<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended JANUARY 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______________ to ______________
Commission File Number 1-5609
UNITRODE CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 04-2271186
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7 CONTINENTAL BOULEVARD, MERRIMACK, NEW HAMPSHIRE 03054
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (603) 424-2410
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
COMMON STOCK, PAR VALUE $.20 NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
<TABLE>
<CAPTION>
Title of class Market
-------------- ------
<S> <C>
COMMON STOCK WARRANTS NASDAQ SMALLCAP MARKET
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
Registrant as of April 5, 1996, was $281,038,097. As of April 5, 1996, there
were 11,487,723 shares of the Registrant's common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates certain portions of the information from the
definitive proxy statement by reference for the Annual Meeting of Stockholders
to be held June 3, 1996.
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UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
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PART I.
ITEM 1. BUSINESS
General Development of the Business
Unitrode Corporation (the "Company" or "Unitrode") was founded in 1960 and is
incorporated under the laws of Maryland. Since its inception, the Company and
its subsidiaries have designed, manufactured, marketed, and sold electronic
components and sub-systems. After divesting various businesses from 1991 through
1994, Unitrode is now focused on the analog/linear and mixed-signal integrated
circuits business.
On May 31, 1991, Unitrode sold its subsidiary, Power General Corporation, to
Nidec Corporation. The Company sold its Semiconductor Products Division to Micro
USPD Inc., a wholly-owned subsidiary of Microsemi Corporation on July 7, 1992.
During fiscal year 1995, the Company divested two additional operating
divisions: Powercube Corporation to Natel Engineering Company, Inc. on June 23,
1994 and the Micro Networks Division to SMC Acquisition Corporation on October
12, 1994. For further information, reference is hereby made to Note D to the
Company's consolidated financial statements included in Part II, Item 8, hereof.
Financial Information about Industry Segments
The Company and its subsidiaries operate within a single industry segment, the
manufacture and sale of electronic components, and have various classes of
products within that one segment.
Description of the Business
GENERAL
The Company currently designs, manufactures, markets and sells a range of
analog/linear and mixed-signal integrated circuits (ICs). This business was
founded in 1981. The Company's products are principally proprietary,
high-performance analog/linear and mixed-signal integrated circuits which are
used in a variety of applications in EDP/computer, telecommunications,
industrial control and instrumentation, defense/aerospace, and automotive
markets. For the most part, the ICs are used either to control switching power
supplies and small electronic motors, or as high-speed interface and
communication circuits between various pieces of electronic equipment.
THE ANALOG/LINEAR INTEGRATED CIRCUIT INDUSTRY
Integrated circuits are the building blocks of all electronic products today and
may be classified as either analog or digital, depending upon the technique used
to process or act upon electronic signals. Digital circuits process binary
(either "on" or "off") signals that are used mostly in computer memory or logic
devices and in micro-processors. Analog circuits process "real world" signals
which measure physical conditions, such as temperature, force, speed, and
pressure, the frequency and wavelength of which vary continuously. Analog
circuits are used to amplify, monitor, condition, or transform these signals or
to interpret these signals for use by digital logic. Advancements in technology
have led to the development of mixed-signal circuits which combine certain types
of analog and digital functions on the same IC in order to reduce space,
increase reliability, and improve performance.
Worldwide merchant sales of analog ICs were estimated at approximately $16.6
billion in calendar year 1995, or approximately 15% of the total integrated
circuit market, according to World Semiconductor Trade Statistics, Inc. The
Company estimates that its served available market, the portion of the market in
which its products directly compete, is about $1.4 billion. The Company's share
of this market is estimated at about 8.4%.
The Company believes that the analog/linear integrated circuit market offers
certain advantages compared to the digital market. The life cycles of products
in the analog integrated circuit market tend to be longer and customer pricing
is less volatile than the digital market. The value in the product is usually
the result of design innovation utilizing a variety of manufacturing process
technologies to address specific customer applications, many of which are in
so-called "niche" markets. The capital requirements for the analog/linear IC
business are lower than those in the digital IC area. In addition,
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foreign competition to date has been less interested in the analog/linear IC
business because the products address smaller markets.
PRODUCTS AND MARKETS
Advancements in digital processing, such as requirements for lower power and
higher operating frequencies, are driving innovation in analog/linear circuitry.
Another significant force in the marketplace is the need to reduce the size and
weight of components, particularly for portable and hand-held uses where these
features are critical. As a result, more and more functions are designed onto a
single chip, requiring both advancements in design and improvements in process
technology.
The Company's product offerings are comprised of analog ICs for power supply
control, motor control, lighting, power driving, power quality and power
factoring, as well as high-speed and high-power interface applications. Products
are developed as a result of careful market analysis, a close working
relationship with its customers, and a thorough understanding of their
applications. As a result, most of the products are based upon proprietary
designs and are considered application specific standard products (ASSPs)
because they are designed for targeted tasks. Some of these products have become
standards in the industry.
The Company's major product categories and their functions are:
Power Supply Control (about 40% of sales): These circuits are used in switching
power supplies (either AC/DC or DC/DC) to modulate, amplify, or regulate current
or voltages, or to protect other circuitry from irregular, spurious, or
erroneous signals. Examples of such products are current-mode pulse-width
modulators (PWMs), resonant-mode ICs, power factor pre-regulator ICs, phase
shifted PWMs, and battery charger ICs. Using these advanced control ICs, a
customer can design a power supply that is smaller and more efficient, critical
attributes of today's power supply applications.
Data Transmission/Interface (about 29% of sales): Interface circuits transfer
data signals between or within (an) electronic system(s). These circuits are
used as drivers and receivers in high-speed data transmission, as well as for
active termination. The Company's largest product line in this family is used
principally to provide active termination for 18 and 9 lines of data
transmission in small computer systems interface (SCSI) applications. Mixing and
matching the 18- and 9-line terminators allow designers flexibility in
terminating wide-SCSI busses with 18 and 27 lines. In fiscal year 1996 the
Company introduced a technically advanced family of fast/wide-SCSI circuits
which operate at data rates of 40 megabytes per second.
Motor Control (about 23% of sales): These ICs are designed to control the
position, speed, braking, and power consumption of small, fractional-horsepower
DC electric motors, such as servo, stepper and DC brushless motors. These
products combine logic with the power output required to control varied loads.
Also included in this product family are full-bridge power amplifiers which
serve as voice-coil driver ICs used predominantly for precise positioning
applications, such as that required in high-density disk drive heads.
Special Function/Power Drivers (about 8% of sales): These circuits complement
high-frequency PWMs and motor control ICs. Driver circuits are used in numerous
high-performance applications that require high speed and power, high-voltage
isolation, and intelligent switching. These power driver circuits are also used
in combination to provide control, protection, and high power in complex
applications. Further integration of driver and PWM circuit functions onto the
same IC usually lessens the number of discrete components needed, thereby
reducing space and increasing reliability.
These products serve a broad range of markets including the EDP/computer,
telecommunications, industrial control and instrumentation, defense/aerospace,
and automotive. The following table identifies the typical user applications by
market:
3
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UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
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<TABLE>
<CAPTION>
MARKET USER APPLICATION
<S> <C>
EDP/Computer Mainframes
Desktop & Notebook PCs
Terminals
Printers
Disk, Tape Drives, & RAIDS
Plotters
Battery Chargers/Monitors
Wireless Data Transmission
Portable Power
Telecommunications Switching Stations
Routers & Hubs
Terminal Servers
Modems / Fax Machines
Cellular Phones
Global Positioning Systems
Battery Chargers/Monitors
Industrial Control HVAC
& Instrumentation Robotics
Lamp Ballasts
Utility Equipment
Power Management
Factory Automation
Video Displays
Energy Management
Efficient Lighting Systems
Defense/Aerospace Satellites
Aircraft Controls
Advanced Weapons
Missile Systems
Displays
Automotive High Intensity Lighting
Intelligent Suspensions
Fan Controls
Airbags
Dashboard Displays
Anti-Lock Brake Systems
Energy Management
</TABLE>
SALES AND DISTRIBUTION
Unitrode's products are sold worldwide by its sales force and through a network
of independent sales representatives and distributors. The Company has about
7,400 customers. About 77% of sales are either through its direct sales force or
manufacturer's representatives, and the remaining 23% is through a distribution
network.
The Company has three field sales offices to serve selected geographical areas
in North America and also has agreements with five distributors in North America
who maintain more than 200 branch locations.
For the year ended January 31, 1996, international sales represented 67% of
sales. International sales are conducted through five sales offices, located in
England, Germany, Hong Kong, Italy, and Singapore. The Company also has
agreements with distributors or sales representatives for locations throughout
Europe, Asia, Japan, South America,
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Australia, New Zealand, and the Middle East. Sales to customers in Europe are
shipped through the Company's international trading operation located in
Shannon, Ireland.
The Company warrants its products to be free from defects in material or
manufacture and to conform to its published ratings and characteristics in
effect at the time and place of shipment. The Company also has agreements with
certain distributors to provide price protection for inventories held by the
distributor at the time of reductions in published list prices and, under
certain circumstances, for stock rotation on unsold product.
CUSTOMERS
The Company's customer base is comprised of merchant manufacturers, electronics
distributors, and customers with captive manufacturing operations. The captive
manufacturers use the Company's products as integral components of their
equipment and systems. In certain cases, product is sold to a
subcontract-assembly company specified by the captive manufacturer. The merchant
manufacturers typically function as original equipment manufacturers (OEMs) as
well as suppliers of sub-systems to other OEMs. About two-thirds of sales are to
customers with applications in the electronic data processing (EDP) market. Some
segments within this market, such as certain kinds of personal computers, disk
drives, printers, and other peripherals, have been somewhat volatile in the
past. In particular, competition among companies in the disk-drive business has
been intense from time to time. Revenues from product sales to one of these
accounts, Western Digital Corporation, represented approximately 23%, 22% and
18% of sales in fiscal years 1996, 1995 and 1994, respectively. The loss of this
customer would have a material adverse effect upon the Company's business.
The Company has no material contracts with the United States Government.
BACKLOG
The Company's backlog was approximately $37.7 million on January 31, 1996, all
of which is expected to be shipped within the current fiscal year. Backlog at
January 31, 1995 was approximately $28.1 million. The Company recognizes backlog
as orders for product, from an end customer or distributor, that have a specific
schedule for delivery. While annual purchase agreements are common in the
industry, the Company does not recognize such agreements as backlog.
MANUFACTURING
In 1981, the Company purchased a manufacturing facility in Merrimack, New
Hampshire ("Merrimack"), and converted it for wafer fabrication dedicated to IC
manufacturing. Since that time, the original building has been expanded and
upgraded to satisfy the need for increased capacity and additional process
technologies, as well as to meet requirements for quality and product
reliability. During fiscal year 1995, the Company completed installation of and
commenced operations in a 10,000 square-foot wafer fabrication expansion which
includes class-10 photo-lithography capability.
As of January 1996, the Company's major wafer fabrication process technologies
included standard and enhanced bipolar, bipolar-CMOS (BiCMOS), and
bipolar-CMOS-DMOS (BCDMOS). The majority of the bipolar processing takes place
at the Company's Merrimack facility, and the majority of the BiCMOS and BCDMOS
processing occurs at GMT Microelectronics Corporation ("GMT"), an independent
foundry in which the Company has a minority investment. (See Note D to the
Company's consolidated financial statements included in Part II, Item 8 hereof).
The Company's bipolar processes are ideal for both precision analog circuits and
power management functions. The BiCMOS process is well-suited for high density
linear designs, especially where speed and lower power consumption are of
primary importance. The BCDMOS process offers all of the advantages of BiCMOS
and, with the addition of lateral DMOS devices, accomodates designs requiring
higher current and voltages. Each of the three major fabrication technologies
has numerous processing options available to enable the product designer to
achieve the optimal product functionality, reliability, and performance.
During fiscal year 1996, the Merrimack wafer fabrication facility produced
approximately 87% of the wafers required to meet customer demands. The Company
also has agreements with several foundries to supply additional wafers as
required, the most significant of which is an agreement with GMT
Microelectronics Corporation. The agreement stipulates that as long as the
Company maintains its investment in GMT, up to 30% of GMT's capacity will be
reserved for the Company.
In the second half of fiscal year 1996, the Company's Merrimack wafer
fabrication facility was operating close to full capacity. The Company's Board
of Directors on December 1, 1995 authorized approximately $2.9 million for
capital expenditures to add equipment to the existing wafer fabrication
facility, which will increase capacity by approximately 20%
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starting in the second half of fiscal year 1997. In addition, the Company plans
to undertake a wafer fabrication expansion program, which is expected to cost
approximately $59 million and to be completed over the next several years
according to the demand for the Company's products.
Following wafer fabrication and wafer testing, the wafers are cut into die which
are then assembled into circuit packages. As is common in the industry, most of
the assembly is done by various IC assembly vendors located in Asia, although
some assembly which requires a U.S. site is performed at the Merrimack facility.
The Company currently believes that adequate assembly capacity exists and that
alternative sources could be obtained, should the need arise, without
significant interruption of the manufacturing process.
The Company performs nearly all of its final testing for reliability and
conformance on its products at its wholly owned subsidiary, Unitrode Electronics
Singapore Pte. Ltd. ("UES"), located in Ayer Rajah, Singapore. The Company
opened UES in the fall of 1986, and completed the latest facility expansion
there in fiscal year 1994. During fiscal 1996, the Company used one independent
source to test less than 10% of its products. It is anticipated that the Company
will continue to use independent sources to test a small percentage of its
needs.
RAW MATERIALS
The Company believes that it has adequate sources of raw materials available.
Single crystal silicon is used as a semiconductor material in its integrated
circuits. Shortages in the supply of certain raw materials, including silicon
wafers and plastic molding compounds for packages, have occurred from time to
time. As is typical in the industry, the Company must allow for significant lead
times for certain raw materials. In fiscal year 1996, the Company entered into a
multi-year agreement with a manufacturer of silicon wafers for a guaranteed
wafer supply in order to support the Company's requirements. (See Note J to the
Company's consolidated financial statements included in Part II, Item 8 hereof).
Multiple sources for raw materials are generally maintained. The Company has not
experienced any shortage of energy and none is anticipated.
WORKING CAPITAL
The Company's business does not require working capital in excess of levels that
are considered normal in the industry. Further, it has not been necessary for
the Company to carry significant or unusual amounts of inventory to meet rapid
delivery requirements to customers or to assure itself of a continuous allotment
of raw materials from suppliers. The Company initiates most of its production
based upon its backlog of orders. As is common in the industry, certain
commodity items which are expected by customers to have short lead times are
produced in advance of firm orders.
