of shipment, in
many cases with little or no penalty. Moreover, we routinely manufacture or
purchase inventory based on estimates of customer demand for our radio
frequency products, which demand is difficult to predict. The cancellation or
deferral of product orders, the return of previously sold products or
overproduction due to the failure of anticipated orders to materialize could
result in our holding excess or obsolete inventory that could substantially
harm our business, financial condition and results of operations. In addition,
our inability to produce and ship radio frequency products to our customers in
a timely manner could harm our reputation and damage our relationships with
our customers.
We customize a substantial portion of our radio frequency products to
address our customers' specific radio frequency needs. If we do not sell our
customer-specific products in large volumes, we may be unable to cover our
fixed costs or may be left with substantial unsaleable inventory.
We manufacture a substantial portion of our radio frequency 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 that will result in sufficient volumes to enable
us to achieve manufacturing efficiencies. Because customer-specific radio
frequency products are developed for unique applications, we expect that some
of our current and future customer-specific radio frequency products may never
be produced in volume and may impair our ability to cover our fixed
manufacturing costs. In addition, if our customers fail to purchase these
customized radio frequency products from us, we risk having substantial
unsaleable inventory. If we have substantial unsaleable inventory, our
financial condition would be harmed.
We primarily depend on a single third-party wafer foundry to manufacture
all of our integrated circuit products, which reduces our control over the
integrated circuit manufacturing process and could increase costs and decrease
availability of our integrated circuit products.
We do not own or operate a semiconductor fabrication facility. We primarily
rely on IBM, an outside foundry, to produce most of our integrated circuit
radio frequency products, although we are in the process of qualifying x-FAB
for manufacturing our newer integrated circuit products. We do not have a
long-term supply agreement with IBM and instead obtain manufacturing services
on a purchase order basis. IBM has no obligation to supply products to us for
any specific period, in any specific quantity or at any specific price, except
as set forth in a particular purchase order. Our requirements represent a
small portion of the total
11
production capacity of this foundry, and IBM may reallocate capacity to other
customers even during periods of high demand for our integrated circuits. If
IBM were to become unable or unwilling to continue manufacturing our
integrated circuits, our business would be seriously harmed. As a result, we
would have to identify and qualify substitute foundries, which would be time
consuming and difficult, resulting in unforeseen manufacturing and operations
problems. In addition, if competition for foundry capacity increases, our
product costs may increase, and we may be required to pay significant amounts
to secure access to manufacturing services. If we do not qualify or receive
supplies from additional foundries, including x-FAB, we may be exposed to
increased risk of capacity shortages due to our dependence on IBM.
We depend on a single third-party subcontractor for integrated circuit
packaging, which reduces our control over the integrated circuit packaging
process and could increase costs and decrease availability of our integrated
circuit products.
Our integrated circuit products are packaged by a sole independent
subcontractor, Amkor, using facilities located in South Korea. We do not have
long-term agreements with Amkor and typically obtain services from it on a
purchase order basis. Our reliance on Amkor involves risks such as reduced
control over delivery schedules, quality assurance and costs. These risks
could result in product shortages or increase our costs of packaging our
products. If Amkor is unable or unwilling to continue to provide packaging
services of acceptable quality, at acceptable costs and in a timely manner,
our business would be seriously harmed. We would also have to identify and
qualify substitute subcontractors, which could be time consuming and difficult
and may result in unforeseen operations problems.
Our inability to maintain or grow revenues from international sales could
harm our financial results.
For the nine months ended September 30, 2001, 55% of our net revenues were
from sales outside of North America. We plan to increase our international
sales activities by hiring additional international sales personnel. Our
international sales will be limited if we cannot do so. Even if we are able to
expand our international operations, we may not succeed in maintaining or
increasing international market demand for our products.
Currency fluctuations related to our international operations could harm
our financial results.
A significant portion of our international revenues and expenses are
denominated in foreign currencies. Accordingly, in the past, we have
experienced significant fluctuations in our financial results due to changing
exchange rates rather than operational changes. For example, in the nine
months ended September 30, 2001, we recognized a foreign currency exchange
loss of approximately $1.2 million or approximately 7% of the net loss for the
period. We expect currency fluctuations to continue, which may significantly
impact our financial results in the future. We may choose to engage in
currency hedging activities to reduce these fluctuations.
Our international operations, including our operations in Germany, the
Philippines, Hong Kong, Taiwan and Korea, may be negatively affected by
actions taken or events that occur in these countries.
We currently have facilities and suppliers located outside of the U.S.,
including research and development operations in Ingolstadt, Germany, two
manufacturing facilities in Manila, Philippines, and sales offices in Hong
Kong, Taiwan and Korea. Substantially all of our suppliers are located outside
the U.S., and substantially all of our products are manufactured outside the
U.S. As a result, our operations are affected by the local conditions in those
countries, as well as actions taken by the governments of those countries. For
example, if the Philippines government enacts restrictive laws or regulations,
or increases taxes paid by manufacturing operations in that country, the cost
of manufacturing our products in Manila could increase substantially, causing
a decrease in our gross margins and profitability. In addition, if the U.S.
imposes significant import restrictions on our products, our ability to import
our products into the U.S. from our international manufacturing and packaging
facilities could be diminished or eliminated. Local economic and political
instability in areas in the Far East, in particular in the Philippines where
there has been political instability in the past, could result in unpleasant
or intolerable conditions for our workers, and ultimately could result in a
shutdown of our facilities.
12
International operations that we may develop or acquire in the future may
subject us to additional business risks, including political instability, and
changing or conflicting laws, regulations and tax systems.
We may develop or acquire additional international operations in Europe and
the Pacific Rim region. International expansion or acquisitions, and any
subsequent international operations, could be affected by the local conditions
in those countries, as well as actions taken by the governments of those
countries. To expand our operations internationally, we will have to comply
with the laws and regulations of each country in which we conduct business. For
example, if a foreign government enacts restrictive laws or regulations, or
increases taxes paid by manufacturing operations in that country, the cost of
manufacturing our products in that country could increase substantially,
causing a decrease in our gross margins and profitability. We cannot assure you
that we will be successful in obtaining any necessary regulatory approvals, or
in complying with applicable regulations in those countries. Furthermore, even
if such approvals are obtained or such regulations are complied with, we cannot
assure you that we will be able to continue to comply with these regulations.
Our success could be jeopardized if key personnel leave.
Our future success depends largely upon the continued service of our
executive officers and other key management and technical personnel. Our
success also depends on our ability to continue to attract, retain and motivate
qualified personnel. Our personnel represent a significant asset as the source
of our technological and product innovations. The competition for qualified
personnel is intense in the radio frequency silicon and radio frequency systems
industries. We cannot assure you that we will be able to continue to attract
and retain qualified management, technical and other personnel necessary for
the design, development, manufacture and sale of our radio frequency products.
We may have difficulty attracting and retaining key personnel particularly
during periods of poor operating performance. The loss of the services of one
or more of our key employees or our inability to attract, retain and motivate
qualified personnel could harm our business.
We must manage our growth.
If we fail to manage our growth, our reputation and results of operations
could be harmed. Our total number of employees has grown from 149 as of
September 30, 2000 to 179 as of September 30, 2001, excluding manufacturing
personnel in Manila, Philippines. In addition, as of September 30, 2001, we had
1,127 manufacturing personnel in the Philippines. The growth has placed, and is
expected to continue to place, significant demands on our personnel, management
and other resources. We must continue to improve our operational, financial and
management information systems to keep pace with the growth of our business.
Our business may be harmed if we fail to protect our proprietary technology.
We rely on a combination of patents, trademarks, copyrights, trade secret
laws, confidentiality procedures and licensing arrangements to protect our
intellectual property rights. We currently have patents issued and pending in
the U.S. and in foreign countries. We intend to seek further U.S and
international patents on our technology. We cannot be certain that patents will
be issued from any of our pending applications, that patents will be issued in
all countries where our products can be sold or that any claims will be 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, including various
countries in Asia, 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.
Despite our efforts and procedures to protect our intellectual property
through the prosecution of patents, trademarks, copyrights and trade secrets
and other methods, we cannot assure you that our current intellectual property
or any intellectual property we may acquire through acquisitions or by other
means will be free from third party claims which may be valid. In connection
with contemplated acquisitions, including the Transilica
13
Acquisition, we conduct due diligence investigations of the intellectual
property of these targeted companies for the purpose of assessing the
protection efforts by these companies on their respective intellectual
property. We cannot assure you that our investigatory efforts will uncover any
defects related to the protection of intellectual property we may acquire. As a
result, intellectual property we acquire, including the intellectual property
we acquire in the Transilica Acquisition, may not be free from third party
claims. Any third party claims may lead to costly and time consuming litigation
which could have a material adverse effect on our business and financial
position.
Our efforts to protect our intellectual property may cause us to become
involved in costly and lengthy litigation which could seriously harm our
business.
We may become involved in litigation in the future to protect our
intellectual property or defend allegations of infringement asserted by others.
Legal proceedings could subject us to significant liability for damages or
invalidate our proprietary rights. Any litigation, regardless of its outcome,
would likely be time consuming and expensive to resolve and would divert
management's time and attention. Any potential intellectual property litigation
also could force us to take specific actions, including:
. ceasing the sale of our products that use the challenged intellectual
property;
. obtaining from the owner of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not be
available on reasonable terms, or at all; or
. redesigning those products that use infringing intellectual property.
As a result, the expense associated with intellectual property litigation or
management's diversion from daily operations of our business caused by any
intellectual property litigation may have a negative impact on our business and
our financial results.
We are the target of several securities fraud class action complaints and
are at risk of securities class action litigation. This could result in
substantial costs to us, drain our resources and divert our management's
attention.
Beginning July 11, 2001, multiple securities fraud class action complaints
were filed in the United States District Court for the Southern District of New
York. We are aware of at least three such complaints: Berger v. Goldman, Sachs
& Co., Inc. et al (S.D.N.Y. July 25, 2001), Atlas v. Microtune et al (S.D.N.Y.
Aug. 7, 2001) and Ellis Investment Ltd. v. Goldman, Sachs & Co., Inc. et al
(S.D.N.Y. August 7, 2001). Purportedly, the complaints are brought on behalf of
all persons who purchased our common stock from August 4, 2000 through December
6, 2000. According to the law firm that filed it, the Atlas complaint names as
defendants Microtune, Douglas J. Bartek, our Chairman and Chief Executive
Officer, Everett ("Buddy") Rogers, our Chief Financial Officer and Vice
President of Finance and Administration, and several investment banking firms
that served as underwriters of our initial public offering. Microtune, Mr.
Bartek and Mr. Rogers were served with notice on the Atlas complaint on August
22, 2001, however, they have not been served on the other referenced
complaints. The Berger and Ellis Investment Ltd. complaints assert claims
against the underwriters only. More such lawsuits may be filed. Among other
things, the complaints allege liability under the federal securities laws as
further set forth in "Recent Developments" on the grounds that the registration
statement for the initial public offering did not disclose that: (1) the
underwriters had agreed to allow certain customers to purchase shares in the
offering in exchange for excess commissions paid to the underwriters; and (2)
the underwriters had arranged for certain customers to purchase additional
shares in the aftermarket at pre-determined prices. We are aware that similar
allegations have been made in lawsuits challenging over 180 other initial
public offerings conducted in 1998, 1999 and 2000. No specific amount of
damages is claimed in the three complaints involving our initial public
offering. These cases are subject to the Private Securities Litigation Reform
Act of 1995 and we expect that the cases will be consolidated into a single
action. These cases and all of the other lawsuits filed in the Southern
District of New York making similar allegations have been coordinated before
the Honorable Shira A. Scheindlin who is expected to set a briefing schedule
for motions to dismiss. We believe that the allegations against Microtune, Mr.
Bartek and Mr. Rogers are without merit. We intend to contest them vigorously
including filing a motion to dismiss these cases. We are unable at this time to
determine whether the outcome of the litigation will have a material impact on
our results of operations or financial condition in any future period.
14
Our ability to sell our radio frequency products may suffer if any
outstanding claims of intellectual property infringement against us or one of
our customers is valid, if any other third party claims that we or our
customers infringe on their intellectual property or if any of our issued
patents are proven to be invalid.
The electronics industry is characterized by vigorous protection and pursuit
of intellectual property rights and positions, which have resulted in
significant and often protracted and expensive litigation. In addition, our
customers may be subject to infringement claims for products incorporating our
radio frequency products. If any claims of infringement are made against any of
our customers, our customers may seek to involve us in the infringement claim
and request indemnification from us. For example, we could be notified of a
claim against one of our customers for which the customer would make a claim
for indemnification from us. If the claim resulted in an adverse result for our
customer, it may reduce or completely eliminate marketing of its infringing
product, which would decrease sales of our radio frequency products to this
customer. Further, if our customer prevailed in its claim for indemnification
against us, or if we were found to infringe on any other third-party
intellectual property, we could be required to:
. pay substantial damages such as royalties on our historical and future
product sales;
. indemnify our customers for their legal fees and damages paid;
. stop manufacturing, using and selling the infringing products;
. expend significant resources to develop non-infringing technology;
. discontinue the use of some of our processes; or
. obtain licenses to the technology.
We may be unsuccessful in developing noninfringing products or negotiating
licenses upon reasonable terms. These problems might not be resolved in time to
avoid harming our results of operations.
Furthermore, we have initiated, and may initiate in the future, claims or
litigation against third parties for infringement of our proprietary rights or
to establish the validity of our proprietary rights. On January 24, 2001, we
filed a lawsuit alleging patent infringement in the United States Court for the
Eastern District of Texas, Sherman Division, against Broadcom Corporation. The
lawsuit is in the initial phases of discovery and its outcome is uncertain. If
we are unsuccessful in this litigation or other similar claims, then Broadcom
and others will be able to compete directly against us, which would materially
adversely effect our ability to sell our products and grow our business. Any
current or future litigation by or against us or one of our customers 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.
Our customers' products are subject to governmental regulation.
Governmental regulation could place constraints on our customers and
consequently minimize their demand for our radio frequency products. The
Federal Communications Commission, or FCC, has broad jurisdiction over several
of our target markets in the U.S. Similar governmental agencies regulate our
target markets in other countries. Although our products are not directly
subject to current regulations of the FCC or any other federal or state
communications regulatory agency, much of the equipment into which our products
are incorporated is subject to direct government regulation. Accordingly, the
effects of regulation on our customers or the industries in which they operate
may, in turn, impede sales of our products. For example, demand for our radio
frequency products will decrease if equipment incorporating our products fails
to comply with FCC emissions specifications.
You may not be able to sell your securities at or above the price you paid.
We may determine the public offering price of the securities offered under
this prospectus through negotiations with third parties such as underwriters,
and this price may not be indicative of the prices that will
15
prevail in the trading market. The market price of our securities may fluctuate
significantly in response to a number of factors, some of which are beyond our
control, including:
. changes in financial estimates and recommendations by securities
analysts;
. changes in market valuations or the financial performance of other
companies supplying radio frequency integrated circuits and tuners;
. announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments; or
. fluctuations in stock market prices and volumes, which are particularly
common among the securities of technology companies.
As a result, you may not be able to sell your securities at or above the
price you paid.
We may be unable to obtain the capital required to grow our business.
From time to time, we may need to raise funds to meet our working capital
and capital expenditure needs through the sale of securities under this
prospectus or through other financing alternatives. We cannot be certain that
we would be able to obtain additional financing on favorable terms, if at all.
Our capital requirements depend upon several factors, including the rate of
market acceptance of our products, our ability to expand our customer base, our
level of expenditures for sales and marketing, the cost of product and service
upgrades and other factors. If our capital requirements vary materially from
those currently planned, we may require additional financing sooner than
anticipated. Further, if we issue equity securities, stockholders will
experience additional dilution and the new equity securities may have rights,
preferences or privileges senior to those of existing holders of common stock.
If we issue debt securities, the debt securities will have rights senior to
those of existing holders of equity securities generally. If we cannot raise
funds, if needed, on acceptable terms, we may not be able to develop our
products and services, take advantage of future opportunities or respond to
competitive pressures or unanticipated requirements, any of which could harm
our ability to grow our business.
Future sales of our securities or the expectation of or uncertainty about
those sales may cause our stock price to decline.
The market price of our common stock or any other securities that we issue
could decline as a result of the registration or sale of substantial amounts of
our securities, including common stock, in the public market or to private
investors, or the expectation or uncertainty that those sales could occur.
These sales or the possibility that they may occur also could also make it more
difficult for us to raise funds through future offerings of securities.
Provisions in our charter documents and Delaware law may deter takeover
efforts that you may feel would be beneficial to you.
Several provisions of our amended and restated certificate of incorporation
and Bylaws may discourage, delay or prevent a merger or acquisition that you
may consider favorable and therefore may harm our stock price. Those provisions
include:
. authorizing the issuance of "blank check" preferred stock;
. providing for a classified board of directors with staggered, three-year
terms;
. prohibiting cumulative voting in the election of directors;
. limiting the persons who may call special meetings of the board or the
stockholders;
. prohibiting stockholder action by written consent;
. establishing advance notice requirements for nominations for election to
the board of directors or for proposing matters that can be acted on by
stockholders at stockholder meetings; and
16
. establishing super-majority voting requirements in some instances.
Management will have broad discretion in using the proceeds of any offering
of our securities.
We need to retain flexibility to respond to factors affecting our business.
Accordingly, our management will retain broad discretion as to the allocation
of the proceeds of any offering of our securities and may use the proceeds in a
manner with which you may not agree. If our management does not effectively use
the proceeds from any offering of our securities, we may not be able to operate
and grow our business successfully.