PRODUCT QUALITY ASSURANCE AND RELIABILITY
The Company is committed to Total Quality Excellence(TQE) in all aspects of its
business. The TQE program is supported by continuous improvement teams and by
employee training programs. The disciplines of statistical process control are
practiced throughout the manufacturing operations, from material procurement
through shipment of the finished product. The Company routinely qualifies
suppliers and subcontractors according to established standards. Internal
practices are also in place to qualify outsourced fabrication processes and
assembly procedures.
In fiscal year 1996, the International Standards Organization completed its
review of the Company's two manufacturing facilities (Merrimack and UES) and
renewed the Company's registration to ISO 9001/9002, respectively. The Merrimack
facility has continuously maintained certification for JAN Class B linear
microelectronics by the Defense Electronics Supply Center (DESC) since November
1985, conformance to MIL-STD 883 Class B and Class S, as well as approval for
standard military DESC drawings.
PATENTS, LICENSES, AND TRADEMARKS
The Company owns a number of patents for product and processing techniques, as
well as certain trademarks relating to its business. The Company also has a
number of patent applications pending review. These patents and trademarks
provide it with some competitive advantage. However, Unitrode's business
prospects are dependent primarily upon the ability of its employees to work
closely with customers and develop and deliver high quality, reliable products
at competitive prices, rather than on its ability to obtain and defend patents
and trademarks. No patent or trademark related to a particular product is of
material importance to the total business.
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Unitrode continues to receive royalty revenues from International Rectifier
Corporation (IRC) as a result of a 1983 exclusive licensing agreement for
certain MOSFET technology which, with the Company's consent and in consideration
of royalty payments, IRC licenses to others. This agreement continues until the
year 2000. Depending upon the number of licensees and the uses of the
technology, royalty revenue will vary, but it is not expected to be material to
overall revenues.
RESEARCH & DEVELOPMENT
Most of the Company's development is directed towards new product designs and,
to a lesser extent, towards process technology to support these designs. At
January 31, 1996, 99 employees supported the Company's research and development
efforts. Design engineering offices are located in Merrimack, New Hampshire; San
Jose, California; and Cary, North Carolina. Field application engineers are
employed to work closely with customers to solve design problems and to
anticipate future product directions.
Research and development expenditures from continuing operations were
approximately $14,674,000, $8,766,000 and $6,142,000 in the years ended January
31, 1996, 1995 and 1994, respectively.
COMPETITION
The Company competes in the high-performance segment of the analog/linear and
mixed signal integrated circuit market specifically addressing power supply
control and management, motor control, and data transmission/interface
applications. Unitrode has a number of competitors, some of which are
substantially larger than the Company, with significantly greater resources.
Unitrode would be adversely affected if its competitors introduced
technologically superior products or offered their products at prices
significantly lower than those of the Company's products. The major competitive
factors include innovative design, product performance, price, reliability,
quality, customer support, and timely delivery. The Company's ability to compete
depends in large part upon the timely introduction of products that are
technologically innovative and which provide cost-effective solutions for its
customers.
SEASONAL ASPECTS
None.
ENVIRONMENTAL REGULATION
The Company expects no material adverse effect upon earnings, capital
expenditures, or its competitive position as a result of compliance with
federal, state or local provisions which have been enacted or adopted regulating
the discharge of materials to the environment, or otherwise relating to the
protection of the environment (see "Legal Proceedings"). In fiscal year 1995
Unitrode completed a program to eliminate chlorinated fluorocarbons from its
manufacturing fabrication processes. Its facilities have been designed to comply
with government regulations, and the Company maintains policies and procedures
to assure on-going compliance. There can be no assurance, however, that changes
in such regulations will not impose costly equipment or other requirements on
the Company as well as others in the industry.
EMPLOYEES
As of January 31,1996, the Company had 620 employees of which 134 were employed
outside of the United States. Approximately 403 employees support the
manufacturing process, 67 employees conduct the sales and marketing effort, 99
employees support research and development, and 51 employees provide
administrative support.
Unitrode has never had a labor work stoppage, and no employees are represented
by a labor organization. The Company considers its employee relations to be
good.
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Financial Information about Foreign and Domestic Operations and Export Sales
Reference is hereby made to Note L to the Company's consolidated financial
statements included in Part II, Item 8 hereof for information about foreign and
domestic operations and export sales.
ITEM 2. PROPERTIES
The Registrant's corporate offices are located in Merrimack, New Hampshire. Its
principal manufacturing facility is located in New Hampshire. All buildings are
well-maintained, suitable and adequate for the present activities of the
Registrant. Information regarding the principal plants and properties appears
below:
<TABLE>
<CAPTION>
Approximate Owned or Lease
facility size leased; land expiration
Location Description (square feet) area owned date
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Merrimack, New Hampshire Manufacturing; 110,100 Owned; 14 acres --
General Office
Ayer Rajah, Singapore Manufacturing; 13,600 Leased 1996/
General Office 1999
Shannon, Ireland Warehouse; 10,000 Leased 2009
General Office
Worcester, Massachusetts (1) Manufacturing; 83,000 Owned; 6 acres --
General Office
San Jose, California General Office 3,200 Leased 1998
Cary, North Carolina General Office 2,000 Leased 1997
Lexington, Massachusetts (1) General Office 16,000 Leased 1999
Lowell, Massachusetts Land -- Owned; 1.3 acres --
Methuen, Massachusetts (1) Manufacturing 30,000 Owned; 4 acres --
</TABLE>
(1) Facility is leased or sublet to a third party(ies) as of January 31, 1996.
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ITEM 3. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
The Company has been notified by responsible state authorities in California
that it is one of a number of "potentially responsible parties" under relevant
state statutes with respect to a former hazardous waste treatment facility in
Escondido, California. The treatment facility was owned and operated by an
entity wholly unrelated to the Company. The Company, along with other
financially viable potentially responsible parties, has entered into a consent
decree with governmental authorities regarding the voluntary payment of cleanup
costs and voluntary cleanup measures with respect to the California site and has
paid past cleanup costs at the California site of approximately $54,000. The
Company has established a reserve which the Company believes to be adequate for
future environmental remediation costs at this site, based upon the probable and
reasonably estimable work to be done at the site, the other potentially
responsible parties involved at the site and the Company's volumetric level of
contribution to the site which is less than one-half of one percent of the total
volume of waste contributed to the site by the parties to the consent decree.
The Company has entered into settlement agreements as a "de minimus" contributor
requiring the payment of an aggregate amount of approximately $161,000 in
settlement of all known governmental claims against the Company related to five
other alleged hazardous waste treatment sites. Although the nature of the
settlements does not preclude, under certain circumstances, additional
governmental action or litigation by non-participating parties, no claims have
been made regarding these sites.
In view of the difficulty in quantifying the potential costs or damages arising
from the alleged environmental hazards, it is not possible to determine with
certainty the extent of the Company's potential exposure at any of the sites.
However, based upon its investigation to date, the Company believes that its
exposure (without giving effect to the joint and several liability provisions
referred to below) would not be material and the Company believes that the
reserves established with respect to these liabilities will be adequate.
Further, although statutes provide that all "potentially responsible parties"
may be held jointly and severally liable for the costs of investigation and
remediation of a site, after consideration of the liabilities of other
"potentially responsible parties" with respect to these sites and their
respective levels of financial responsibility, the Company believes that its
liability with respect to the sites is not material. If any liability on the
part of the Company were to be measured by the ratio of the waste attributable
to the Company over the total waste involved, based on information presently
available to the Company, the Company's aggregate liability with respect to the
unsettled sites would not be material.
The Company is involved in investigation and cleanup under the supervision of
the Maine Department of Environmental Protection of groundwater and soil
contamination at the former Westbrook, Maine wafer fabrication facility of its
former Semiconductor Products Division. Although the facility was closed in
1989, the Division was sold in 1992 and the Westbrook, Maine real estate was
sold in 1994, the Company has retained responsibility for environmental
remediation at this site. The ultimate cost of cleanup at this site is difficult
to predict given the uncertainties regarding the extent of the required cleanup,
the interpretation of applicable laws and regulations and alternative cleanup
methods. However, based upon the Company's experience at the site, the Company
has established a reserve, taking into account the probable and reasonably
estimable work to be done at the site, which the Company believes to be
adequate.
Environmental reserves are reviewed as events and developments warrant and
adjusted to reflect the likelihood of additional environmental expenditures.
Based upon information currently available to the Company, management believes
that any additional aggregate liability to which the Company may be subjected
from all the above-mentioned sites would not be material.
OTHER
On August 18, 1994, the U.S. District Court for the District of Massachusetts
entered an order preliminarily approving a settlement and certifying a class
only for settlement purposes in the lawsuit entitled William Steiner v. Unitrode
Corp., et.al., Civil Action No. 90-11443-MLW. In the suit, the plaintiff,
representing a settlement class of purchasers of the Company's common stock
between March 2, 1988, and March 16, 1990, alleged violation of the antifraud
provisions of the federal securities laws by the Company and certain of its
former officers and directors. An order giving final approval to the settlement
was entered by the court on December 7, 1994, which involved a settlement amount
of $3 million consisting of $1.5 million in cash and $1.5 million in stock
warrants to purchase the Company's common stock. The Company paid the $1.5
million cash settlement in the fourth quarter of fiscal year 1995 which was
reimbursed to the Company under the
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Company's insurance coverage. Pursuant to an order issued by the Court on
October 17, 1995, the claims administrator distributed 247,883 warrants and
cash, net of expenses, valued at $3 million to the court-approved settlement
class of shareholders and their counsel.
In addition to the matters described above, from time to time as a normal
incidence of the nature of the Company's business, various claims, charges or
litigation are or may be asserted or commenced against the Company relating to,
among other things, contractual matters, patent disputes, environmental matters
and product liability. While there can be no assurance that the Company will
prevail in all these matters, the Company does not believe that these matters
will have a material adverse effect on the Company's consolidated financial
position or results of operations. However, an adverse resolution of one or more
of such matters could have an adverse effect on the Company's consolidated
results of operations in a quarter in which such matters might be resolved.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's securities holders during
the fourth quarter of the fiscal year ended January 31, 1996.
Executive Officers of the Registrant
Information relating to the executive officers of the Company is set forth
below. All officers held office as of January 31, 1996.
<TABLE>
<CAPTION>
NAME, AGE AND POSITION BUSINESS EXPERIENCE DURING PAST FIVE YEARS
<S> <C>
Edward H. Browder- 55 President (January 1996 to present); Director (June 1991 to
President and Director present); President of Seacliff Technologies (April 1993 to
December 1995); President of Concurrent Logic, Inc. (Prior
to April 1993)
Allan R. Campbell - 54 Senior Vice President, General Counsel and Secretary
Senior Vice President, General Counsel (June 1994 to present); Vice President, General Counsel and
and Secretary Secretary (May 1990 to May 1994)
Robert L. Gable - 65 Chairman and Chief Executive Officer (June 1990 to present);
Chairman and Chief Executive President (March 1992 to January 1996)
Officer; Director
S. Kelley MacDonald - 50 Vice President, Corporate Communications
Vice President, (June 1992 to present); Director of Corporate
Corporate Communications Communications (June 1990 to May 1992)
Patrick J. Moquin - 47 Vice President, Human Resources (August 1995 to present);
Vice President, Human Resources Senior Director, Human Resources, Worldwide Field Operations,
Sun Microsystems, Inc. (May 1994 to July 1995); Various senior-
level human resources positions at Sun Microsystems, Inc.
(April 1986 to April 1994)
Richard V. Paulson - 53 Executive Vice President, Marketing and Strategy
Executive Vice President, (February 1995 to present); Vice President, Corporate Development
Marketing and Strategy (November 1994 to January 1995); Vice President; General
Manager, Micro Networks Division (October 1991 to October 1994);
President, Dymec, Inc. (June 1989 to September 1991)
</TABLE>
10
<PAGE> 11
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME, AGE AND POSITION BUSINESS EXPERIENCE DURING PAST FIVE YEARS
<S> <C>
Dennis A. Peasenell - 52 Executive Vice President, Operations (February 1995 to present);
Executive Vice President, Vice President; President, Unitrode Integrated Circuits
Operations Corporation (January 1993 to January 1995); Vice President;
General Manager, Unitrode Integrated Circuits Corporation
(May 1990 to December 1992)
Cosmo S. Trapani - 57 Executive Vice President and Chief Financial Officer
Executive Vice President and (June 1994 to present); Vice President, Chief Financial
Chief Financial Officer Officer and Treasurer (August 1990 to May 1994)
</TABLE>
There are no family relationships among these officers, nor any arrangement or
understanding between any officer and any other person pursuant to which the
officer was elected.
To the Company's knowledge, based solely upon the review of copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended January 31, 1996 the Company
complied with all Section 16(a) filing requirements applicable to its officers,
directors and any beneficial owners holding greater than ten percent of its
common stock, except that Form 3 reports relating to the election of Louis E.
Lataif and James T. Vanderslice as directors of the Company were filed three
weeks late due to an administrative error.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Reference is hereby made to Note M to the Company's consolidated financial
statements included in Part II, Item 8 hereof regarding the Market for the
Registrant's Common Equity and Related Stockholder Matters.
11
<PAGE> 12
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR FINANCIAL SUMMARY
Unitrode Corporation and Consolidated Subsidiaries
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net Sales $ 116,149 $ 95,359 $ 85,994 $ 86,195 $ 105,914
Royalties 2,395 1,722 921 1,158 1,761
Gross Profit 63,378 48,275 39,262 34,943 26,472
As a % of Net Revenues 53% 50% 45% 40% 25%
Depreciation and Amortization 8,998 7,430 5,901 6,502 11,708
R&D Expenses 14,674 9,433 8,064 6,352 7,062
Operating Income (Loss) 26,392 11,373 11,871 7,993 (17,210)
Pretax Income (Loss) 27,952 12,522 12,844 9,119 (16,400)
Tax Provision Rate 37% 26% 35% 32% --
Net Income (Loss) 17,519 9,249 16,448 9,119 (16,400)
As a % of Net Revenues 15% 10% 19% 10% (15)%
As a % of Beginning Stockholders'
Equity 21% 11% 24% 14% (20)%
- ------------------------------------------------------------------------------------------------------------------------------
SHARE DATA
Net Income (Loss) Before Extraordinary
Item and Accounting Change $ 1.47 $ .75 $ .65 $ .48 $ (1.24)
Net Income (Loss) 1.47 .75 1.27 .70 (1.24)
High and Low Price 17.63-32.50 13.50-21.00 9.88-15.25 6.06-12.06 4.00-7.13
Closing Year-End Price 25.94 18.63 14.88 11.88 6.75
Year-End Book Value 8.06 6.93 6.69 5.42 4.93
Equivalent Shares Outstanding
(in thousands) 11,907 12,360 12,924 13,110 13,234
Number of Stockholders of Record 652 722 858 894 946
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL DATA
Cash/Short-Term Investments $ 36,228 $ 30,714 $ 30,756 $ 25,850 $ 22,129
Total Assets 118,424 103,304 101,923 85,860 92,935
Net Working Capital 47,147 37,543 43,378 33,020 29,235
Current Ratio 2.95 2.79 3.43 2.81 2.02
Plant and Equipment-net 35,289 32,019 29,595 22,270 25,836
Capital Expenditures 11,794 15,591 12,573 9,591 4,657
Stockholders' Equity 92,417 81,591 84,036 67,629 64,185
Total Interest Bearing Debt -- 300 530 761 992
- ------------------------------------------------------------------------------------------------------------------------------
PROFORMA OPERATING RESULTS EXCLUDING DISPOSED OPERATIONS
Net Sales $ 116,149 $ 87,231 $ 64,602 $ 49,748 $ 39,557
Royalties 2,395 1,722 921 1,158 1,761
Gross Profit 63,378 46,311 34,166 25,732 21,530
As a % of Net Sales 53% 51% 51% 49% 50%
Depreciation and Amortization 8,998 6,525 4,231 3,559 3,444
R&D Expenses 14,674 8,766 6,142 4,463 3,439
Operating Income 26,392 17,770 13,384 8,257 7,043
Pretax Income 27,952 18,810 14,247 9,272 7,811
Tax Provision Rate 37% 35% 34% 33% 34%
Net Income 17,519 12,226 9,403 6,212 5,155
As a % of Net Revenues 15% 14% 14% 12% 12%
Net Income per Share 1.47 .99 .73 .47 .39
</TABLE>
12
<PAGE> 13
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Fiscal Year 1996 Versus Fiscal Year 1995
RESULTS OF OPERATIONS
Net revenues for fiscal year 1996 were $118.5 million compared with $97.1
million in fiscal year 1995 for an increase of $21.5 million or 22%. Excluding
Powercube Corporation ("Powercube") and the Micro Networks Division ("Micro
Networks"), which were sold in fiscal year 1995, net revenues were $118.5
million for fiscal year 1996 compared with $89.0 million for the prior year, an
increase of 33%. Integrated circuit sales, which now represent the total
business of the Company, increased due to strong demand for products in the
computer peripherals segment of the electronic data processing markets. Product
sales to one of the Company's customers represented approximately 23% and 22% of
integrated circuits sales for fiscal years 1996 and 1995, respectively.
Approximately 67% of analog integrated circuit sales in fiscal year 1996 were
international compared with 63% in fiscal year 1995. Each of the Company's
geographic markets reported increases in net sales in fiscal year 1996 with the
largest volume increase occurring in the Far East.
Gross profit as a percentage of net sales was approximately 53% for fiscal year
1996 compared with 49% for fiscal year 1995. Excluding the disposed operations,
gross profit increased to 53% from 51% in the prior year. This improvement was
primarily due to a lower average cost per unit as a result of manufacturing
efficiencies on the strength of greater capacity utilization and, therefore,
absorption of fixed costs over the increased sales volume.
Research and development expenses from continuing operations were 13% of net
sales, or $14.7 million, compared with 10%, or $8.8 million in the prior year.
This increase of approximately $5.9 million related primarily to increased
staffing, additional product and process development efforts to support
opportunities in the Company's markets, as well as the start-up of the Company's
new design center in San Jose, California. Selling, general and administrative
expenses, excluding disposed operations, decreased to approximately 19% of net
sales in fiscal year 1996 compared to 23% in fiscal year 1995. Fiscal year 1995
legal costs of approximately $1.2 million associated with litigation settlements
represented 1.4 percentage points of the decrease. In addition, selling, general
and administrative expenses have declined as a percentage of net sales in fiscal
year 1996 due to the increased sales volume.
In the fiscal year ended January 31, 1995, the Company had unusual charges of
$5.5 million as a result of the disposal of Powercube and Micro Networks. (For
further information, see Note D to the Company's consolidated financial
statements.)
Interest income increased by approximately $433,000 principally due to an
increase in the weighted average interest rate earned on cash and short-term
investments.
The consolidated effective tax rate for fiscal year 1996 was 37.3% compared to
26.1% in fiscal year 1995. The effective tax rate in fiscal year 1995 benefited
from the sale of Micro Networks and Powercube, as well as a reduction of $1.5
million in the valuation allowance for tax carryforwards.
Net income was $17.5 million in fiscal year 1996 compared with $9.2 million in
fiscal year 1995. Excluding disposed operations, net income increased from $12.2
million, or $.99 per share, to $17.5 million, or $1.47 per share, for an
increase of 43%. Management has concluded that the effect of inflation had no
significant impact on operations.
Integrated circuit bookings in fiscal year 1996 were $125.7 million, an increase
of $25.5 million or 25% from the prior year. Backlog at January 31, 1996
increased 34% to $37.7 million compared with $28.1 million at January 31, 1995.
New orders and backlog improved due to the strong demand for products in the
computer peripherals segment of the electronic data processing markets. Bookings
were $34.6 million in the fourth quarter of fiscal year 1996 which is an
increase of 38% from the comparable period in the prior year. The book-to-bill
ratio for fiscal year 1996 was 1.08 compared to 1.15 in fiscal year 1995,
excluding disposed operations.
13
<PAGE> 14
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
FINANCIAL CONDITION
Cash and short-term investments at January 31, 1996 increased by $5.5 million
since the beginning of fiscal year 1996. The principal sources of cash were
$25.2 million from operating activities, $1.5 million in proceeds from the sale
of assets and investments, and $1.1 million in proceeds from exercises of stock
options under the Company's Stock Option Plans. The principal uses of cash were
$11.8 million for capital expenditures and $10.0 million for the repurchase of
the Company's common stock. Capital expenditures in fiscal year 1996 were
primarily for increased capacity and new process development projects.
The ratio of current assets to current liabilities improved to 2.95:1 at the end
of fiscal year 1996 compared with 2.79:1 at the end of the previous year.
Working capital of $47.1 million at January 31, 1996 increased by $9.6 million
from January 31, 1995. On October 20, 1995, the Company entered into a
three-year $25.0 million revolving credit agreement with BayBank, which replaced
the previous unused $15.0 million revolving credit agreement with another bank.
It is anticipated that the Company's operating cash needs for fiscal year 1997,
including planned capital expenditures, will be met by internally generated
funds and available cash.
The Company currently plans to make approximately $16 million in capital
expenditures in fiscal year 1997 to support ongoing operations. In addition,
the Company plans to undertake a wafer fabrication expansion program, which is
expected to cost approximately $59 million and to be completed over the next
several years according to the demand for the Company's products.
In the second half of fiscal year 1996, the Company's wafer fabrication facility
in Merrimack, New Hampshire was operating close to full capacity. The Company's
Board of Directors on December 1, 1995 authorized approximately $2.9 million for
capital expenditures to add equipment to the existing wafer fabrication
facility, which will increase capacity by approximately 20% starting in the
second half of fiscal year 1997. Future sales growth will be supported by this
internal increase in capacity as well as using wafers sourced from foundry
suppliers, including wafers from GMT Microelectronics Corporation, ("GMT"), a
foundry in which the Company has a minority investment and has a right to a
certain percentage of its output. On February 28, 1996, the Company made an
additional $1.5 million investment in GMT redeemable preferred stock which
entitles the Company to favorable pricing terms on specific products.
Accounts receivable at January 31, 1996 increased by $4.2 million from the prior
year primarily due to a higher level of sales. Receivable days sales outstanding
were 48 days at the end of fiscal year 1996 compared with 47 days at the end of
the prior fiscal year. Inventories at January 31, 1996 increased by $2.7 million
since January 31, 1995 primarily to support the anticipated increases in
production requirements.
Accrued employee compensation and benefits has increased by $2.9 million since
January 31, 1995 primarily due to incentive compensation benefits relating to
fiscal year 1996 performance. Accrued legal and settlement expenses decreased by
$1.5 million since the beginning of fiscal year 1996 following the settlement of
litigation. (For further information, see Note J in the Company's consolidated
financial statements.)
On February 21, 1995, the Company's Board of Directors authorized the repurchase
of up to 1,000,000 additional shares of its common stock. During fiscal year
1996, the Company repurchased 500,000 shares of the Company's common stock from
AlliedSignal, Inc. at an average price per share of $19.63 or a total of
approximately $9.8 million. As of January 31, 1996, there were 578,700 shares
remaining under all Board authorizations.
NEW ACCOUNTING STANDARDS
See Note A in the Company's consolidated financial statements for a discussion
of recently issued accounting standards.
14
<PAGE> 15
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
FACTORS AFFECTING FUTURE RESULTS
The Company's future operating results are difficult to predict and may be
affected by a number of factors including the timely ability to develop and
market new products, competitive pricing pressures, fluctuations in
manufacturing yields, adequate availability of wafers and manufacturing
capacity, changes in product mix and economic conditions in the United States
and international markets. Revenues from product sales to one of the Company's
customers, Western Digital Corporation, represented approximately 23% of sales
in fiscal year 1996. The loss of this customer would have a material adverse
effect upon the Company's business.
The semiconductor market has historically been cyclical and subject to
significant economic downturns at various times. While the semiconductor
industry in recent periods has experienced increased demand and constraints in
production capacity, it is uncertain how long these conditions will continue. As
a result of these and other factors, there can be no assurance that the Company
will not experience material fluctuations in future operating results on a
quarterly or annual basis.
Presently, the Company's manufacturing facilities are operating at close to full
capacity. In fiscal year 1997, the Company is planning to increase its
manufacturing capacity through expansion of its production facilities and
increased use of third-party foundries. There can be no assurance that the
Company will complete the expansion of its production facilities on time or that
third-party foundries will meet the Company's production requirements or that
the combined capacity will be sufficient to satisfy demand for its products. Any
constraints in manufacturing capacity could adversely affect the business of the
Company's customers and cause them to seek alternative sources for the products
currently obtained from the Company. The Company's additional capacity will
result in a significant increase in operating expenses, such as depreciation,
and if revenues do not increase to offset these additional expenses, the
Company's future operating results could be adversely affected. Meanwhile, other
semiconductor manufacturers are also expanding or planning to expand their
production capacity over the next several years. There can be no assurance that
the expansion by the Company and its competitors will not lead to overcapacity
in the Company's targeted markets, which could lead to price erosion that could
adversely affect the Company's operating results.
FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 ("the Act") provides a new
"safe harbor" for forward-looking statements so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed in the statement. The Company desires to
take advantage of the new "safe harbor" provisions of the Act. Certain
information contained herein, particularly the information appearing under the
headings "Business," "Results of Operations," "Financial Condition" and "Factors
Affecting Future Results" are forward-looking. Information regarding certain
important factors that could cause actual results of operations or outcomes of
other events to differ materially from any such forward-looking statement appear
together with such statement, and/or elsewhere herein.
Fiscal Year 1995 Versus Fiscal Year 1994
RESULTS OF OPERATIONS
Net revenues for fiscal year 1995 were $97.1 million compared with $86.9 million
in fiscal year 1994 for an increase of $10.2 million or 12%. Excluding Powercube
Corporation ("Powercube") and the Micro Networks Division ("Micro Networks"),
which were sold in fiscal year 1995, net revenues were $89.0 million for fiscal
year 1995 compared with $65.5 million for the prior year or an increase of 36%.
Integrated circuit sales increased due to the strengthening of the electronic
data processing markets, as well as sales of new products. Royalty income,
principally from a license agreement with International Rectifier Corporation,
was $1.7 million for fiscal year 1995 compared with $0.9 million in fiscal year
1994. Royalty income increased in fiscal year 1995 due to additional licensees
and a non-recurring lump sum payment. Approximately 63% of analog integrated
circuit sales in fiscal year 1995 were international compared with 59% in fiscal
year 1994.
Gross profit as a percentage of net sales was approximately 49% for fiscal year
1995 compared with 45% for fiscal year 1994. This improvement was primarily due
to the increased proportion of overall sales from analog integrated circuits,
15
<PAGE> 16
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
which had a significantly higher percentage of gross profit than the two
disposed operations. Excluding the disposed operations, gross profit as a
percentage of net sales was approximately 51% for both fiscal years.
Research and development expenses, excluding the disposed operations, were 10.0%
of net sales in fiscal year 1995 compared with 9.5% in the prior year. This
increase of approximately $2.6 million related primarily to increased headcount
and product development efforts. Selling, general and administrative expenses,
excluding the disposed operations, were approximately 22.7% of net sales for
fiscal years 1995 and 1994.
During fiscal year 1994, management introduced new products at Micro Networks
and Powercube, in an effort to build the businesses and diversify their markets,
and also took steps to reduce costs at both operations to offset losses due to
substantial weakness in the military market. After evaluating additional
strategies to improve operating performance in both these businesses, management
concluded in fiscal year 1995 that the sale of these two operations would enable
the Company to focus its efforts on its growing analog integrated circuits
business. Powercube was sold on June 23, 1994 and Micro Networks on October 12,
1994. The Company recorded unusual charges of $5.5 million as a result of the
disposals. (For further information, see Note D to the Company's consolidated
financial statements.)
Non-operating income in fiscal year 1995 decreased by $201,000 from the previous
fiscal year primarily due to losses on the sale of fixed assets. Interest income
increased by $369,000 principally due to an increase in the weighted average
interest earned on cash and short-term investments.
The consolidated effective tax rate for fiscal year 1995 was 26% compared to 35%
in fiscal year 1994. The lower tax rate in the fiscal year 1995 was primarily
due to one-time tax benefits associated with the sale of Powercube and Micro
Networks and a $1.5 million reduction in the valuation allowance which was
primarily for tax credit carryforwards. The tax credit carryforwards were
utilized in fiscal year 1995 for increased foreign profits. In fiscal year 1994,
the cumulative effect of implementation of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109")increased net
income by $8,100,000 or $.63 per share.
Net income was $9.2 million for fiscal year 1995 compared with $16.4 million for
fiscal year 1994. Excluding SFAS No. 109 in fiscal year 1994 and unusual charges
and related tax benefits from the sale of Powercube and Micro Networks in fiscal
year 1995, net income would have increased from $8.3 million to $11.7 million,
or 41%. Management has concluded that the effect of inflation had no significant
impact on operations.