If we do not anticipate and adapt to evolving industry standards in the
radio frequency tuner and broadband communications markets, or if industry
standards develop more slowly than expected, our products could become obsolete
and we could lose market share.
Products for broadband communications applications generally are based on
industry standards that are continuously evolving. In some cases, the
development of these standards takes longer than originally anticipated. We
have directed our development toward producing radio frequency products that
comply with the evolving standards. The delayed development of a standard in
our target markets has resulted in slower deployment of new technologies, which
may harm our ability to sell our radio frequency products, or frustrate the
continued use of our proprietary technologies. The continued delay in the
development of these industry standards could result in fewer manufacturers
purchasing our radio frequency products in favor of continuing to use the
proprietary technologies designed by our competitors. Such delayed development
of industry standards and the resulting slower deployment of new technologies
would result in diminished and/or delayed revenues and consequently harm our
business. Further, if new industry standards emerge, our products or our
customers' products could become unmarketable or obsolete. In addition, we may
incur substantial unanticipated costs to comply with these evolving standards.
Our ability to adapt to changes and to anticipate future standards and the
rate of adoption and acceptance of those standards is a significant factor in
maintaining or improving our competitive position and prospects for growth. Our
inability to anticipate the evolving standards in the broadband communications
markets and, in particular, in the radio frequency market, or to develop and
introduce new products successfully into these markets, could result in
diminished revenues and consequently harm our business.
Other technologies for the broadband communications market will compete with
some of our target markets. If these technologies prove to be more reliable,
faster or less expensive or become more popular, the demand for our radio
frequency products and our revenues may decrease.
Some of our target markets, such as cable modem and cable telephony
services, are competing with a variety of non-radio frequency based broadband
communications technologies, including digital subscriber line technology. Many
of these technologies may compete effectively with cable modem and cable
telephony services. If any of these competing technologies are more reliable,
faster or less expensive, reach more customers or have other advantages over
radio frequency based broadband technology, the demand for our radio frequency
products and our revenues may decrease.
Our success depends on the continued growth of the broadband communications
markets generally and the radio frequency product markets specifically.
We derive a substantial portion of our revenues from sales of radio
frequency products into markets related to broadband communication
applications, in particular, the cable modem market. These markets are
characterized by:
. intense competition;
. rapid technological change; and
. short product life cycles, especially in the consumer electronics
markets.
17
Although the broadband communications markets generally have grown rapidly
in the last few years, these markets may not continue to grow or a significant
slowdown in these markets may occur. In particular, the set-top box, cable
modem and cable telephony markets may not grow at a rate sufficient for us to
achieve profitability. Because of the intense competition in the broadband
communications markets, the unproven technology of many products addressing
these markets and the short life cycles of many consumer products, it is
difficult to predict the potential size and future growth rate of the radio
frequency product markets. In addition, the broadband communications markets
are transitioning from analog to digital, as well as expanding to new services,
including internet access, cable telephony and interactive television. The
future growth of the radio frequency product markets are partially dependent
upon the market acceptance of products and technologies addressing the
broadband communications markets, and we cannot assure you that the radio
frequency technologies upon which our products are based will be accepted by
any of these markets. If the demand for radio frequency products is not as
great as we expect, we may not be able to generate sufficient revenues to
become successful.
The semiconductor industry is cyclical. If there is a sustained upturn in
the semiconductor market, there could be a resulting increased demand for
foundry services, significantly reducing product availability and increasing
our costs.
The semiconductor industry periodically experiences increased demand and
production capacity constraints. An increased demand for semiconductors could
substantially increase the cost of producing our radio frequency products,
particularly our integrated circuit products, and consequently reduce our
profit margins. As a result, we may experience substantial period-to-period
fluctuations in future results of operations due to general semiconductor
industry conditions.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This prospectus, any prospectus supplement and the documents we incorporate
by reference in this prospectus and any prospectus supplement contain "forward-
looking statements" within the meaning of Section 27A of the Securities Act of
1933, and Section 21E of the Securities Exchange Act of 1934. For this purpose,
any statements contained in this prospectus or any prospectus supplement or
incorporated by reference in this prospectus or any prospectus supplement that
are not statements of historical fact may be deemed to be forward-looking
statements. We may, in some cases, use words such as "project," "believe,"
"anticipate," "plan," "expect," "estimate," "intend," "should," "will," "could"
or "may" or other words that convey uncertainty of future events or outcomes to
identify forward-looking statements. For a discussion of important factors that
could affect our actual results or cause our actual results to differ
materially from the results anticipated by these forward-looking statements,
please refer to the section entitled "Risk Factors." These important factors
also include the factors that we identify in the documents we incorporate by
reference. You should read these factors and the other cautionary statements
made in this prospectus, any prospectus supplement and the documents we
incorporate by reference as being applicable to all related forward-looking
statements wherever they appear.
18
RATIOS OF EARNINGS TO FIXED CHARGES
Our consolidated ratios of earnings to fixed charges and our deficiencies of
earnings to fixed charges and earnings to combined fixed charges and preferred
stock dividends for the periods indicated are as follows:
May 28, 1996
Nine Months (inception)
Ended through
September 30, Year ended December 31, December 31,
------------- ----------------------------------- ------------
2001 2000 1999 1998 1997 1996
------------- -------- ------- ------- ------- ------------
Ratio of earnings to
fixed charges.......... -- -- -- -- -- --
Deficiency of earnings
to fixed charges....... $(17,666) $(29,760) $(8,508) $(3,487) $(2,406) $(623)
Ratio of earnings to
combined fixed charges
and preferred stock
dividends.............. -- -- -- -- -- --
Deficiency of earnings
to combined fixed
charges and preferred
stock dividends........ $(17,666) $(29,760) $(8,508) $(4,298) $(6,589) $(623)
We have computed the ratios of earnings to fixed charges shown above by
dividing income before income taxes and fixed charges by fixed charges. We have
computed the ratios of earnings to combined fixed charges and preferred stock
dividends by dividing income before income taxes and fixed charges by the sum
of fixed charges and preferred stock dividends. The term "fixed charges" means
the sum of the following: (a) interest expensed and capitalized; (b) amortized
premiums, discounts and capitalized expenses related to indebtedness; (c) an
estimate of the interest within rental expense; and (d) preference securities
dividend requirements of consolidated subsidiaries. For the periods presented,
our fixed charges consisted only of a percentage of rental expense of operating
leases that represents interest.
USE OF PROCEEDS
Unless we otherwise indicate in an applicable prospectus supplement, we
currently expect to use the net proceeds from the sale of any securities for
working capital and other general corporate purposes, including:
. to finance our growth;
. for capital expenditures made in the ordinary course of business; and
. for acquisitions of businesses, products and technologies that
complement or expand our business.
We may set forth additional information on the use of net proceeds from the
sale of securities we offer under this prospectus in a prospectus supplement
relating to the specific offering. Pending any specific application, we may
initially invest funds in short-term marketable securities or apply them to the
reduction of short-term indebtedness. We will receive no proceeds from the sale
of our common stock by the selling stockholders.
19
THE SECURITIES WE MAY OFFER
The descriptions of the securities contained in this prospectus, together
with the applicable prospectus supplements, summarize the terms and provisions
of the various types of securities that we may offer. We will describe in the
applicable prospectus supplement relating to any securities the particular
terms of the securities offered by that prospectus supplement. If we indicate
in the applicable prospectus supplement, the terms of the securities may differ
from the terms we have summarized below. We will also include in the prospectus
supplement information, where applicable, about material United States federal
income tax considerations relating to the securities, and the securities
exchange, if any, on which the securities will be listed.
We may sell from time to time, in one or more offerings:
. common stock;
. preferred stock;
. debt securities; and
. warrants to purchase any of the securities listed above.
In this prospectus, we refer to the common stock, preferred stock, debt
securities and warrants collectively as "securities." The maximum aggregate
dollar amount of all securities that we and any selling stockholders may issue
under this prospectus and all supplements to this prospectus will not exceed
$250,000,000.
If we decide to sell shares of our common stock, the selling stockholders
may sell up to 3.5 million shares of the common stock owned by them, subject to
any reductions or cutbacks as determined by us and the underwriters. The
selling stockholders are including their shares in this registration statement
because they were granted piggyback registration rights when they acquired
shares of our convertible preferred stock prior to our initial public offering
in August 2000.
If we issue debt securities at a discount from their original stated
principal amount, then, for purposes of calculating the total dollar amount of
all securities issued under this prospectus, we will treat the initial offering
price of the debt securities as the total original principal amount of the debt
securities.
This prospectus may not be used to consummate a sale of any securities
unless it is accompanied by a prospectus supplement.