Integrated circuit bookings in fiscal year 1995 were $100.2 million which is an
increase of $34.9 million or 54% from the prior year. The improvement was due to
the strengthening of the electronic data processing markets as well as demand
for new products. Integrated circuit bookings were $25.1 million in the fourth
quarter of fiscal year 1995 which is an increase of 49% from the comparable
period in the prior year. The book-to-bill ratio for fiscal year 1995 was 1.15
compared to 1.01 in fiscal year 1994, excluding the divested operations.
Backlog at the end of fiscal year 1995 was $28.1 million compared with $15.3
million at the end of fiscal year 1994, excluding the disposed operations. The
84% increase in backlog is principally due to the strengthening of the
electronic data processing markets as well as demand for new products.
FINANCIAL CONDITION
Cash and short-term investments at January 31, 1995 have essentially remained
the same at $30.7 million when compared to the beginning of fiscal year 1995.
The principal uses of cash were $15.6 million for capital expenditures, $14.4
million for the repurchase of the Company's common stock and $2.0 million for an
investment in GMT. The principal sources of cash were $25.4 million from
operating activities, $5.7 million in proceeds from the sale of Powercube and
Micro Networks, and $2.0 million in proceeds from exercises of stock options
under the Company's Stock Option Plans. Capital expenditures in fiscal year 1995
were primarily for increased capacity and new product development projects at
the integrated circuit business.
The ratio of current assets to current liabilities was 2.79:1 at the end of
fiscal year 1995 compared with 3.43:1 at the end of the previous fiscal year.
Working capital of $37.5 million at January 31, 1995 decreased by $5.8 million
from January 31, 1994. The Company also had available an unused $15.0 million
revolving credit agreement with Fleet Bank.
16
<PAGE> 17
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
Accounts receivable at January 31, 1995 increased by $0.8 million from the prior
year. This increase was primarily due to a higher level of integrated circuit
sales offset somewhat by the sale of Micro Networks and Powercube. Receivable
days sales outstanding were 47 days at the end of fiscal year 1995 compared with
46 days at the end of the prior fiscal year. Inventories at January 31, 1995
declined by $2.5 million and excess of cost over net assets acquired decreased
by $2.4 million, primarily due to the sale of Micro Networks and Powercube.
Other assets at January 31, 1995 increased by $3.7 million since the end of
fiscal year 1994 primarily due to the reclassification of $3.4 million for
facilities to be sold following the disposition of Powercube and Micro Networks
and a $1.0 million equity investment in GMT accounted for under the cost method.
Accrued employee compensation and benefits has increased by $1.4 million since
January 31, 1994 primarily due to incentive compensation benefits relating to
fiscal year 1995 performance.
Accrued legal and settlement expenses of $1.5 million at January 31, 1995
represent the cost of issuing stock warrants to purchase the Company's common
stock under the settlement agreement for the William Steiner lawsuit. This $1.0
million increase from January 31, 1994 is primarily due to the reallocation of
$0.8 million from accrued disposal costs and unusual charges and $0.6 million in
net additional reserves, offset by a $0.4 million payment for the Department of
Defense settlement involving alleged irregularities in testing of products for
compliance with applicable military specifications at the Company's
Semiconductor Products Division.
Accrued disposal costs and unusual charges of $0.5 million at January 31, 1995
have declined by $1.0 million since January 31, 1994. During fiscal year 1995,
this accrual increased by $1.5 million due to costs associated with the sale of
Powercube and Micro Networks. Disposal costs of $1.7 million that were applied
against this accrual during the year were primarily for employee bonuses, legal
and consulting fees, environmental and other facility related costs, and
workforce reductions at Micro Networks and Powercube prior to the dates of their
sale. In addition, the Company reallocated $0.8 million of accrued disposal
costs to accrued legal and settlement expenses for the William Steiner lawsuit.
(For further information, see Note D to the Company's consolidated financial
statements.)
During fiscal year 1995, the Company repurchased 1,000,000 shares of the
Company's common stock at an average price per share of $14.36 or a total of
approximately $14.4 million.
17
<PAGE> 18
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BALANCE SHEETS
Unitrode Corporation and Consolidated Subsidiaries
<TABLE>
<CAPTION>
January 31 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 36,228,314 $ 17,752,008
Short-term investments -- 12,961,780
Accounts receivable, net of allowance of
$367,804 in 1996 and $296,510 in 1995 17,904,537 13,746,458
Inventories 9,971,427 7,316,502
Notes receivable 884,645 865,762
Deferred income taxes 4,112,000 4,383,000
Prepaid expenses and other current assets 2,241,077 1,455,541
------------ ------------
Total current assets 71,342,000 58,481,051
------------ ------------
Property, plant and equipment, at cost:
Land 625,790 625,790
Buildings and improvements 9,340,263 7,091,619
Machinery and equipment 67,373,176 57,726,016
Construction in progress 1,739,326 2,972,115
------------ ------------
79,078,555 68,415,540
Less: accumulated depreciation 43,789,869 36,396,265
------------ ------------
Property, plant and equipment, net 35,288,686 32,019,275
------------ ------------
Other assets and deferred charges 3,648,505 3,847,839
Other investments 1,000,000 1,427,693
Restricted cash and investments 437,285 --
Notes and other receivables, net of unamortized
discount of $78,095 in 1996 and $100,952
in 1995 4,341,604 4,878,392
Deferred income taxes 102,000 102,000
Excess of cost over net assets acquired,
less accumulated amortization of $1,826,203
in 1996 and $1,542,199 in 1995 2,264,126 2,548,130
------------ ------------
Total assets $118,424,206 $103,304,380
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE> 19
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
BALANCE SHEETS
Unitrode Corporation and Consolidated Subsidiaries
<TABLE>
<CAPTION>
January 31 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ -- $ 299,696
Accounts payable 8,401,521 6,993,697
Income taxes payable 2,000,229 2,194,151
Accrued employee compensation and benefits 7,794,635 4,881,653
Accrued disposal costs and unusual charges -- 528,480
Accrued legal and settlement expenses -- 1,534,999
Other current liabilities 5,998,299 4,505,789
------------ ------------
Total current liabilities 24,194,684 20,938,465
------------ ------------
Deferred income taxes 1,340,000 615,000
Other long-term liabilities 472,348 160,000
------------ ------------
Total liabilities 26,007,032 21,713,465
------------ ------------
Commitments and contingent liabilities (Note J)
Stockholders' equity:
Preferred stock, $1.00 par value:
Authorized - 1,000,000 shares, none issued
Common stock, $.20 par value:
Authorized - 30,000,000 shares
Issued - 11,467,948 in 1996
and 11,781,100 in 1995 2,293,590 2,356,220
Additional paid-in capital 25,582,283 25,670,178
Retained earnings 64,838,832 54,067,673
------------ ------------
92,714,705 82,094,071
Less:
Deferred compensation 297,531 503,156
------------ ------------
Total stockholders' equity 92,417,174 81,590,915
------------ ------------
Total liabilities and stockholders' equity $118,424,206 $103,304,380
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE> 20
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
Unitrode Corporation and Consolidated Subsidiaries
<TABLE>
<CAPTION>
Years ended January 31 1996 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues $ 118,543,642 $ 97,080,607 $ 86,915,155
Cost of revenues 55,165,336 48,805,269 47,653,104
------------- ------------ ------------
Gross profit 63,378,306 48,275,338 39,262,051
------------- ------------ ------------
Operating expenses:
Research and development 14,674,199 9,432,841 8,063,791
Selling, general and administrative 22,312,236 21,927,403 19,327,439
Unusual items -- 5,542,002 --
------------- ------------ ------------
Total operating expenses 36,986,435 36,902,246 27,391,230
------------- ------------ ------------
Income from operations 26,391,871 11,373,092 11,870,821
------------- ------------ ------------
Other income (expense):
Non-operating income (expense), net (36,929) (5,650) 195,071
Interest income 1,682,166 1,249,187 879,891
Interest expense (85,204) (95,102) (101,408)
------------- ------------ ------------
Total other income 1,560,033 1,148,435 973,554
------------- ------------ ------------
Income before income tax provision,
and cumulative effect of change in
accounting principle 27,951,904 12,521,527 12,844,375
Income tax provision 10,433,000 3,273,000 4,496,000
------------- ------------ ------------
Income before cumulative effect of
change in accounting principle 17,518,904 9,248,527 8,348,375
Cumulative effect of change in accounting
for income taxes -- -- 8,100,000
------------- ------------ ------------
Net income $ 17,518,904 $ 9,248,527 $ 16,448,375
============= ============ ============
Earnings per share:
Income before cumulative effect of change
in accounting principle $ 1.47 $ .75 $ .65
============= ============ ============
Cumulative effect of change in
accounting principle $ -- $ -- $ .63
============= ============ ============
Net income $ 1.47 $ .75 $ 1.27
============= ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE> 21
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
Unitrode Corporation and Consolidated Subsidiaries
<TABLE>
<CAPTION>
Years ended January 31 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 17,518,904 $ 9,248,527 $ 16,448,375
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 8,997,825 7,429,624 5,900,527
Cumulative effect of change in accounting
for income taxes -- -- (8,100,000)
Loss on the sale of divisions -- 5,542,002 --
Provision for losses on accounts receivable 199,900 122,890 43,000
Deferred compensation 205,625 240,314 200,339
Deferred income taxes 996,000 2,160,000 2,070,000
Other, net 95,707 125,888 (118,971)
(Increase) decrease in assets:
Accounts receivable (4,357,979) (2,292,735) (963,545)
Inventories (2,654,925) (1,413,625) 394,410
Prepaid expenses and other current assets (829,469) (227,931) 535,712
Other assets and deferred charges (1,050,250) (15,000) (358,666)
Increase (decrease) in liabilities:
Accounts payable 1,407,824 1,686,373 1,240,571
Income taxes payable 308,078 (1,108,269) 1,629,388
Accrued employee compensation and benefits 2,912,982 1,575,868 209,121
Accruals relating to unusual charges -- (461,495) (1,049,324)
Other current and long-term liabilities 1,444,859 2,788,570 (1,074,964)
------------ ------------ ------------
Total adjustments 7,676,177 16,152,474 557,598
------------ ------------ ------------
Net cash provided by operating activities 25,195,081 25,401,001 17,005,973
------------ ------------ ------------
Cash flows from investing activities:
Purchase of property, plant and equipment (11,794,316) (15,590,878) (12,573,433)
Proceeds on sale of businesses -- 5,728,898 --
Repayment of notes receivable 865,762 505,298 269,071
Proceeds on sale of assets and investments 1,485,350 56,049 1,825,422
Restricted cash and investments (437,285) -- --
Maturities of short-term investments 14,200,750 499,697 3,981,982
Purchases of short-term investments (1,289,427) (12,961,780) (2,998,990)
Notes receivable and other investments (21,163) (2,187,676) (207,421)
Accrued disposal costs (528,480) (1,316,405) (563,719)
------------ ------------ ------------
Net cash provided (used) by investing activities 2,481,191 (25,266,797) (10,267,088)
------------ ------------ ------------
Cash flows from financing activities:
Repayment of debt (299,696) (230,770) (230,769)
Purchase of common stock (10,025,275) (14,420,393) (2,111,244)
Proceeds from exercise of common stock options 1,125,005 2,012,252 1,492,766
------------ ------------ ------------
Net cash used by financing activities (9,199,966) (12,638,911) (849,247)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 18,476,306 (12,504,707) 5,889,638
Cash and cash equivalents at beginning of year 17,752,008 30,256,715 24,367,077
------------ ------------ ------------
Cash and cash equivalents at end of year $ 36,228,314 $ 17,752,008 $ 30,256,715
============ ============ ============
Supplemental information:
Interest paid $ 98,000 $ 96,000 $ 85,000
Income taxes paid, net of tax refunds 9,131,000 2,237,000 782,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE> 22
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
STATEMENTS OF STOCKHOLDERS' EQUITY
Unitrode Corporation and Consolidated Subsidiaries
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Retained Deferred Stockholders'
Stock Capital Earnings Compensation Equity
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 31, 1993 $ 2,497,178 $ 26,542,726 $ 38,998,533 $ (409,455) $ 67,628,982
Net income 16,448,375 16,448,375
Acquisition of 199,481 shares
of common stock (39,896) (828,539) (1,242,809) (2,111,244)
Issuance of 55,000 restricted
common shares (Note H) 11,000 588,376 (599,376) --
Exercise of 215,658 shares
of common stock (Note H) 43,131 1,449,635 1,492,766
Income tax benefit related
to stock plans 377,000 377,000
Amortization of deferred compensation 200,339 200,339
------------ ------------ ------------ ------------ ------------
Balance, January 31, 1994 2,511,413 28,129,198 54,204,099 (808,492) 84,036,218
Net income 9,248,527 9,248,527
Acquisition of 1,003,840 shares
of common stock (200,768) (4,834,672) (9,384,953) (14,420,393)
Exercise of 238,875 shares
of common stock (Note H) 47,775 1,964,477 2,012,252
Forfeiture of 11,000 shares
of common stock (Note H) (2,200) (62,822) 65,022 --
Income tax benefit related
to stock plans 473,997 473,997
Amortization of deferred compensation 240,314 240,314
------------ ------------ ------------ ------------ ------------
Balance, January 31, 1995 2,356,220 25,670,178 54,067,673 (503,156) 81,590,915
Net income 17,518,904 17,518,904
Acquisition of 511,400 shares
of common stock (102,280) (3,175,250) (6,747,745) (10,025,275)
Issuance of 247,883 common stock
warrants (Note O) 1,500,000 1,500,000
Exercise of 198,248 shares
of common stock (Note H) 39,650 1,085,355 1,125,005
Income tax benefit related
to stock plans 502,000 502,000
Amortization of deferred compensation 205,625 205,625
------------ ------------ ------------ ------------ ------------
Balance, January 31, 1996 $ 2,293,590 $ 25,582,283 $ 64,838,832 $ (297,531) $ 92,417,174
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE> 23
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Unitrode Corporation and Consolidated Subsidiaries
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of all domestic and foreign subsidiaries. All material intercompany
transactions are eliminated. The accounts of certain immaterial foreign
subsidiaries are included on the basis of fiscal years ending in December.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION: The Company recognizes revenue at the time of shipment. A
portion of the Company's sales are made to certain distributors which provide
for price protection and certain rights of return on product unsold by the
distributors. The Company records a distributor liability reserve for price
adjustments and estimated sales returns.
TRANSLATION OF FOREIGN CURRENCIES: The accounts of foreign subsidiaries have
been translated using the U.S. dollar as the functional currency. Monetary and
non-monetary asset and liability accounts have been translated at the exchange
rate in effect at each year end and historical rates, respectively. Income and
expense accounts are translated at average monthly rates, except for
depreciation, which is translated at historical rates. Exchange gains and losses
are included in other income (expense).
INCOME TAXES: The provision for income taxes is computed on the pretax income of
the consolidated subsidiaries located within each taxing country based on the
current tax law. Deferred taxes result from the future tax consequences
associated with temporary differences between the amount of assets and
liabilities recorded for tax and financial accounting purposes.
EARNINGS PER SHARE: Earnings per share is based on the weighted average number
of common and common equivalent shares outstanding during the year. Average
common and common equivalent shares outstanding were 11,907,101, 12,360,405 and
12,924,105 in fiscal years 1996, 1995 and 1994, respectively.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS: The Company considers highly liquid
investments in debt securities purchased within three months of their maturity
date to be cash equivalents. Investments in debt securities that mature within
one year and do not meet the definition of cash equivalents are included in
short-term investments. Cash equivalents and short-term investments are
classified as held to maturity and valued at amortized cost, which approximates
market value.
INVENTORIES: Inventories are stated at average cost but not in excess of net
realizable value.
PROPERTY, PLANT AND EQUIPMENT: Depreciation on plant and equipment is computed
using the straight-line method over the expected useful lives of the assets.
When properties are retired or otherwise disposed of, the related cost and
accumulated depreciation are removed from the accounts, and any resulting gain
or loss is reflected in the statements of operations.
INTANGIBLE ASSETS: The excess cost over net assets acquired is amortized over
periods not to exceed 12 years. Patents, copyrights, trademarks, and other
intangible assets are amortized over their estimated useful lives.
STOCKHOLDERS' EQUITY: Pursuant to Maryland law, any shares of common stock
reacquired by the Company constitute unissued shares.
23
<PAGE> 24
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
FORWARD FOREIGN EXCHANGE CONTRACTS: The Company enters into forward foreign
exchange contracts principally as a hedge against trade receivables and firm
orders in its backlog denominated in foreign currencies. Realized and unrealized
gains and losses on these contracts are included in net income and offset the
foreign exchange gains or losses on the hedged trade receivables. At January 31,
1996, the Company had contracts of varying maturities to sell foreign currencies
of 3.3 million German marks, 6.0 million French francs, and 0.7 million British
pounds, totaling approximately $4.4 million. At January 31, 1995, the Company
had contracts of varying maturities to sell foreign currencies of 2.9 million
German marks, 5.0 million French francs, and 0.6 million British pounds,
totaling approximately $3.7 million.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The Company has used a variety of methods
and assumptions to estimate the fair value of the Company's financial
instruments. The carrying amounts for cash and cash equivalents, short-term
investments, accounts receivable, current portion of long-term debt, and
accounts payable approximate fair value because of the short maturity of these
instruments. Forward foreign exchange contracts are valued based on quoted
market prices of comparable contracts. The carrying amount of the Company's
notes receivable approximate fair value based upon comparable credit risks and
the interest rates which incorporate such risks. It was not practicable to
estimate the fair value of the Company's investment in an untraded closely held
company. This investment is included in other investments on the balance sheet
and valued at original cost of $1.0 million at January 31, 1996 and January 31,
1995.
NEW ACCOUNTING STANDARDS: The Company has not yet adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" and Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" which
will require adoption in fiscal year 1997. The Company is in the process of
determining the effect of adoption of these statements on its consolidated
financial statements and related disclosures.
CONCENTRATION OF CREDIT RISK: Financial instruments which subject the Company to
concentrations of credit risk consist principally of cash equivalents,
short-term investments and trade accounts receivable. The Company invests cash
equivalents and short-term investments in high-quality debt securities. Credit
exposure to any one entity is limited by Company policy. No losses have been
experienced on such investments as of January 31, 1996. The Company's trade
accounts receivables are primarily from sales to customers in the EDP/computer
and communication markets. Excluding the disposed operations, the Company's ten
largest customers accounted for approximately 52%, 55% and 52% of sales for
fiscal years 1996, 1995 and 1994, respectively, and approximately 53% and 57% of
accounts receivable at January 31, 1996 and 1995. The Company's largest
customer, Western Digital, represented approximately 23%, 22% and 18% of sales
for fiscal years 1996, 1995 and 1994, respectively and 29% of accounts
receivable at January 31, 1996. The Company does not require collateral and has
not historically experienced significant credit losses related to receivables
from individual customers or groups of customers in any particular industry or
geographic area.
RECLASSIFICATIONS: Certain amounts for fiscal year 1994 and 1995 have been
reclassified to conform with presentation of similar amounts in fiscal year
1996.
24
<PAGE> 25
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
NOTE B CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents and short-term investments consisted of the following:
<TABLE>
<CAPTION>
January 31 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Cash equivalents:
Tax-exempt municipal securities $20,450,000 $ -
Taxable municipal securities 3,700,000 -
----------- -----------
$24,150,000 $ -
=========== ===========
Short-term investments:
U.S. government securities $ - $ 2,000,000
Tax-exempt municipal securities - 10,961,780
----------- -----------
$ - $12,961,780
=========== ===========
</TABLE>
NOTE C NOTES AND OTHER RECEIVABLES
Notes and other receivables consisted of the following:
<TABLE>
<CAPTION>
January 31 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Microsemi Corporation 5% collaterized subordinated promissory
notes, monthly payments through July 1, 2002 $2,905,174 $3,274,272
Microsemi Corporation 5% subordinated promissory note,
quarterly payments through June 30, 1999 700,000 900,000
Microsemi Corporation other receivables, annual payments
through June 30, 1999, net of unamortized discount
of $78,095 in 1996 and $100,952 in 1995 241,905 299,048
SMC Acquisition Corporation unsecured note at prime plus
2%, payable quarterly through September 30, 1997 379,170 595,834
GMT Microelectronics Corporation 11.75%
subordinated debenture, due January 9, 2002 1,062,485 1,000,000
Reserve allowance (62,485) (325,000)
---------- ----------
5,226,249 5,744,154
Less: current maturities 884,645 865,762
---------- ----------
Long-term notes and other receivables $4,341,604 $4,878,392
========== ==========
</TABLE>
NOTE D ACQUISITIONS AND DISPOSALS
On January 9, 1995, the Company entered into an agreement with GMT
Microelectronics Corporation ("GMT"), a Norristown, Pennsylvania foundry, to
supply wafers. As part of the agreement, the Company invested $2.0 million in
GMT as follows: $1.0 million in exchange for one million shares or an
approximate 9% interest in GMT's common stock, and a $1.0 million 11.75%
subordinated debenture due January 9, 2002.
On February 28, 1996, the Company made an additional $1.5 million investment in
GMT redeemable preferred stock which entitles the Company to favorable pricing
terms on specific products.
On October 12, 1994, the Company sold certain of the assets of its Micro
Networks Division ("Micro Networks") to SMC Acquisition Corporation (the
"Buyer") pursuant to an Asset Purchase Agreement. The Buyer also assumed certain
of the liabilities of Micro Networks. The assets sold consisted principally of
accounts receivable, inventory, and machinery and equipment. The liabilities
assumed by the Buyer consisted principally of accounts payable and accrued
compensation and benefits. Under the agreement, the Buyer agreed to pay $3.7
million as follows: $3.0 million in cash on October 12, 1994 and a $650,000
unsecured note payable in equal quarterly installments over 3 years with
interest at prime plus 2 percent. The Buyer also entered into a multi-year lease
for use of the building with the Company and agreed to pay royalties on revenues
subject to certain provisions. The Company recorded charges of approximately
$1.4 million for the writeoff of goodwill, $0.4 million to writedown the
building to its estimated fair market value of $2.3 million, and $1.1 million
for disposal
25
<PAGE> 26
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
costs. In addition, the Company established a reserve of $325,000 on the
unsecured note which was reclassified in fiscal year 1996 since the Buyer had
been timely on all of the note payments. The disposal costs consisted primarily
of professional fees, facility related costs, and employee settlements and
bonuses.
On June 23, 1994, the Company sold substantially all of the assets of its wholly
owned subsidiary, Powercube Corporation ("Powercube") to Natel Engineering
Company, Inc. (the "Buyer") pursuant to an Asset Purchase Agreement. The Buyer
also assumed certain of the liabilities of Powercube. The assets sold consisted
principally of accounts receivable, inventory, and machinery and equipment. The
liabilities assumed by the Buyer consisted principally of accounts payable,
accrued commissions and accrued warranty. Under the agreement, the Buyer paid
approximately $2.7 million in cash on June 23, 1994 for substantially all of the
assets of Powercube, except for the land and building which the Buyer leased
until March 1995. In addition, the Company recorded a charge of approximately
$1.3 million for writedowns of certain assets and $0.5 million for disposal
costs. The writedown of assets included $0.8 million for the building and $0.5
million for goodwill.
The following schedule summarizes the basis for the total fiscal year 1995
unusual items charge:
<TABLE>
<CAPTION>
Micro Networks Powercube Total
-------------- --------- -----
<S> <C> <C> <C>
Total book value of assets sold $ 3,572,136 $ 4,121,128 $ 7,693,264
Total book value of liabilities
assumed by Buyers (401,000) (355,915) (756,915)
----------- ------------ -----------
Net book value of assets sold 3,171,136 3,765,213 6,936,349
Less:
Proceeds on sale 3,690,898 2,688,000 6,378,898
----------- ------------ -----------
Gain (loss) on sale 519,762 (1,077,213) (557,451)
Reserve on unsecured note (325,000) - (325,000)
Writedown of assets (1,825,803) (1,324,780) (3,150,583)
Disposal costs (1,057,748) (451,220) (1,508,968)
----------- ------------ -----------
Unusual items charge $(2,688,789) $ (2,853,213) $(5,542,002)
=========== ============ ===========
</TABLE>
Accrued Disposal Costs and Unusual Charges Rollforward:
<TABLE>
<CAPTION>
Balance
(In thousands) at Beginning Change in Balance at
Description of Period Provision Payments Estimates Reclassification End of Period
- ----------- -------------- --------- -------- --------- ---------------- -------------
<C> <C> <C> <C> <C> <C> <C>
1996 $ 528 $ - $ (528) $ - $ - $ -
1995 1,547 1,509(1) (1,325) (453)(2) (750)(3) 528
1994 3,488 - (1,379) (562)(2) - 1,547
</TABLE>
(1) Disposal costs on sale of Micro Networks and Powercube
(2) Micro Networks and Powercube restructuring charges
(3) Litigation settlement costs reclassed from accrued disposal costs to
accrued legal and settlement expenses.
26
<PAGE> 27
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
NOTE E INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
January 31 1996 1995
---------------------------------------------------------------
<S> <C> <C>
Raw materials $1,698,344 $ 687,083
Work in process 5,384,901 4,198,556
Finished goods 2,888,182 2,430,863
---------- ----------
Total inventory $9,971,427 $7,316,502
========== ==========
</TABLE>
NOTE F BORROWING ARRANGEMENTS
On October 20, 1995, the Company entered into a three-year, $25 million domestic
revolving credit agreement with BayBank. Pursuant to the agreement, interest
rates on the amounts borrowed are at the Bank's prime rate. There were no
borrowings under this agreement during fiscal year 1996. The credit agreement
contains various covenants, the most restrictive of which requires a minimum
level of tangible net worth. At January 31, 1996, tangible net worth (as
defined) exceeded the required level by approximately $13,200,000.
Prior to October 20, 1995, the Company maintained a $15 million domestic
revolving credit agreement with another bank. There were no borrowings under
this credit agreement during fiscal years 1996, 1995 and 1994.
The current portion of long-term debt consisted of New Hampshire Industrial
Revenue Bonds. Interest rates on the amounts borrowed were at 68% to 70% of
prime and there was no balance outstanding at January 31, 1996.
NOTE G LEASES
Rental expenses incurred for operating leases amounted to $700,000, $604,000 and
$669,000 for the years ended January 31, 1996, 1995 and 1994, respectively.
These leases are principally for the rental of office and manufacturing space.
Many of the leases contain renewal options and some provide for the payment of a
proportionate share of maintenance, insurance and taxes in addition to the
minimum annual rentals.
At January 31, 1996, the future minimum payments under all leases with
terms greater than one year are as follows:
<TABLE>
<CAPTION>
Operating
Fiscal Year Leases
------------------------------------------------------
<S> <C>
1997 $ 861,000
1998 611,000
1999 477,000
2000 169,000
2001 -
Thereafter -
----------
Total minimum lease payments $2,118,000
==========
</TABLE>
The Company has a non-cancelable sublease agreement to rent its Lexington office
facilities to a third party. Under this agreement which expires April 30, 1996,
the Company collected rent payments of $204,000 in fiscal year 1996 and has a
commitment from the sublessee to receive $51,000 in future rental payments which
will offset the Company's future minimum lease payments of $1,147,000. The
sublessee has notified the Company that it will not renew its sublease agreement
and the Company is actively searching for a new tenant. At January 31, 1996, the
Company's reserve for future minimum lease payments on its Lexington office
lease was $510,000.
27
<PAGE> 28
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
NOTE H STOCK OPTIONS AND RESTRICTED STOCK
The Company's Stock Option Plans provide for the granting of options to
qualified employees and non-employee directors to purchase the Company's stock
at the fair market value on the date of grant. These options become exercisable
as designated in the grant and may expire up to ten years from the date of
grant.
Options were exercisable for 558,104 shares at January 31, 1996. There were
779,004, 381,005 and 683,380 shares available at January 31, 1996, 1995 and
1994, respectively, for future grants of options. In fiscal year 1996, the
Company increased by 1,000,000 the number of shares available for grant under
one of its plans. During fiscal year 1994, there were 364,120 shares that lapsed
due to the expiration of the associated plans.
Under its Restricted Stock and Cash Bonus Plans, the Company may award shares of
restricted common stock to key executives. Subject to certain conditions, the
restrictions lapse in five equal annual installments, beginning one year from
the date of the award. Upon lapse of the restrictions, the Company pays the
participant a cash bonus to help defray the related personal income taxes. The
cash bonus is the lesser of the amount required to defray the federal income tax
at the maximum marginal tax rate then in effect, or 200% of the fair market
value of the shares at the date of the original award. There may be up to five
such cash bonuses, but the maximum aggregate cash bonus payable over the five
years is the fair market value of the shares on the date of the grant. Upon
termination of employment, the key executive must remit to the Company all
shares still subject to the restrictions. There were 0, 0, and 2,300 shares
available for grant at January 31, 1996, 1995 and 1994, respectively, for future
awards of restricted stock.