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SELLING STOCKHOLDERS
The following table sets forth the name of each selling stockholder and its
relationship, if any, with us and:
. the number of shares of our common stock beneficially owned by each
selling stockholder as of November 25, 2001;
. the maximum number of shares of our common stock that may be offered for
the account of each selling stockholder; and
. the amount and percentage of our common stock to be beneficially owned
by each selling stockholder assuming the sale of all shares of common
stock that the selling stockholders may sell hereunder.
Beneficial ownership is determined in accordance with the rules of the SEC.
Except as set forth below, the entities named in this table have sole voting
and investment power with respect to all shares of common stock shown as
beneficially owned by them. The number of outstanding shares of our common
stock as of December 3, 2001 was 47,691,617.
Percentage
Shares of of
Shares of Maximum Common Stock Common Stock
Common Stock Number of Shares Beneficially Beneficially
Beneficially of Common Stock Owned After Owned After
Name of Selling Owned Prior That May Be Sold the the
Stockholder(3) to Offering Hereunder Offering(1) Offering(2)
--------------- ------------ ---------------- ------------ ------------
HMTF Europe Fund Cayman,
L.P.................... 2,677,458 1,586,295 1,091,163 --
HMTF Europe Private Fund
Cayman, L.P............ 32,017 18,968 13,049 --
HM PG Europe I, C.V..... 197,816 117,198 80,618 --
HMEU 1-EQ Coinvestors,
L.P.................... 34,382 20,371 14,011 --
HMEU 1-P Coinvestors,
L.P.................... 7,110 4,210 2,900 --
HMEU 1-EN Coinvestors,
L.P.................... 4,574 2,710 1,864 --
HM 1-FOF Coinvestors
Cayman, L.P............ 252 143 109 --
HMTF Equity Fund
IV(1999) Cayman, L.P... 2,734,166 1,619,894 1,114,272 --
HMTF Private Equity Fund
IV (1999) Cayman, L.P.. 19,368 11,476 7,892 --
HM 4-EN Coinvestors
Cayman, L.P............ 7,987 4,733 3,254 --
HM 4-P Coinvestors
Cayman, L.P............ 2,168 1,284 884 --
HM 4-EQ Coinvestors
Cayman, L.P............ 44,691 26,477 18,214 --
Hicks, Muse PG-IV
(1999), C.V. .......... 145,564 86,241 59,323 --
--------- --------- --------- ---
Total................. 5,907,553 3,500,000 2,407,553 --
========= ========= ========= ===
--------
* Less than 1% of the outstanding shares of our common stock.
(1) Assumes the sale of all shares of our common stock registered hereunder,
however, this prospectus provides that the selling stockholders may sell
only up to 3.5 million shares of the common stock owned by them, subject to
any reductions or cutbacks as determined by us and any underwriters, if we
decide to sell shares of our common stock.
(2) Because each selling stockholder may sell all or some of the shares
registered on its behalf only if we decide to sell shares of our common
stock, at this time no estimate can be given as to the percentage of shares
owned by each selling stockholder after the completion of any offering. We
will provide this percentage information in a prospectus supplement at the
time of any offering hereunder.
(3) Each of the selling stockholders listed above is an affiliate of Hicks,
Muse, Tate & Furst Incorporated, a private investment firm. As of November,
25, 2001, Thomas O. Hicks, a partner of Hicks, Muse, Tate & Furst
Incorporated, directly held of record 38,669 shares of common stock and
indirectly held 17,194 shares of common stock. This indirect ownership
includes (i) 5,016 shares held of record as the trustee of certain trusts
for the benefit of Mr. Hicks' children, (ii) 1,266 shares held of record by
TOH, Jr. Ventures
21
Ltd., a limited partnership whose general partner is TOH Management
Company, LLC, a limited liability company whose sole member is Mr. Hicks,
(iii) 9,658 shares held of record by TOH Investors, L.P., a limited
partnership whose general partner is TOH Management Company, LLC and (iv)
1,254 shares held of record by MHH Ventures, Ltd., whose general partner is
TOH Management Company, LLC. Mr. Hicks is also the indirect general partner
of each of the selling stockholders listed above and, accordingly may be
deemed to beneficially own all or a portion of the shares of common stock
owned by those entities. In addition, Jack D. Furst, a partner of Hicks,
Muse, Tate & Furst Incorporated, is a Class II Director of Microtune and,
as of October 31, 2001, did not hold of record any shares of common stock
and indirectly held 20,662 shares of common stock. This indirect ownership
includes (i) 4,744 shares held of record by JF Investors, L.P. a limited
partnership whose sole general partner is an entity wholly owned by Mr.
Furst and (ii) 15,918 shares held of record by the JDF Family Trust, an
irrevocable trust where Mr. Furst is the trustee. Mr. Furst is also an
officer of the indirect general partner of each of the selling stockholders
listed above and, accordingly may be deemed to beneficially own all or a
portion of the shares of common stock owned by those entities. Each of Mr.
Hicks and Mr. Furst disclaims beneficial ownership of all shares not owned
by each of them of record (except to the extent of any pecuniary interest
therein). In addition, Eric Lindberg, an employee of Hicks, Muse, Tate &
Furst Incorporated, was appointed as a Class III Director of Microtune and
a member of our audit committee in August 2001 and, as of October 31, 2001,
directly held of record 262 shares of common stock. Messrs. Furst and
Lindberg replaced Lawrence D. Stuart, Jr., a former partner of Hicks, Muse,
Tate & Furst Incorporated, and Philippe von Stauffenberg, an employee of
Hicks, Muse, Tate & Furst Incorporated, respectively, upon their
resignation from our board of directors in August 2001.
In January 2000, we combined with Microtune GmbH (formerly Temic Telefunken
Hochfrequenztechnik GmbH) and its wholly-owned subsidiaries and affiliated
companies, by acquiring HMTF Acquisition (Bermuda), Ltd. In connection with
this combination, we issued 2,898,602 shares of our Series E preferred
stock and a warrant to acquire 966,201 shares of our common stock to HMTF
Temic/Microtune Cayman, L.P., a Cayman Islands limited partnership and an
affiliate of Hicks, Muse, Tate & Furst Incorporated. In addition, in 1999
HMTF Temic/Microtune Cayman, L.P. purchased 833,334 shares of our Series D
preferred stock. In January 2000, we effected a 2-for-1 stock split of our
common stock. Following our stock split, HMTF Temic/Microtune Cayman, L.P.
owned 1,666,668 shares of our Series D preferred stock, 5,797,204 shares of
our Series E preferred stock, and a warrant to acquire 1,932,402 shares of
our common stock. These shares were subsequently converted or exercised
into shares of our common stock and were distributed in a pro rata
distribution without consideration to the selling stockholders listed
above.
22
DESCRIPTION OF CAPITAL STOCK
General
Our authorized capital stock consists of 175,000,000 shares of stock,
including:
. 150,000,000 shares of common stock, $0.001 par value per share, of which
47,691,617 shares were issued and outstanding as of December 3, 2001;
and
. 25,000,000 shares of preferred stock, $0.001 par value per share, of
which no shares are currently issued or outstanding.
Common Stock
This section describes the general terms of our common stock. For more
detailed information, you should refer to our amended and restated certificate
of incorporation, a copy of which has been filed with the SEC. Our amended and
restated certificate of incorporation is also incorporated by reference into
this prospectus.
Each holder of common stock is entitled to one vote for each share on all
matters to be voted upon by the stockholders and there are no cumulative voting
rights. Subject to preferences to which holders of preferred stock may be
entitled, holders of common stock are entitled to receive ratably the
dividends, if any, as may be declared from time to time by our board of
directors out of funds legally available therefor. In the event of our
liquidation, dissolution or winding up, holders of common stock would be
entitled to share in our assets remaining after the payment of liabilities and
the satisfaction of any liquidation preference granted to the holders of any
outstanding shares of preferred stock. Holders of common stock have no
preemptive or conversion rights or other subscription rights and there are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are, and any shares of common stock offered
by us in this offering, when issued and paid for, will be, fully paid and
nonassessable. The rights, preferences and privileges of the holders of common
stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock or debt securities that we
may designate and issue in the future.
Preferred Stock
This section describes the general terms and provisions of our preferred
stock. If shares of preferred stock are offered by virtue of this prospectus, a
prospectus supplement will describe the specific terms of the shares of
preferred stock, as well as any general terms described in this section that
will not apply to those shares of preferred stock. We will file a copy of the
certificate of designation that contains the terms of each new series of
preferred stock with the SEC each time we issue a new series of preferred
stock. Each certificate of designation will establish the number of shares
included in a designated series and fix the designations, powers, privileges,
preferences and rights of the shares of each series as well as any applicable
qualifications, limitations or restrictions. In addition to the other
information contained in this prospectus or any applicable prospectus
supplement, you should refer to the applicable certificate of designation as
well as our restated certificate of incorporation before deciding to buy shares
of our preferred stock as described in the applicable prospectus supplement.
Our board of directors has been authorized to provide for the issuance of up
to 25 million shares of our preferred stock in multiple series without the
approval of stockholders. With respect to each series of our preferred stock,
our board of directors has the authority to fix the following terms:
. the designation of the series;
. the number of shares within the series;
. whether dividends are cumulative and, if cumulative, the dates from
which dividends are cumulative;
. the rate of any dividends, any conditions upon which dividends are
payable, and the dates of payment of dividends;
23
. whether the shares are redeemable, the redemption price and the terms of
redemption;
. the amount payable for each share you own if we dissolve or liquidate;
. whether the shares are convertible or exchangeable, the price or rate of
conversion or exchange, and the applicable terms and conditions of
conversion or exchange;
. any restrictions on issuance of shares in the same series or any other
series;
. voting rights applicable to the series of preferred stock; and
. any other rights, preferences or limitations of the series.
Your rights with respect to your shares of preferred stock will be
subordinate to the rights of our general creditors. Shares of our preferred
stock offered by us in this prospectus, when issued and paid for, will be fully
paid and nonassessable, and will not be entitled to preemptive rights unless
specified in the applicable prospectus supplement.
Limitation of Liability and Indemnification
Delaware law provides that a corporation has the ability to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding if the person acted
in good faith and in a manner the person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the person's
conduct was unlawful. Our amended and restated certificate of incorporation
provides that our directors will not be personally liable to us or our
stockholders for monetary damages for breach of fiduciary duty as a director to
the maximum extent permitted by Delaware law. This limitation of liability does
not apply to liabilities arising under federal or state securities laws and
does not affect the availability of equitable remedies such as injunctive
relief or rescission.
Our Bylaws provide that we shall indemnify our directors, officers,
employees and agents to the fullest extent permitted by law including in
circumstances in which indemnification is otherwise discretionary under
Delaware law. Our Bylaws also permit us to secure insurance on behalf of any
officer, director, employee or other agent for any liability arising out of his
or her actions in that capacity, regardless of whether our Bylaws permit any
indemnification. We maintain directors' and officers' liability insurance and
intend to continue to maintain the insurance in the future.
We have also entered into agreements to indemnify our directors and
executive officers. In these agreements, we agree to indemnify these persons
for expenses (including attorneys' fees), judgments, fines and settlement
amounts incurred by any of them in any action or proceeding, including any
action by or in the right of us arising out of that person's services as our
director, officer, employee, agent or fiduciary or for any subsidiary of us or
any other company or enterprise to which the person provides services at our
request. We believe that these provisions and agreements are necessary to
attract and retain qualified persons as directors and executive officers.
Delaware Anti-Takeover Law and Charter and Bylaw Provisions
Provisions of Delaware law and our amended and restated certificate of
incorporation and Bylaws could make it more difficult for a third party to
acquire us by means of a tender offer, a proxy contest or otherwise or to
remove our directors. These provisions are intended to discourage coercive
takeover practices and inadequate takeover bids and to encourage persons
seeking to acquire control of us to first negotiate with our Board of
Directors. We believe that the benefits of increased protection of our ability
to negotiate with the proponent of an unfriendly or unsolicited proposal to
acquire or restructure us outweigh the disadvantages of discouraging those
proposals because negotiation of those proposals could result in an improvement
of their terms.
24
Delaware Anti-Takeover Law. We are subject to Section 203 of the Delaware
General Corporation Law. In general, Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years following the date the
person became an interested stockholder, unless (with specific exceptions):
. the board of directors approves the transaction in which the stockholder
became an interested stockholder prior to the date the interested
stockholder attained that status;
. when the stockholder became an interested stockholder, he or she owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding shares owned by persons who
are directors and also officers; or
. on or subsequent to the date the business combination is approved by the
board of directors, the business combination is authorized at an annual
or special meeting of stockholders by the affirmative vote of at least
two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
Generally, a "business combination" includes a merger, asset or stock sale,
or other transaction resulting in a financial benefit to the interested
stockholder. Generally, an "interested stockholder" is a person who, together
with affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock. The existence of this provision would be expected
to have an anti-takeover effect with respect to transactions not approved in
advance by the board of directors, including discouraging attempts that might
result in a premium over the market price for the shares of common stock held
by stockholders.
Provisions of Our Amended and Restated Certificate of Incorporation and
Bylaws. Our amended and restated certificate of incorporation divides our Board
of Directors into three classes, as nearly equal in number as possible, serving
staggered terms. Approximately one-third of the board is elected each year. Our
classified board could prevent a party who acquires control of a majority of
our outstanding voting stock from obtaining control of our Board of Directors
until the second annual stockholders meeting following the date the acquiror
obtains the controlling stock interest. A classified board could also have the
effect of discouraging a potential acquiror from making a tender offer or
otherwise attempting to obtain control of us and could increase the likelihood
that incumbent directors will retain their positions.
Our amended and restated certificate of incorporation provides that our
directors may be removed (i) with cause by the affirmative vote of the holders
of at least a majority of the voting power of all of the then outstanding
shares of voting stock, voting as a single class, or (ii) without cause by the
affirmative vote of the holders of at least two-thirds of the voting power of
all of the then-outstanding shares of the voting stock.
Our Bylaws establish an advance notice procedure for stockholder proposals
to be brought before our annual meeting of stockholders, including proposed
nominations of persons for election to our Board of Directors. Stockholders at
an annual meeting may only consider proposals or nominations specified in the
notice of meeting or brought before the meeting by or at the direction of our
Board of Directors or by a stockholder who was a stockholder of record on the
record date for the meeting, who is entitled to vote at the meeting and who has
given to our Secretary a timely notice in proper written form in accordance
with our Bylaws, of the stockholder's intention to bring that business before
the meeting. Although the Bylaws do not give our Board of Directors the power
to approve or disapprove stockholder nominations of candidates or proposals
regarding other business to be conducted at a special or annual meeting of the
stockholders, the Bylaws may have the effect of precluding the conduct of
business at a meeting if the proper procedures are not followed or may
discourage or deter a potential acquiror from conducting a solicitation of
proxies to elect its own slate of directors or otherwise attempting to obtain
control of our company.
Under Delaware law, a special meeting of stockholders may be called by the
Board of Directors or by any other person authorized to do so in our amended
and restated certificate of incorporation or Bylaws. Our
25
Bylaws authorize the Board of Directors, the Chairman of the Board, the Vice
Chairman of the Board, our Chief Executive Officer, our President and any
holder of at least 15% of our outstanding voting stock to call a special
meeting of stockholders. The limits on the right of holders of less than 15% of
our outstanding voting stock to call a special meeting means that a stockholder
owning less than 15% of our outstanding voting stock cannot force stockholder
consideration of a proposal over the opposition of our Board of Directors by
calling a special meeting of stockholders prior to the time that a majority of
our Board of Director believes that consideration to be appropriate or until
the next annual meeting provided that the requestor meets the notice
requirements. The restriction on the ability of stockholders to call a special
meeting means that a proposal to replace our Board of Directors could be
delayed until the next annual meeting.
Under Delaware law, stockholders may execute an action by written consent in
lieu of a stockholder meeting. Delaware law permits a corporation to eliminate
the ability of stockholders to take actions by written consent. Our amended and
restated certificate of incorporation prohibits actions by written consent of
stockholders. Denying stockholders the right to act by written consent may
lengthen the amount of time required to take stockholder actions since actions
by written consent may not be subject to the minimum notice requirement of a
stockholders meeting. Denying stockholders the right to act by written consent
may also deter hostile takeover attempts. A holder or group of holders
controlling a majority in interest of our capital stock would not be able to
amend our Bylaws or remove directors pursuant to a stockholders' written
consent. Any holder or group of holders would have to obtain the consent of a
majority of our Board of Directors, the Chairman of the Board, the Vice
Chairman of the Board, the Chief Executive Officer, the President or a holder
of at least 15% of our outstanding voting stock to call a stockholders' meeting
and wait until the notice periods, as determined by the Board of Directors
pursuant to our Bylaws, expire prior to taking any action.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Computershare
Investor Services, 1601 Elm Street, Suite 4340, Dallas, Texas, 75201, phone:
(214) 969-1859.
Stock Market Listing
Our common stock is listed on the Nasdaq National Market. The trading symbol
for our common stock on this market is "TUNE."
DESCRIPTION OF DEBT SECURITIES
We may issue debt securities in one or more series under an Indenture
between us and a trustee to be determined. A form of an Indenture is filed as
an exhibit to the registration statement of which this prospectus is a part.
Any Indenture will be subject to, and governed by, the Trust Indenture Act of
1939.
The following summary of certain provisions of the Indenture filed as an
exhibit to the registration statement does not purport to be complete and is
qualified in its entirety by express reference to the Indenture and any
specific securities resolution or any supplemental indenture authorizing a
series of debt securities. Copies of the resolution or supplemental indenture
will be filed with the SEC. Capitalized terms used in this section without
definition have the meanings given the terms in the Indenture.