During fiscal year 1994, restricted stock totaling 20,000 shares was awarded to
the Chief Executive Officer of the Company. Such stock was not covered by the
Company's Restricted Stock and Cash Bonus Plan. The fair market value at the
dates of award charged to stockholders' equity as unamortized deferred
compensation in fiscal year 1994 was $599,376. These amounts are amortized over
the period in which the restrictions lapse.
Amortization charged to expense under the Restricted Stock and Cash Bonus Plans
was $205,625, $240,314, and $200,339 for fiscal years 1996, 1995 and 1994,
respectively. Cash bonus payments under the Plans were $247,465, $331,481 and
$207,161 for fiscal years 1996, 1995 and 1994, respectively.
The following table summarizes stock option and restricted stock transactions
for the three years ended January 31:
<TABLE>
<CAPTION>
Restricted
Stock Option Plans Stock Plans
-------------------------------------- -----------
Shares Price Range Shares
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at January 31, 1993 938,325 $ 3.56-$28.94 91,000
Granted 174,000 10.31- 14.19 55,000
Terminated (47,255) 4.75- 28.94 -
Exercised/Released (215,658) 3.56- 11.63 (26,000)
--------- -------------- -------
Outstanding at January 31, 1994 849,412 $ 3.56-$26.69 120,000
Granted 328,000 14.44- 19.81 -
Terminated (39,125) 5.56- 26.69 (11,000)
Exercised/Released (238,875) 3.56- 15.38 (34,000)
--------- -------------- -------
Outstanding at January 31, 1995 899,412 $ 3.56-$22.88 75,000
Granted 604,950 20.63-30.94 -
Terminated (15,261) 4.75-22.88 -
Exercised/Released (198,248) 3.56-20.63 (33,000)
--------- -------------- -------
Outstanding at January 31, 1996 1,290,853 $ 4.75-$30.94 42,000
========= ============== =======
</TABLE>
28
<PAGE> 29
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
NOTE I OTHER ASSETS AND DEFERRED CHARGES
Other assets and deferred charges consisted of the following:
<TABLE>
<CAPTION>
January 31 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Property for sale $2,360,599 $3,434,718
Deferred charges 615,671 296,046
Deposits 600,250 -
Other 71,985 117,075
---------- ----------
Total $3,648,505 $3,847,839
========== ==========
</TABLE>
On December 29, 1995, the Company sold the land and building in Billerica,
Massachusetts for $1,150,000. A gain of $59,000 was recognized on the sale.
NOTE J COMMITMENTS AND CONTINGENT LIABILITIES
ENVIRONMENTAL MATTERS
The Company has been notified by responsible state authorities in California
that it is one of a number of "potentially responsible parties" under relevant
state statutes with respect to a former hazardous waste treatment facility in
Escondido, California. The treatment facility was owned and operated by an
entity wholly unrelated to the Company. The Company, along with other
financially viable potentially responsible parties, has entered into a consent
decree with governmental authorities regarding the voluntary payment of cleanup
costs and voluntary cleanup measures with respect to the California site and has
paid past cleanup costs at the California site of approximately $54,000. The
Company has established a reserve which the Company believes to be adequate for
future environmental remediation costs at this site, based upon the probable and
reasonably estimable work to be done at the site, the other potentially
responsible parties involved at the site and the Company's volumetric level of
contribution to the site which is less than one-half of one percent of the total
volume of waste contributed to the site by the parties to the consent decree.
The Company has entered into settlement agreements as a "de minimus" contributor
requiring the payment of an aggregate amount of approximately $161,000 in
settlement of all known governmental claims against the Company related to five
other alleged hazardous waste treatment sites. Although the nature of the
settlements does not preclude, under certain circumstances, additional
governmental action or litigation by non-participating parties, no claims have
been made regarding these sites.
In view of the difficulty in quantifying the potential costs or damages arising
from the alleged environmental hazards, it is not possible to determine with
certainty the extent of the Company's potential exposure at any of the sites.
However, based upon its investigation to date, the Company believes that its
exposure (without giving effect to the joint and several liability provisions
referred to below) would not be material and the Company believes that the
reserves established with respect to these liabilities will be adequate.
Further, although statutes provide that all "potentially responsible parties"
may be held jointly and severally liable for the costs of investigation and
remediation of a site, after consideration of the liabilities of other
"potentially responsible parties" with respect to these sites and their
respective levels of financial responsibility, the Company believes that its
liability with respect to the sites is not material. If any liability on the
part of the Company were to be measured by the ratio of the waste attributable
to the Company over the total waste involved, based on information presently
available to the Company, the Company's aggregate liability with respect to the
unsettled sites would not be material.
The Company is involved in investigation and cleanup under the supervision of
the Maine Department of Environmental Protection of groundwater and soil
contamination at the former Westbrook, Maine wafer fabrication facility of its
former Semiconductor Products Division. Although the facility was closed in
1989, the Division was sold in 1992 and the Westbrook, Maine real estate was
sold in 1994, the Company has retained responsibility for environmental
remediation at this site. The ultimate cost of cleanup at this site is difficult
to predict given the uncertainties regarding the extent of the required cleanup,
the interpretation of applicable laws and regulations and alternative cleanup
methods. However, based upon the Company's experience at the site, the Company
has established a reserve, taking into account the probable and reasonably
estimable work to be done at the site, which the Company believes to be
adequate.
29
<PAGE> 30
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
Environmental reserves are reviewed as events and developments warrant and
adjusted to reflect the likelihood of additional environmental expenditures.
Based upon information currently available to the Company, management believes
that any additional aggregate liability to which the Company may be subjected
from all the above-mentioned sites would not be material.
OTHER LEGAL MATTERS
On August 18, 1994, the U.S. District Court for the District of Massachusetts
entered an order preliminarily approving a settlement and certifying a class
only for settlement purposes in the lawsuit entitled William Steiner v. Unitrode
Corp., et.al., Civil Action No. 90-11443-MLW. In the suit, the plaintiff,
representing a settlement class of purchasers of the Company's common stock
between March 2, 1988, and March 16, 1990, alleged violation of the antifraud
provisions of the federal securities laws by the Company and certain of its
former officers and directors. An order giving final approval to the settlement
was entered by the court on December 7, 1994, which involved a settlement amount
of $3 million consisting of $1.5 million in cash and $1.5 million in stock
warrants to purchase the Company's common stock. The Company paid the $1.5
million cash settlement in the fourth quarter of fiscal year 1995 which was
reimbursed to the Company under the Company's insurance coverage. Pursuant to an
order issued by the Court on October 17, 1995, the claims administrator
distributed 247,883 warrants and cash, net of expenses, valued at $3 million to
the court-approved settlement class of shareholders and their counsel.
In addition to the matters described above, from time to time as a normal
incidence of the nature of the Company's business, various claims, charges or
litigation are or may be asserted or commenced against the Company relating to,
among other things, contractual matters, patent disputes, environmental matters
and product liability. While there can be no assurance that the Company will
prevail in all these matters, the Company does not believe that these matters
will have a material adverse effect on the Company's consolidated financial
position or results of operations. However, an adverse resolution of one or more
of such matters could have an adverse effect on the Company's consolidated
results of operations in a quarter in which such matters might be resolved.
COMMITMENTS
In fiscal year 1996, the Company entered into a supply agreement with a
manufacturer of silicon wafers. Under this agreement, the Company made a $1
million deposit in advance of production to guarantee certain quantities of
wafers starting in fiscal year 1997. The advance payment will be repaid to the
Company in the form of credits against the price of wafers purchased from this
manufacturer, based upon the monthly allocations in the contract.
The Company has entered into change-of-control agreements with certain key
executives which grant these officers the right to receive up to twice their
annual salary and bonus plus continuation of certain benefits following a change
of control in the Company and termination of these officers.
NOTE K INCOME TAXES
Effective February 1, 1993, the Company adopted "Accounting for Income Taxes"
("SFAS No. 109"). SFAS No. 109 requires recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been
reported in the Company's financial statements or tax returns. As a result, the
Company recognized the benefit of certain deferred income tax assets that were
not allowed under the previous accounting standard, Accounting Principles Board
Opinion No. 11. The effect of the cumulative adjustment as of February 1, 1993,
increased net income for fiscal year 1994 by $8.1 million or $.63 per share.
30
<PAGE> 31
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
Income before income taxes for domestic and foreign operations was as follows:
<TABLE>
<CAPTION>
Years ended January 31 1996 1995 1994
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $24,748,155 $10,203,838 $10,989,476
Foreign 3,203,749 2,317,689 1,854,899
----------- ----------- ----------
Total $27,951,904 $12,521,527 $12,844,375
=========== =========== ===========
</TABLE>
Income tax provision (benefit) is composed of the following:
<TABLE>
<CAPTION>
Years ended January 31 1996 1995 1994
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal $ 7,159,000 $ (110,000) $1,229,000
State 1,124,000 676,000 406,000
Foreign 1,156,000 547,000 791,000
----------- ---------- ----------
Total current 9,439,000 1,113,000 2,426,000
----------- --------- ----------
Deferred:
Federal 342,000 1,600,000 2,070,000
State (73,000) (55,000) -
Foreign 725,000 615,000 -
----------- ---------- ----------
Total deferred 994,000 2,160,000 2,070,000
----------- --------- ----------
Total income tax provision $10,433,000 $3,273,000 $4,496,000
=========== ========== ==========
</TABLE>
The approximate tax effect of each significant type of temporary difference and
carryforward was as follows:
<TABLE>
<CAPTION>
January 31, 1996 January 31, 1995
---------------- ----------------
<S> <C> <C>
Net Deferred Tax Assets:
Current:
Inventories $ 460,000 $ 534,000
Deferred compensation and
fringe benefit accruals 1,616,000 1,348,000
Distributor and other reserves 769,000 1,463,000
Other 1,267,000 1,038,000
----------- ----------
4,112,000 4,383,000
----------- ----------
Non-current:
Property, plant and equipment 60,000 (46,000)
Other 42,000 148,000
----------- ----------
102,000 102,000
----------- ----------
Net Deferred Tax Liabilities:
Non-current:
Property, plant and equipment (1,340,000) (615,000)
----------- ----------
Total Net Deferred Tax Assets $ 2,874,000 $3,870,000
=========== ==========
</TABLE>
31
<PAGE> 32
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
Based on the Company's history of taxable income and projections of future
earnings, management believes that it is more likely than not that sufficient
taxable income will be generated in the foreseeable future to realize the
deferred tax assets.
The Company does not provide for income taxes that may be due upon the
remittance of the earnings of its foreign subsidiaries as the Company intends to
indefinitely reinvest such earnings outside of the United States. As of January
31, 1996, such earnings approximated $6.1 million and the related unrecognized
deferred tax liability approximated $2.3 million.
The differences between the effective tax rates and the applicable U.S.
federal statutory tax rates were as follows:
<TABLE>
<CAPTION>
Years ended January 31 1996 1995 1994
----------------------------------------------------------
<S> <C> <C> <C>
U.S. federal statutory
tax rate 35.0% 35.0% 35.0%
State taxes, net of federal
tax benefit 2.4 2.8 1.8
Tax effect of foreign
operations 0.1 4.0 (1.8)
Sales of operating
units - (8.6) -
Change in valuation allowance - (10.1) -
Other, net (0.2) 3.0 -
---- ---- ----
37.3% 26.1% 35.0%
==== ==== ====
</TABLE>
NOTE L INDUSTRY SEGMENT/INTERNATIONAL OPERATIONS
The Company and its subsidiaries operate within a single industry segment - the
manufacture and sale of electronic components. Its products are sold throughout
the world into the EDP/computer, telecommunications, industrial controls and
instrumentation, defense/aerospace, and automotive markets.
The Company's products are sold worldwide by its sales force and through a
network of independent sales representatives and distributors. Sales and
marketing outside the United States are conducted principally through sales
subsidiaries and by direct export sales from the United States. Data on the
Company's U.S. export sales to unaffiliated customers, based on geographic
location, is presented below. U.S. export sales to unaffiliated customers
include shipments through the Company's international trading operation located
in Shannon, Ireland.
<TABLE>
<CAPTION>
(In thousands)
Years ended January 31 1996 1995 1994
-------------------------------------------------------------
<S> <C> <C> <C>
U.S. EXPORT SALES:
Far East $54,575 $37,160 $25,328
Europe 18,606 15,046 11,270
Other 4,824 2,369 1,255
Disposed divisions - 795 2,425
------- ------- -------
Total $78,005 $55,370 $40,278
======= ======= =======
</TABLE>
32
<PAGE> 33
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
NOTE M SELECTED QUARTERLY DATA (UNAUDITED)
(In thousands except per share data)
<TABLE>
<CAPTION>
Fiscal Year 1996 Quarters First Second Third Fourth Year
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues $25,888 $28,860 $30,116 $33,680 $118,544
Gross profit 13,786 15,351 16,093 18,148 63,378
Net income 3,799 4,174 4,544 5,002 17,519
Net income per share .32 .35 .38 .42 1.47
Stock prices:
High 22.00 30.88 32.50 29.63 32.50
Low 17.63 20.63 25.63 23.38 17.63
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year 1995 Quarters First Second Third Fourth Year
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues (a) $22,268 $23,958 $25,800 $25,055 $97,081
Gross profit 10,559 11,409 13,081 13,226 48,275
Net income (b) 1,879 1,214 2,382 3,774 9,249
Net income per share (c) .15 .10 .20 .31 .75
Stock prices:
High 16.25 17.50 20.00 21.00 21.00
Low 13.50 14.63 15.63 15.88 13.50
</TABLE>
(a) Revenues from disposed operations were $8.1 million for the year as
follows: $3.9 million in the first quarter; $3.1 million in the second
quarter; and $1.1 million in the third quarter.
(b) Includes pretax unusual item charges of $2.9 million in the second
quarter for the sale of Powercube Corporation and $2.7 million in the
third quarter for the sale of the Micro Networks Division.
(c) The sum of the quarterly net income per share does not equal the annual
amount reported, as per share amounts are calculated independently and
are based on the weighted average shares outstanding for each period.
The Company did not declare any cash dividends during fiscal years 1996 and
1995. The Company's common stock is listed on the New York Stock Exchange.
NOTE N EMPLOYEE BENEFIT PLANS
The Company contributes to the Unitrode Corporation Profit Sharing/401(k)
Savings Plan (the "Plan") which covers all U.S. employees with at least six
months of service. Under the profit sharing component of the Plan, Company
contributions may be made at the discretion of the Board of Directors, whether
or not the Company as a whole earns a profit. The amounts charged to operations
were $1,915,000, $1,596,000 and $1,274,000 for the years ended January 31, 1996,
1995 and 1994, respectively.