The particular terms of the debt securities offered by a prospectus
supplement will be described in that supplement, along with any applicable
modifications or additions to the general terms of the debt securities as
described in this prospectus and in the Indenture. Accordingly, for a
description of the terms of any series of debt securities, reference must be
made to both the description of the debt securities in this prospectus and the
prospectus supplement.
26
General
The Indenture does not limit the amount of debt securities that can be
issued or our ability or that of our subsidiaries to incur, assume or guarantee
debt. In addition, the Indenture does not restrict our ability or that of our
subsidiaries to create or permit liens. It provides that the debt securities
may be issued from time to time in one or more series pursuant to the terms of
one or more securities resolutions or supplemental indentures creating the
series.
As of the date of this prospectus, there were no debt securities outstanding
under the Indenture.
Terms
Reference is made to the relevant prospectus supplement for the following
terms, if applicable, of the debt securities offered thereby:
. the designation, aggregate principal amount, currency or composite
currency in which principal or interest may be paid and denominations;
. the price at which the debt securities will be issued and, if an index
formula or other method is used, the method for determining amounts of
principal or interest;
. the maturity date and other dates, if any, on which principal will be
payable;
. the interest rate or rates, if any, or method of calculating the
interest rate or rates;
. the date or dates from which interest will accrue and on which interest
will be payable, and the record dates for the payment of interest;
. the manner of paying principal and interest;
. the place or places where principal and interest will be payable;
. the terms of any mandatory or optional redemptions by us, including any
sinking fund;
. the terms of any conversion or exchange rights;
. the terms of any redemptions at the option of holders;
. any tax indemnity provisions;
. if the debt securities provide that payments of principal or interest
may be made in a currency other than that in which debt securities are
denominated, the manner for determining the payments;
. the portion of principal payable upon acceleration of a discounted debt
security (as defined below);
. whether and upon what terms debt securities may be defeased;
. whether any events of default or covenants in addition to or in lieu of
those set forth in the Indenture apply;
. provisions for electronic issuance of debt securities or for debt
securities in uncertificated form;
. the ranking of the debt securities; and
. any other terms not inconsistent with the provisions of the Indenture.
We may issue debt securities as registered debt securities, bearer debt
securities or uncertificated debt securities and in such denominations as
specified in the terms of the series.
In connection with its original issuance, no bearer debt security will be
offered, sold or delivered to any location in the United States, and a bearer
debt security in definitive form may be delivered in connection with its
original issuance only upon presentation of a certificate in a form prescribed
by us to comply with United States laws and regulations.
27
Registration of transfer of registered debt securities may be requested upon
surrender thereof at any office or agency we maintain for that purpose and upon
fulfillment of all other requirements of the agent.
Securities may be issued under the Indenture as discounted debt securities
to be offered and sold at a discount from the principal amount thereof. Special
United States federal income tax and other considerations applicable thereto
will be described in the prospectus supplement relating to any discounted debt
securities. "Discounted debt security" means a security where the amount of
principal due upon acceleration is less than the stated principal amount
payable at maturity.
Covenants
Any covenants that may apply to a particular series of debt securities will
be described in the prospectus supplement relating thereto.
Ranking Of Debt Securities
Unless stated otherwise in a prospectus supplement, the debt securities will
not be secured by our properties or assets and will represent unsecured debt.
Unless stated otherwise in a prospectus supplement, unsecured debt securities
will rank equally and ratably with any other unsecured and unsubordinated debt.
The Indenture does not limit the ability of any of our subsidiaries to issue,
assume or guarantee debt, and the debt securities may be effectively
subordinated to all existing and future indebtedness and other liabilities and
commitments of our subsidiaries.
Successor Obligor
The Indenture provides that, unless otherwise specified in the securities
resolution establishing a series of debt securities, we may not consolidate
with or merge into, or transfer all or substantially all of our assets to, any
person in any transaction in which we are not the survivor, unless:
. the person is organized under the laws of the United States or a State
thereof or is organized under the laws of a foreign jurisdiction and
consents to the jurisdiction of the courts of the United States or a
State thereof;
. the person assumes by supplemental indenture all of our obligations
under the Indenture, the debt securities and any coupons;
. all required approvals of any regulatory body having jurisdiction over
the transaction have been obtained; and
. immediately after the transaction no default (as defined below) exists.
The successor will be substituted for us, and thereafter all of our
obligations under the Indenture, the debt securities and any coupons will
terminate.
Exchange Of Debt Securities
Registered debt securities may be exchanged for an equal aggregate principal
amount of registered debt securities of the same series and date of maturity in
such authorized denominations as may be requested upon surrender of the
registered debt securities at an office or agency we maintain for that purpose
and upon fulfillment of all other requirements of our agent.
28
Default and Remedies
Unless the securities resolution establishing the series otherwise provides
(in which event the prospectus supplement will so state), an "event of default"
with respect to a series of debt securities will occur if:
. we default in any payment of interest on any debt securities of that
series when the same becomes due and payable and the default continues
for a period of 30 days;
. we default in the payment of the principal and premium, if any, of any
debt securities of the series when the same becomes due and payable at
maturity or upon redemption, acceleration or otherwise;
. we default in the payment or satisfaction of any sinking fund obligation
with respect to any debt securities of that series as required by the
securities resolution establishing that series;
. we default in the performance of any of our other agreements applicable
to the series and the default continues for 60 days after the notice
specified below;
. pursuant to or within the meaning of any Bankruptcy Law (as defined
below), we:
. commence a voluntary case;
. consent to the entry of an order for relief against us in an
involuntary case;
. consent to the appointment of a Custodian (as defined below) for us
or for all or substantially all of our property; or
. make a general assignment for the benefit of our creditors;
. a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
. is for relief against us in an involuntary case;
. appoints a Custodian for us or for all or substantially all of our
property; or
. orders our liquidation, and the order or decree remains unstayed and
in effect for 60 days; or
. there occurs any other event of default provided for in such series.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar federal
or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or a similar official under any
Bankruptcy Law.
"Default" means any event which is, or after notice or passage of time would
be, an event of default. If an event of default occurs and is continuing on a
series, the trustee, by notice to us, or the holders of at least 25% in
principal amount of the series, may declare the principal of and accrued
interest on all the debt securities of the series to be due and payable
immediately. Discounted debt securities may provide that the amount of
principal due upon acceleration is less than the stated principal amount. The
holders of a majority in principal amount of the series, by notice to the
trustee, may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing events of
default on the series have been cured or waived except nonpayment of principal
or interest that has become due solely because of the acceleration. If an event
of default occurs and is continuing on a series, the trustee may pursue any
available remedy to collect principal or interest then due on the series, to
enforce the performance of any provision applicable to the series, or otherwise
to protect the rights of the trustee and holders of the series.
The trustee may require indemnity satisfactory to it before it enforces the
Indenture or the debt securities of the series. Subject to certain limitations,
holders of a majority in principal amount of the debt securities of the series
may direct the trustee in its exercise of any trust or power with respect to
the series. Except in the case of default in payment on a series, the trustee
may withhold from holders of that series notice of any continuing default if it
determines that withholding the notice is in the interest of holders of the
series. We are required to furnish the trustee annually a brief certificate as
to our compliance with all conditions and covenants under the Indenture.
29
The Indenture does not have a cross-default provision. Thus, a default by us
on any other debt, including any other series of debt securities, would not
constitute an event of default. A securities resolution may provide for a
cross-default provision, in which case the prospectus supplement will describe
the terms of that provision.
Amendments and Waivers
The Indenture and the debt securities or any coupons of the series may be
amended, and any default may be waived, as follows. Unless the securities
resolution otherwise provides (in which event the prospectus supplement will so
state), we and the trustee may amend the debt securities, the Indenture and any
coupons with the written consent of the holders of a majority in principal
amount of the debt securities of all series affected voting as one class.
Unless the securities resolution otherwise provides (in which event the
prospectus supplement will so state), a default on a particular series may be
waived with the consent of the holders of a majority in principal amount of the
debt securities of the series. However, without the consent of each debt
security holder affected, no amendment or waiver may:
. reduce the amount of debt securities whose holders must consent to an
amendment or waiver;
. reduce the interest on or change the time for payment of interest on any
debt security;
. change the fixed maturity of any debt security or change the amount or
time for any payment of any sinking fund or similar fund;
. reduce the principal of any non-discounted debt security;
. reduce the amount of the principal of any discounted debt security that
would be due on acceleration, upon redemption or upon maturity;
. change the currency in which the principal of or interest on a debt
security is payable;
. make any change that materially adversely affects the right to convert
or exchange any debt security; or
. waive any default in payment of interest on or principal of a debt
security.
Without the consent of any debt security holder, we and the trustee may
amend the Indenture, the debt securities or any coupons to:
. cure any ambiguity, omission, defect or inconsistency;
. provide for assumption of our obligations to debt security holders in
the event of a merger or consolidation requiring such assumption;
. provide that specific provisions of the Indenture shall not apply to a
series of debt securities not previously issued;
. create a series and establish its terms;
. provide for a separate trustee for one or more series; or
. make any change that does not materially adversely affect the rights of
any debt security holder.
Legal Defeasance and Covenant Defeasance
Any series of our debt securities may be subject to the defeasance and
discharge provisions of the applicable indenture if so specified in the
applicable prospectus supplement. If those provisions are applicable, we may
elect either:
. legal defeasance--which will permit us to defease and be discharged
from, subject to limitations, all of our obligations with respect to
those debt securities; or
. covenant defeasance--which will permit us to be released from our
obligations to comply with covenants relating to those debt securities
as described in the applicable prospectus supplement, which may include
obligations concerning subordination of our subordinated debt
securities.
30
If we exercise our legal defeasance option with respect to a series of debt
securities, payment of those debt securities may not be accelerated because of
an event of default. If we exercise our covenant defeasance option with respect
to a series of debt securities, payment of those debt securities may not be
accelerated because of an event of default related to the specified covenants.
Unless otherwise provided in the applicable prospectus supplement, we may
invoke legal defeasance or covenant defeasance with respect to any series of
our debt securities only if:
. we irrevocably deposit with the trustee, in trust, an amount in funds or
U.S. government obligations which, through the payment of principal and
interest in accordance with their terms, will provide money in an amount
sufficient to pay, when due upon maturity or redemption, as the case may
be, the principal of, premium, if any, and interest on those debt
securities;
. we deliver to the trustee a certificate from a nationally recognized
firm of independent accountants expressing their opinion that the
payments of principal and interest when due and without reinvestment of
the deposited U.S. government obligations plus any deposited money
without investment will provide cash at such times and in such amounts
as will be sufficient to pay the principal, premium, and interest when
due with respect to all the debt securities of that series to maturity
or redemption, as the case may be;
. 123 days pass after the deposit is made and, during the 123-day period,
no default relating to our bankruptcy, insolvency or reorganization
occurs that is continuing at the end of that period;
. no event of default has occurred and is continuing on the date of the
deposit and after giving effect to the deposit;
. the deposit is not a default under any other agreement binding on us;
. we deliver to the trustee an opinion of counsel to the effect that the
trust resulting from the deposit is not, or is qualified as, a regulated
investment company under the Investment Company Act of 1940;
. in the case of legal defeasance, we shall have delivered to the trustee
an opinion of counsel in the U.S. reasonably acceptable to the trustee
confirming that (a) we have received from, or there has been published
by, the Internal Revenue Service a ruling or (b) since the date of the
indenture, there has been a change in the applicable federal income tax
law, in the case of either (a) or (b) to the effect that, and based upon
which the opinion of counsel shall confirm that, the holders of
outstanding debt securities will not recognize income, gain or loss for
federal income tax purposes as a result of this legal defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if this legal
defeasance had not occurred;
. in the case of covenant defeasance, we shall have delivered to the
trustee an opinion of counsel in the U.S. reasonably acceptable to the
trustee confirming that the holders of outstanding debt securities will
not recognize income, gain or loss for federal income tax purposes as a
result of this covenant defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if this covenant defeasance had not
occurred; and
. we deliver to the trustee an officers' certificate and an opinion of
counsel, each stating that all conditions precedent to the defeasance
and discharge of the debt securities of that series as contemplated by
the applicable indenture have been complied with.
Regarding the Trustee
We will identify a third party to act as trustee and registrar for debt
securities issued under the Indenture and, unless otherwise indicated in a
prospectus supplement, the trustee will also act as transfer agent and paying
agent with respect to the debt securities. We may remove the trustee with or
without cause if we so notify the trustee three months in advance and if we are
not in default during the three-month period. The trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for us or our affiliates, and may otherwise deal with us or our
affiliates, as if it were not trustee.
31
DESCRIPTION OF WARRANTS
The following description, together with the additional information we may
include in any applicable prospectus supplements, summarizes the material
terms and provisions of the warrants that we may offer under this prospectus
and the related warrant agreements and warrant certificates. While the terms
summarized below will apply generally to any warrants that we may offer, we
will describe the particular terms of any series of warrants in more detail in
the applicable prospectus supplement. If we indicate in the prospectus
supplement, the terms of any warrants offered under that prospectus supplement
may differ from the terms described below. Specific warrant agreements will
contain additional important terms and provisions and will be incorporated by
reference as an exhibit to the registration statement which includes this
prospectus.
General
We may issue warrants for the purchase of common stock, preferred stock or
debt securities in one or more series. We may issue warrants independently or
together with common stock, preferred stock and debt securities, and the
warrants may be attached to or separate from these securities.
We will evidence each series of warrants by warrant certificates that we
will issue under a separate agreement. We will enter into the warrant
agreement with a warrant agent. Each warrant agent will be a bank that we
select which has its principal office in the United States and a combined
capital and surplus of at least $50,000,000. We will indicate the name and
address of the warrant agent in the applicable prospectus supplement relating
to a particular series of warrants.
We will describe in the applicable prospectus supplement the terms of the
series of warrants, including:
. the offering price and aggregate number of warrants offered;
. the currency for which the warrants may be purchased;
. if applicable, the designation and terms of the securities with which
the warrants are issued and the number of warrants issued with each such
security or each principal amount of such security;
. if applicable, the date on and after which the warrants and the related
securities will be separately transferable;
. in the case of warrants to purchase debt securities, the principal
amount of debt securities purchasable upon exercise of one warrant and
the price at, and currency in which, this principal amount of debt
securities may be purchased upon exercise;
. in the case of warrants to purchase common stock or preferred stock, the
number of shares of common stock or preferred stock, as the case may be,
purchasable upon the exercise of one warrant and the price at which
these shares may be purchased upon exercise;
. the effect of any merger, consolidation, sale or other disposition of
our business on the warrant agreement and the warrants;
. the terms of any rights to redeem or call the warrants;
. any provisions for changes to or adjustments in the exercise price or
number of securities issuable upon exercise of the warrants;
. the dates on which the right to exercise the warrants will commence and
expire;
. the manner in which the warrant agreement and warrants may be modified;
. federal income tax consequences of holding or exercising the warrants;
. the terms of the securities issuable upon exercise of the warrants; and
. any other specific terms, preferences, rights or limitations of or
restrictions on the warrants.
32
Before exercising their warrants, holders of warrants will not have any of
the rights of holders of the securities purchasable upon such exercise,
including:
. in the case of warrants to purchase debt securities, the right to
receive payments of principal of, or premium, if any, or interest on,
the debt securities purchasable upon exercise or to enforce covenants in
the applicable indenture; or
. in the case of warrants to purchase common stock or preferred stock, the
right to receive dividends, if any, or payments upon our liquidation,
dissolution or winding up or to exercise voting rights, if any.
Exercise of Warrants
Each warrant will entitle the holder to purchase the securities that we
specify in the applicable prospectus supplement at the exercise price that we
describe in the applicable prospectus supplement. Unless we otherwise specify
in the applicable prospectus supplement, holders of the warrants may exercise
the warrants at any time up to 5:00 P.M. eastern standard time on the
expiration date that we set forth in the applicable prospectus supplement.
After the close of business on the expiration date, unexercised warrants will
become void.
Holders of the warrants may exercise the warrants by delivering the warrant
certificate representing the warrants to be exercised together with specified
information, and paying the required amount to the warrant agent in immediately
available funds, as provided in the applicable prospectus supplement. We will
set forth on the reverse side of the warrant certificate and in the applicable
prospectus supplement the information that the holder of the warrant will be
required to deliver to the warrant agent.
Upon receipt of the required payment and the warrant certificate properly
completed and duly executed at the corporate trust office of the warrant agent
or any other office indicated in the applicable prospectus supplement, we will
issue and deliver the securities purchasable upon exercise. If fewer than all
of the warrants represented by the warrant certificate are exercised, then we
will issue a new warrant certificate for the remaining amount of warrants. If
we so indicate in the applicable prospectus supplement, holders of the warrants
may surrender securities as all or part of the exercise price for warrants.
Enforceability Of Rights By Holders Of Warrants
Each warrant agent will act solely as our agent under the applicable warrant
agreement and will not assume any obligation or relationship of agency or trust
with any holder of any warrant. A single bank or trust company may act as
warrant agent for more than one issue of warrants. A warrant agent will have no
duty or responsibility in case of any default by us under the applicable
warrant agreement or warrant, including any duty or responsibility to initiate
any proceedings at law or otherwise, or to make any demand upon us. Any holder
of a warrant may, without the consent of the related warrant agent or the
holder of any other warrant, enforce by appropriate legal action its right to
exercise, and receive the securities purchasable upon exercise of, its
warrants.