Also, the Company matches 50% of employee contributions up to 2% of compensation
under the 401(k) savings component of the Plan. Company contributions charged to
operations were $160,000, $118,000 and $163,000 for the years ended January 31,
1996, 1995 and 1994, respectively, including disposed operations.
The Company established a deferred incentive compensation plan for selected
engineers in fiscal year 1995. Plan assets consists of restricted cash and
investments which are held in trust until individual payments are required.
33
<PAGE> 34
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
NOTE O STOCKHOLDERS' EQUITY
On April 30, 1990, the Company's Board of Directors adopted a Shareholder Rights
Plan (the "Plan") and declared a special dividend of one right for each share of
the Company's common stock outstanding at the close of business on May 14, 1990.
Each right, when exercisable upon the occurrence of certain events, entitles the
registered holder to purchase from the Company a unit consisting of one-one
hundredth of a share (a "Unit") of Series A Junior Participating Preferred
Stock, par value $1.00 per share, at a purchase price of $30.00 per Unit. Upon
the occurrence of certain further events, such as the acquisition of 20% or more
of the Company's common stock by a person or group or the designation of a
person or group as an Adverse Person by the Company's Board of Directors, a
holder of a Unit (except holders who are Acquiring Persons or Adverse Persons,
as defined in the Plan) will be entitled to receive common stock of the Company
having a market value equal to twice the exercise price. Also, if the Company is
acquired in a merger in which the Company is not the surviving corporation, or
there is a sale of 50% or more of the Company's assets or earning power, each
Unit (except Units held by Acquiring Persons or Adverse Persons) may receive
common stock of the acquiring company having a value equal to twice the exercise
price of the right. In general, the Company may redeem the rights at $.01 per
right at any time until 10 days following public announcement that a 20%
position has been acquired in the Company (which period may be extended at any
time while the rights are still redeemable). So long as the rights are not
separately transferable, the Company will issue one right with each new share of
common stock issued. The total number of rights outstanding at January 31, 1996
was 11,467,948.
On November 21, 1995, the Company issued 247,883 warrants to purchase Unitrode
Common Stock as final settlement of the William Steiner class action lawsuit.
The warrants were determined to have a value of $1.5 million at the time of
issuance and are combined with additional paid-in-capital on the Company's
balance sheet. Each warrant entitles the holder to purchase one share of
Unitrode Common Stock at a price of $28.467 per share. The warrants become
exercisable on August 21, 1996, and expire on August 21, 1997.
34
<PAGE> 35
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
REPORT OF MANAGEMENT
The management of Unitrode Corporation is responsible for the preparation of the
consolidated financial statements in accordance with generally accepted
accounting principles and for the integrity and objectivity of all the financial
data included in this annual report. In preparing the financial statements,
management makes informed judgments and estimates as to the expected effects of
events and transactions currently being reported.
To meet this responsibility, the Company maintains a system of internal
accounting controls to provide reasonable assurance that assets are safeguarded,
and that transactions are properly executed and recorded. The system includes
policies and procedures, and reviews by officers of the Company.
The Board of Directors, through its Audit Committee, is responsible for
determining that management fulfills its responsibility with respect to the
Company's financial statements and the system of internal accounting controls.
The Audit Committee is composed solely of outside directors. The Committee meets
periodically and, when appropriate, separately with representatives of the
independent accountants and officers of the Company to monitor the activities of
each.
Coopers & Lybrand L.L.P., the independent accountants, have been selected by the
Board of Directors to examine the Company's financial statements. Their report
appears herein.
Cosmo S. Trapani Robert L. Gable
Executive Vice President Chairman and Chief Executive
and Chief Financial Officer Officer
35
<PAGE> 36
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Unitrode Corporation:
We have audited the consolidated financial statements and the financial
statement schedule of Unitrode Corporation and Consolidated Subsidiaries listed
in Item 14(a) of this Form 10-K. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Unitrode
Corporation and Consolidated Subsidiaries as of January 31, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended January 31, 1996, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
As discussed in Note K to the consolidated financial statements, the Company
changed its method of accounting for income taxes in fiscal year 1994.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 28, 1996
36
<PAGE> 37
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is hereby incorporated by reference from the
Registrant's definitive proxy statement for the Annual Meeting of Stockholders
to be held June 3, 1996.
Information regarding executive officers is included in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is hereby incorporated by reference from the
Registrant's definitive proxy statement for the Annual Meeting of Stockholders
to be held June 3, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is hereby incorporated by reference from the
Registrant's definitive proxy statement for the Annual Meeting of Stockholders
to be held June 3, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS AND SCHEDULES PAGE
- ---------------------------------- ------
<S> <C>
Report of Independent Accountants 36
(a) 1. Financial Statements:
Balance Sheets as of January 31, 1996
and 1995 18-19
Statements of Operations for the Years
Ended January 31, 1996, 1995 and 1994 20
Statements of Cash Flows for the Years
Ended January 31, 1996, 1995 and 1994 21
Statements of Stockholders' Equity for
the Years Ended January 31, 1996, 1995
and 1994 22
Notes to Financial Statements 23-34
</TABLE>
37
<PAGE> 38
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(a) 2. Financial Statement Schedule:
<S> <C>
Schedule II - Valuation and Qualifying Accounts 41
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or the notes thereto.
Individual financial statements of the Registrant have been omitted because
consolidated financial statements of the Registrant and all of its subsidiaries
are furnished.
(a) 3. List of Exhibits: The exhibits listed below are filed as a part of
this report.
Executive Compensation Plans and Arrangements:
<TABLE>
<S> <C>
10A Unitrode Corporation 1983 Stock Option Plan, adopted
June 6, 1983, as amended (filed as Exhibit 4F to the
Registration Statement on Form S-8 for the
Registrant (Registration No. 33-12353) and
incorporated herein by reference).
10B Unitrode Corporation 1984 Restricted Stock and Cash
Bonus Plan (filed as Exhibit 4E to the Registration
Statement on Form S-8 for the Registrant
(Registration No. 33-12353) and incorporated herein
by reference).
10C Unitrode Corporation Amended and Restated 1986
Non-Employee Director Option Plan adopted January,
1986 and amended February, 1992 (filed as Exhibit 4
to the Registration Statement on Form S-8 for the
Registrant (Registration No. 33-54544) and
incorporated herein by reference).
10D Forms of Change of Control Employment Agreements
(filed as Exhibit 10K to the Annual Report on Form
10-K filed by the Registrant for the fiscal year
ended January 31, 1991 and incorporated herein by
reference).
10E Unitrode Corporation 1992 Employee Stock Option
Plan, adopted February 1992 (filed as Exhibit 4 to
the Registration Statement on Form S-8 for the
Registrant (Registration No. 33-54542) and
incorporated herein by reference).
10F Corporate Management Fiscal Year 1996 Incentive
Bonus Program (filed as Exhibit 10G to the Annual
Report on Form 10-K filed by the Registrant for the
fiscal year ended January 31, 1995, and incorporated
herein by reference).
10G Amendments to the Unitrode Corporation 1992 Employee
Stock Option Plan, adopted April, 1995 (filed as
Exhibit 10H to the Annual Report on Form 10-K filed
by the Registrant for the fiscal year ended January
31, 1995, and Exhibit 4.5 to the Registration Statement
on Form S-8 for the Registrant (Registration
No. 333-00107) and incorporated herein by
reference).
10H Unitrode Corporation Fiscal Year 1997 Supplementary
Compensation Programs.
Other Exhibits:
3A Articles of Restatement of the Charter of the
Registrant and Articles of Amendment to the Charter
of the Registrant previously filed and incorporated
by reference to Exhibit 3A to the Registrant's Form
10-K filed May 1, 1989.
</TABLE>
38
<PAGE> 39
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
3B Articles Supplementary to the Charter of the
Registrant, previously filed and incorporated by
reference to Exhibits 3(A)(1) and (6) to the
Registrant's Form 8-K filed May 4, 1990.
3C Articles of Amendment to the Charter of the Company,
previously filed and incorporated by reference to
Exhibit 3B for the Company's Form 10-K filed May 4,
1992.
3D By-laws of the Company, as amended (filed as Exhibit
3C to the Annual Report on Form 10-K filed by the
Registrant for the fiscal year ended January 31,
1992, and incorporated herein by reference).
10I Rights Agreement dated as of May 2, 1990 between the
Company and The First National Bank of Boston as
Rights Agreement (filed as Exhibit 1 to the
Company's Registration Statement on Form 8-A dated
May 3, 1990, and incorporated herein by reference).
10J Agreement between Micro USPD, Inc. and Unitrode
Corporation dated May 28, 1992 (filed as Exhibit 10L
to the Annual Report on Form 10-K filed by the
Company for the fiscal year ended January 31, 1993
and incorporated herein by reference).
10K First Amendment, dated as of April 30, 1993, to the
Rights Agreement, dated as of May 2, 1990, between
the Company and The First National Bank of Boston,
as Rights Agreement (filed as Exhibit 1 to Form
8-A/A, Amendment to Registration Statement on Form
8-A, dated May 26, 1993, and incorporated herein by
reference).
10L Agreement among Natel Engineering Company, Inc.,
Unitrode Corporation and Powercube Corporation dated
June 23, 1994 (filed as Exhibit 2 to Form 8-K dated
June 23, 1994, and incorporated herein by
reference).
10M Agreement between SMC Acquisition Corporation and
Unitrode Corporation dated October 11, 1994 (filed
as Exhibit 2 to Form 8-K dated October 12, 1994, and
incorporated herein by reference).
10N Credit Agreement dated as of October 20, 1995
between Unitrode Corporation and BayBank.
10O Warrant Agreement between Unitrode Corporation and
the First National Bank of Boston (filed as Exhibit
1 to Registration Statement on Form 8-A dated
November 2, 1995, and incorporated herein by
reference).
11 Calculation of Primary and Fully Diluted Net Income
Per Share.
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the fourth quarter of
the fiscal year ended January 31, 1996.
39
<PAGE> 40
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
UNITRODE CORPORATION
(Registrant)
<S> <C>
April 24, 1996 By: /s/ Robert L. Gable
- ----------------------------- -----------------------------------------------
Date Robert L. Gable, Chairman, Chief Executive Officer
and Director (Principal Executive Officer)
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
April 24, 1996 /s/ Peter A. Brooke
- ----------------------------- ----------------------------------------------------
Date Peter A. Brooke, Director
April 24, 1996 /s/ Edward H. Browder
- ----------------------------- ----------------------------------------------------
Date Edward H. Browder, President and Director
April 24, 1996 /s/ Robert L. Gable
- ----------------------------- ----------------------------------------------------
Date Robert L. Gable, Chairman, Chief Executive Officer
and Director
April 24, 1996 /s/ Arthur L. Goldstein
- ----------------------------- ----------------------------------------------------
Date Arthur L. Goldstein, Director
April 24, 1996 /s/ Kenneth Hecht
- ----------------------------- ----------------------------------------------------
Date Kenneth Hecht, Director
April 24, 1996 /s/ Louis E. Lataif
- ----------------------------- ----------------------------------------------------
Date Louis E. Lataif, Director
April 24, 1996 /s/ Cosmo S. Trapani
- ----------------------------- ----------------------------------------------------
Date Cosmo S. Trapani, Executive Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer)
April 24, 1996 /s/ James T. Vanderslice
- ----------------------------- ----------------------------------------------------
Date James T. Vanderslice, Director
</TABLE>
40
<PAGE> 41
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
Unitrode Corporation and Consolidated Subsidiaries
FOR THE YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Additions
Balance at charged to Net Balance
beginning costs and Additions at end
Description of period expenses (Deductions) of period
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
1996 $ 296,510 $199,900 $ (128,606) $ 367,804
========== ======== ============ ==========
1995 $ 230,138 $122,890 $ (56,518)(1) $ 296,510
========== ======== ============ ==========
1994 $ 152,278 $ 43,000 $ 34,860 $ 230,138
========== ======== ============ ==========
Inventory Reserves
1996 $1,218,889 $ 25,000 $ (510,892) $ 732,997
========== ======== =========== ==========
1995 $1,633,258 $772,969 $(1,187,338)(2) $1,218,889
========== ======== =========== ==========
1994 $1,692,485 $866,469 $ (925,696) $1,633,258
========== ======== =========== ==========
</TABLE>
(1) Includes a reduction of $29,700 due to the sale of Powercube Corporation.
(2) Includes reductions of $318,471 and $554,000, respectively, due to the
sales of Powercube Corporation and the Micro Networks Division.
41
<PAGE> 1
Exhibit 10H
UNITRODE CORPORATION FISCAL YEAR 1997
SUPPLEMENTARY COMPENSATION PROGRAMS
I. MANAGEMENT BONUS PROGRAM
PURPOSE
The purpose of Unitrode's Management Bonus Program is to reward those key
employees who are identified by a Corporate Senior Officer (the CEO and his
direct reports) as responsible for driving the business objectives of the
Corporation.
ELIGIBILITY
Participation in the Management Bonus Program is limited to those key
contributors who are recommended for the program by the appropriate Senior
Officer, approved by the Board of Directors, and who:
1. Are active employees on the day of the award or were active employees on the
last day of the fiscal year but who terminated employment before the day of
the award due to death, disability, involuntary termination (except
termination for cause as defined in Corporate Policy 2-4, Subsection III-D)
or retirement.
- RETIREMENT, for the purposes of eligibility for bonus distribution, will
be defined as fol-lows: A participant in the management bonus program who
has attained the age of at least 55 years which would entitle that person
to receive early retirement recognition.
2. Have been identified as participants at the time of the approval of the AOP
or at the time of employment (or promotion).
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<PAGE> 2
- - To be eligible, a newly hired employee must be an employee for at least one
fiscal quarter; for any participant who has been employed for less than one
year, such employee's award shall be prorated from the date of eligibility.
3. Are NOT eligible for a sales commission program; and
4. Are approved for participation by the CEO.
ACCRUAL
1. Bonuses, including officers' bonuses, should be incorporated into the AOP,
approved by the CEO, and accrued for throughout the year with appropriate
adjustment for realistic expectation of individual achievement of performance
objectives (e.g., if individual objectives are challenging, on average each
eligible employee might be expected to achieve about 80% of his/her
individual objectives which in turn determine 50% of the bonus award.)
2. Bonus accruals should be reversed if necessary to preserve the profit margin
of the AOP and within the guidelines established below, to maintain an
appropriate ratio to the profit sharing accrual.