33
PLAN OF DISTRIBUTION
We may distribute the securities being offered hereby and the selling
stockholders may sell shares of our common stock they own in one or more of the
following ways from time to time:
. through agents to the public or to specific purchasers;
. through underwriters or dealers for resale to the public or to specific
purchasers;
. directly to specific purchasers; or
. through a combination of any such methods.
We may distribute the securities from time to time in one or more
transactions either (i) at a fixed price or prices, which may be changed, (ii)
at market prices prevailing at the time of sale, (iii) at prices related to the
prevailing market prices, or (iv) at negotiated prices.
We will set forth in a prospectus supplement the terms of the offering of
securities, including:
. the name or names of any agents or underwriters;
. the purchase price of the securities being offered and the proceeds we
will receive from the sale;
. the name of any selling stockholders and amount of common stock sold;
. the number of shares of our common stock owned by the selling
stockholders and any affiliations with us;
. any over-allotment options under which underwriters may purchase
additional securities from us or the selling stockholders;
. any agency fees or underwriting discounts and other items constituting
agents' or underwriters' compensation;
. any public offering price;
. any discounts or concessions allowed or reallowed or paid to dealers;
and
. any securities exchanges on which the securities may be listed.
If we use any agents, underwriters or dealers in connection with the sale of
our securities being registered under Rule 415, the maximum commission or
discount to be received by any NASD member will not exceed 8%. The selling
stockholders agreed that (1) they will not offer or sell any shares of common
stock pursuant to this prospectus other than as part of an underwritten public
offering in which we sell shares of our common stock and (2) the maximum number
of shares of common stock that they will sell pursuant to this prospectus will
not exceed 3.5 million shares of common stock. Since the selling stockholders
may sell all or some of their shares of common stock that have been registered
pursuant to this prospectus only if we sell our common stock, no estimate can
be made of the aggregate number of shares of common stock that will be sold
under this prospectus and any prospectus supplement by the selling stockholders
or owned by the selling stockholders upon completion of any such sale, but such
information will be provided in a prospectus supplement prior to the sale.
The shares of common stock that may be offered by the selling stockholders
under this prospectus were acquired upon conversion of shares of our preferred
stock purchased in private transactions prior to our initial public offering on
August 4, 2000. In those transactions, we granted the selling stockholders
rights to register the shares of common stock owned by them for resale subject
to reductions or cutbacks in the number of shares they may sell as determined
by us and any underwriters.
Agents
We may designate agents to solicit offers to purchase from time to time. Any
agent, which may be deemed to be an underwriter as that term is defined in the
Securities Act of 1933, will be named in a prospectus supplement, and any
commissions payable by us to that agent will be set forth in the prospectus
supplement. Unless otherwise indicated in a prospectus supplement, any agent
will be acting on a best efforts basis for the period of its appointment or on
a continuing basis.
34
Underwriters
If we use underwriters for a sale of securities, the underwriters will
acquire the securities for their own account. The underwriters may resell the
securities in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale. The securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more underwriters. The obligations of the underwriters to purchase the
securities will be subject to the conditions set forth in the applicable
underwriting agreement. We and the selling stockholders may have agreements
with the underwriters, dealers and agents to indemnify them against specified
civil liabilities, including liabilities under the Securities Act of 1933. We
may change from time to time any public offering price and any discounts or
concessions the underwriters allow or reallow or pay to dealers.
Dealers
If we use dealers for a sale of securities, we will sell the securities to
the dealer as principal. The dealer may then resell the securities to the
public at varying prices to be determined by the dealer at the time of resale.
Direct Sales
We may also sell securities directly to one or more purchasers without using
underwriters, dealers or agents.
Underwriters, dealers and agents that participate in the distribution of the
securities may be underwriters as defined in the Securities Act of 1933 and any
discounts or commissions they receive from us and any profit on their resale of
the securities may be treated as underwriting discounts and commissions under
the Securities Act of 1933. We will identify in the applicable prospectus
supplement any underwriters, dealers or agents and will describe their
compensation. We and the selling stockholders may have agreements with the
underwriters, dealers and agents to indemnify them against specified civil
liabilities, including liabilities under the Securities Act of 1933.
Underwriters, dealers and agents may engage in other transactions with us or
perform other services for us or our subsidiaries.
Trading Markets and Listing Of Securities
Other than our common stock and unless otherwise specified in a prospectus
supplement, each class or series of securities will be a new issue with no
established trading market. We may elect to list any other class or series of
securities on any exchange or trading market, but we are not obligated to do
so. It is possible that one or more underwriters may make a market in a class
or series of securities, but the underwriters will not be obligated to do so
and may discontinue any market making at any time without notice. We cannot
give any assurance as to the liquidity of the trading market for any of the
securities.
Stabilization Activities
Any underwriter may engage in over-allotment transactions, stabilizing
transactions, short covering transactions and penalty bids in accordance with
Regulation M under the Securities Exchange Act of 1934. Over-allotment involves
sales in excess of the offering size, which create a short position.
Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum price. Short
covering transactions involve purchases of the securities in the open market
after the distribution is completed to cover short positions. Penalty bids
permit the underwriters to reclaim a selling concession from a dealer when the
securities originally sold by the dealer are purchased in a covering
transaction to cover short positions. Those activities may cause the price of
the securities to be higher than it would otherwise be. If commenced, the
underwriters may discontinue any of the activities at any time.
35
VALIDITY OF SECURITIES
The validity of the common stock, preferred stock, warrants and debt
securities will be passed upon for us by Gray Cary Ware & Freidenrich LLP,
Austin, Texas.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in Amendment No. 1 to our Annual Report on Form
10-K for the year ended December 31, 2000, as set forth in their report, which
is incorporated by reference in this prospectus and elsewhere in the
Registration Statement of which this prospectus is a part. Our financial
statements are incorporated by reference in reliance on Ernst & Young LLP's
report, given upon their authority as experts in accounting and auditing.
Ernst & Young LLP, independent auditors, have also audited the consolidated
financial statements of HMTF Acquisition (Bermuda) Ltd. and Temic Telefunken
Hochfrequenztechnik GmbH included in our Registration Statement on Form S-1
(Registration No. 333-36340) on pages F-26 through F-42 of that registration
statement, as set forth in their report, which is incorporated by reference in
this prospectus and elsewhere in the Registration Statement of which this
prospectus is a part. These financial statements are incorporated by reference
in reliance on Ernst & Young LLP's report, given upon their authority as
experts in accounting and auditing.
The financial statements of Transilica Inc. included in Amendment No. 2 to
the Form 8-K dated December 5, 2001 and incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said report.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference the information we file with
them, which means:
. incorporated documents are considered part of this prospectus;
. we can disclose important information to you by referring you to those
documents; and
. information that we file with the SEC will automatically update this
prospectus.
The following documents that we filed with the SEC either pursuant to the
Securities Act of 1933 or the Securities Exchange Act of 1934 are incorporated
by reference and made a part of this prospectus:
. Amendment No. 1 to our Annual Report on Form 10-K for the fiscal year
ended December 31, 2000;
. Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001;
. Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2001;
. Our Quarterly Report on Form 10-Q for the quarter ended September 30,
2001;
. Our Amendment No. 2 to our Current Report on Form 8-K dated December 5,
2001, and originally filed with the SEC on November 15, 2001; and
. The description of our securities contained in Item 1 to our
Registration Statement on Form 8-A filed with the SEC on July 14, 2000.
In addition, pursuant to Rule 3-05(b)(4)(iii) of Regulation S-X, the
consolidated financial statements of HMTF Acquisition (Bermuda) Ltd. ("HMTF
Acquisition"), and Temic Telefunken Hochfrequenztechnik GMBH ("Temic") that
appear on pages F-26 through F-42 of our Registration Statement on Form S-1
(Registration No. 333-36340) are incorporated herein by reference.
This prospectus is part of a registration statement on Form S-3 filed with
the SEC. We are incorporating by reference the documents listed above and any
future filings that we make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 prior to the sale of all the
securities covered by this prospectus.
36
We will provide, without charge, to each person to whom this prospectus is
delivered, upon oral or written request, a copy of any or all of the documents
incorporated by reference in this prospectus (other than exhibits to those
documents unless the exhibits are specifically incorporated by reference into
the information that this prospectus incorporates). Written or telephone
requests should be directed to Investor Relations at Microtune, Inc., 2201
Tenth Street, Plano, Texas 75074, telephone number (972) 673-1600.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, along with other information,
with the SEC. You may read and copy any document we file at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. The SEC maintains an Internet site
that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The address of that
website is www.sec.gov.
This prospectus constitutes part of a registration statement on Form S-3
filed under the Securities Act with respect to the securities offered. As
permitted by the SEC's rules, this prospectus omits some of the information,
exhibits and undertakings included in the registration statement.
Statements contained in this prospectus as to the contents of any contract
or other document are not necessarily complete, and in each instance we refer
you to the copy of the contract or document filed as an exhibit to the
registration statement, each such statement being qualified in all respects by
that reference.
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