IMPLEMENTATION
1. The financial objectives defined in the AOP will be assigned a Profit
Sharing/Bonus target A through H by the CEO which will guide the Company in
designing its program and establishing the appropriate accrual for the
Management Bonus Program
2. Once the Bonus plan is approved by the CEO and the Board of Directors, the
appropriate Senior officer should establish objectives for each qualified
employee
AWARDS
1. Bonuses may be awarded annually, based upon:
a) The achievement of the financial targets as defined; and
b) The achievement of a clear set of objectives which are agreed to by the
supervising Senior Officer the employee and the employee's supervisor.
2. The amount of the award will be determined as follows:
a) 50% of the bonus will depend upon the level at which the Company achieves
its financial target.
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<PAGE> 3
b) The remaining 50%, if the Corporation achieves its financial target, will
depend upon the achievement by the individual of the agreed-upon
objectives or portion thereof.
II. BONUS PROGRAM -- ALL OTHER EMPLOYEES
PURPOSE
Based on the performance of the corporation, the Company may make cash awards
for FY97. The purpose of this bonus program is to reward those employees who are
not participants in the Management Bonus Program for their contribution to the
overall success of Unitrode's performance objectives and goals in a fiscal year.
ELIGIBILITY
Participation in this program is limited to employees who are not participants
in the Management Bonus Plan and:
1. Have been employees for at least six months prior to January 31; and
2. Are active employees on the day of the award or were active employees on the
last day of the fiscal year, but who terminated employment before the day of
the award due to death, disability, involuntary termination (with the
exception of termination for cause), or retirement. See Section I-1.
Employees with less than 12 months' participation will be prorated from the
date of eligibility as stated above.
- - - - -
3
<PAGE> 1
EXHIBIT 10N
================================================================================
CREDIT AGREEMENT
Dated as of October 20, 1995
Between
UNITRODE CORPORATION
and
BAYBANK
================================================================================
<PAGE> 2
PAGE
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<TABLE>
TABLE OF CONTENTS
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<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS.......................................................1
Section 1.1. Definitions....................................................................1
Section 1.2. Accounting Terms...............................................................7
ARTICLE 2. THE CREDITS...........................................................................7
Section 2.1. The Revolving Credit...........................................................7
Section 2.2. Requests for Revolving Credit Advances.........................................7
Section 2.3. Interest on Revolving Credit Advances..........................................8
Section 2.4. Election of LIBOR Pricing Options..............................................8
Section 2.5. Additional Payments............................................................8
Section 2.6. Set-Off; Computation of Interest; Etc. ........................................8
Section 2.7. Commitment Fee.................................................................9
Section 2.8. Reduction of Commitment by the Borrower........................................9
Section 2.9. Increased Costs, Etc. .........................................................9
Section 2.10. Use of Proceeds...............................................................10
Section 2.11. Changed Circumstances.........................................................11
Section 2.12. Conversion to Term Loan.......................................................11
ARTICLE 3. CONDITIONS OF THE REVOLVING CREDIT ADVANCES..........................................12
Section 3.1. Conditions to First Revolving Credit Advance..................................12
Section 3.2. Conditions to All Revolving Credit Advances...................................13
ARTICLE 4. PAYMENT AND REPAYMENT................................................................13
Section 4.1. Mandatory Prepayment..........................................................13
Section 4.2. Voluntary Prepayments.........................................................13
Section 4.3. Payment and Interest Cutoff...................................................14
Section 4.4. Payments Not at End of Interest Period........................................14
Section 4.5. Indemnification for Losses Upon Prepayment of Fixed Rate
Term Loan.....................................................................14
ARTICLE 5. REPRESENTATIONS AND WARRANTIES.......................................................15
Section 5.1. Corporate Existence, Charter Documents, Etc. .................................15
Section 5.2. Principal Place of Business; Location of Records..............................16
Section 5.3. Qualification.................................................................16
Section 5.4. Subsidiaries..................................................................16
Section 5.5. Corporate Power...............................................................16
Section 5.6. Valid and Binding Obligations.................................................17
Section 5.7. Other Agreements..............................................................17
Section 5.8. Payment of Taxes..............................................................17
Section 5.9. Financial Statements..........................................................17
Section 5.10. Other Materials Furnished.....................................................18
Section 5.11. Changes in Condition..........................................................18
Section 5.12. Assets, Licenses, Etc. .......................................................18
Section 5.13. Litigation....................................................................18
</TABLE>
<PAGE> 3
PAGE
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<TABLE>
<CAPTION>
<S> <C> <C>
Section 5.14. Pension Plans.................................................................18
Section 5.15. Outstanding Indebtedness......................................................19
Section 5.16. Environmental Matters.........................................................19
Section 5.17. Foreign Trade Regulations.....................................................20
Section 5.18. Governmental Regulations......................................................20
Section 5.19. Margin Stock..................................................................20
ARTICLE 6. REPORTS AND INFORMATION..............................................................21
Section 6.1. Quarterly Financial Statements................................................21
Section 6.2. Annual Financial Statements...................................................21
Section 6.3. Pro Forma Statements and Budget...............................................21
Section 6.4. Notice of Defaults............................................................21
Section 6.5. Notice of Litigation..........................................................21
Section 6.6. Communications with Others....................................................22
Section 6.7. Reportable Events.............................................................22
Section 6.8. Reports to other Creditors....................................................22
Section 6.9. Communications with Independent Public Accountants............................22
Section 6.10. Environmental Reports.........................................................22
Section 6.11. Miscellaneous.................................................................23
ARTICLE 7. FINANCIAL COVENANTS..................................................................23
Section 7.1. Consolidated Net Income.......................................................23
Section 7.2. Consolidated Current Ratio....................................................23
Section 7.3. Ratio of Consolidated Liabilities to Consolidated Tangible
Net Worth.....................................................................23
Section 7.4. Ratio of Consolidated Cash Flow to Consolidated Fixed Charges.................23
Section 7.5. Consolidated Tangible Net Worth...............................................23
Section 7.6. Consolidated Capital Expenditures.............................................23
ARTICLE 8. AFFIRMATIVE COVENANTS................................................................24
Section 8.1. Existence and Business........................................................24
Section 8.2. Taxes and Other Obligations...................................................24
Section 8.3. Maintenance of Properties and Leases..........................................24
Section 8.4. Insurance.....................................................................24
Section 8.5. Records, Accounts and Places of Business......................................25
Section 8.6. Inspection....................................................................25
Section 8.7. Maintenance of Accounts.......................................................25
ARTICLE 9. NEGATIVE COVENANTS...................................................................25
Section 9.1. Restrictions on Indebtedness..................................................25
Section 9.2. Restriction on Liens..........................................................26
Section 9.3. Investments...................................................................27
Section 9.4. Dispositions of Assets........................................................27
Section 9.5. Assumptions, Guaranties, Etc. of Indebtedness of Other Persons................28
Section 9.6. Mergers, Acquisitions, Etc. ..................................................28
Section 9.7. ERISA.........................................................................28
Section 9.8. Distributions.................................................................28
Section 9.9. Sale and Leaseback............................................................28
</TABLE>
<PAGE> 4
PAGE
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<TABLE>
<S> <C> <C>
Section 9.10. Transactions with Affiliates..................................................29
ARTICLE 10. EVENTS OF DEFAULT AND REMEDIES......................................................29
Section 10.1. Events of Default.............................................................29
Section 10.2 Remedies......................................................................30
ARTICLE 11. WAIVERS; AMENDMENTS; REMEDIES.......................................................31
ARTICLE 12. INDEMNIFICATION.....................................................................31
ARTICLE 13. MISCELLANEOUS.......................................................................32
Section 13.1. Successors and Assigns........................................................32
Section 13.2. Notices.......................................................................33
Section 13.3. Merger........................................................................33
Section 13.4. Governing Law.................................................................33
Section 13.5. Counterparts..................................................................33
Section 13.6. Expenses......................................................................33
Section 13.7. WAIVER OF JURY TRIAL..........................................................34
LIST OF EXHIBITS AND SCHEDULES
Exhibit A, Revolving Credit Note
Exhibit B, Form of Compliance Certificate
Exhibit C, Opinion of Borrower's Counsel
Exhibit D, LIBOR Pricing Notice
Schedule 5.2 Schedule of Principal Place of Business; Location of Records
Schedule 5.4 Schedule of Subsidiaries and Stock Ownership
Schedule 5.9 Schedule of Financial Statements
Schedule 5.14 Schedule of Pension Plans
Schedule 5.15 Schedule of Liens, Encumbrances, Indebtedness and Capitalized Lease
Obligations
Schedule 5.16 Environmental Matters
Schedule 8.4 Schedule of Insurance
Schedule 9.4 Schedule of Real Property to Be Sold
</TABLE>
<PAGE> 5
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of October 20, 1995 by and
between UNITRODE CORPORATION, a Maryland corporation (the "Borrower"), and
BAYBANK, a Massachusetts trust company (the "Bank").
Recitals
--------
The Borrower desires to establish a revolving credit facility for its
working capital needs and general corporate purposes, and the Bank is willing to
provide such facility on the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the Borrower and
the Bank hereby agree as follows:
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS
Section 1.1. DEFINITIONS. In addition to the terms defined elsewhere in
this Agreement, unless otherwise specifically provided herein, the following
terms shall have the following meanings for all purposes when used in this
Agreement, and in any note, agreement, certificate, report or other document
made or delivered in connection with this Agreement:
"AFFILIATE" shall mean (a) any director or officer of the
Borrower and (b) any Person that controls, is controlled by or is under
common control with the Borrower. For purposes of this definition,
"control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting
securities, by contract or otherwise.
"AGREEMENT" shall mean this Credit Agreement, as amended or
supplemented from time to time. References to Articles, Sections,
Exhibits, Schedules and the like refer to the Articles, Sections,
Exhibits, Schedules and the like of this Agreement unless otherwise
indicated, as amended and supplemented from time to time.
"APPLICABLE LIBOR RATE" shall mean the LIBOR Rate plus 2% per
annum.
"BANK AGREEMENT" shall mean this Agreement, the Revolving
Credit Note and any other present or future agreement from time to time
entered into between the Borrower or any Subsidiary and the Bank, each
as from time to time amended or supplemented, and all statements,
reports and certificates delivered by the Borrower to the Bank in
connection therewith.
"BANK OBLIGATIONS" shall mean all present and future
obligations and Indebtedness of the Borrower or any Subsidiary owing to
the Bank under this Agreement or any other
1
<PAGE> 6
Bank Agreement, including, without limitation, the obligations to pay
the Indebtedness from time to time evidenced by the Revolving Credit
Note, and obligations to pay interest, commitment fees, balance
deficiency fees, charges, expenses, reimbursement of letter credit
drawings and indemnification from time to time owed under any Bank
Agreement.
"BUSINESS DAY" shall mean a day on which the Bank shall be
open to conduct commercial banking business in Boston, Massachusetts.
"CAPITALIZED LEASE" shall mean any lease which is or should be
capitalized on the balance sheet of the lessee in accordance with
generally accepted accounting principles and Statement of Financial
Accounting Standards No. 13.
"CAPITALIZED LEASE OBLIGATIONS" shall mean the amount of the
liability reflecting the aggregate discounted amount of future payments
under all Capitalized Leases calculated in accordance with generally
accepted accounting principles and Statement of Financial Accounting
Standards No. 13.
"CLOSING DATE" shall mean the date on which all of the
conditions set forth in Section 3.1 have been satisfied.
"COMPLIANCE CERTIFICATE" shall mean a certificate in the form
of EXHIBIT B hereto and executed by the chief executive officer or
chief financial officer of the Borrower.
"CONSOLIDATED" and "CONSOLIDATING," and "CONSOLIDATED" and
"CONSOLIDATING" when used with reference to any term, mean that term
(or the terms "combined" and "combining", as the case may be, in the
case of partnerships, joint ventures and Affiliates that are not
Subsidiaries) as applied to the accounts of the Borrower (or other
specified Person) and all of its Subsidiaries (or other specified
Persons), or such of its Subsidiaries as may be specified, consolidated
(or combined) in accordance with generally accepted accounting
principles and with appropriate deductions for minority interests in
Subsidiaries, as required by generally accepted accounting principles.
"CONSOLIDATED CASH FLOW" shall mean for any period the sum of
(a) Consolidated Net Income and (b) all amounts deducted in computing
Consolidated Net Income in respect of consolidated depreciation and
amortization expense of the Borrower and its Subsidiaries.
"CONSOLIDATED CURRENT ASSETS" shall mean, at any date as of
which the amount thereof shall be determined, all assets of the
Borrower and its Subsidiaries which should properly be classified as
current, at any date as of which the amount thereof shall be
determined, in accordance with generally accepted accounting principles
consistently applied.
"CONSOLIDATED CURRENT LIABILITIES" shall mean, at any date as
of which the amount thereof shall be determined, the sum of (a) all
liabilities of the Borrower and its Subsidiaries which should properly
be classified as current in accordance with generally accepted
accounting principles consistently applied, including, without
limitation, all fixed prepayments of, and sinking fund payments with
respect to, Indebtedness and all estimated
2
<PAGE> 7
taxes of the Borrower and its Subsidiaries required to be made within
one year from the date of determination, PLUS without duplication (b)
one-third (1/3) of the outstanding principal amount of the Revolving
Credit Advances on such date.
"CONSOLIDATED FIXED CHARGES" shall mean as at the end of any
fiscal quarter, the sum of (a) current maturities of long term
indebtedness of the Borrower and its Subsidiaries outstanding, PLUS (b)
Capitalized Lease obligations of the Borrower and its Subsidiaries
outstanding, and (c) one-third (1/3) of the principal balance of the
Revolving Credit Advances outstanding.
"CONSOLIDATED INTANGIBLE ASSETS" shall mean (a) all
intercompany loans (without duplication for exclusions made in
accordance with generally accepted accounting principles) and loans to
any employee or officer of the Borrower or any Subsidiary, and all
amounts payable to the Borrower or any Subsidiary from any of the
aforesaid persons, (b) all assets which would be classified as
intangible assets under generally accepted accounting principles
consistently applied, including, without limitation, goodwill (whether
representing the excess of cost over book value of assets acquired or
otherwise), patents, trademarks, trade names, copyrights, franchises,
and deferred charges (including, without limitation, unamortized debt
discount and expense, organization costs, and research and development
costs), (c) treasury stock and minority interests in other corporations
or business organizations, (d) cash set apart and held in a sinking or
other analogous fund established for the purpose of redemption or other
retirement of capital stock, and (e) to the extent not already deducted
from total assets, reserves for depreciation, depletion, obsolescence
and/or amortization of properties and all other reserves or
appropriations of retained earnings which, in accordance with generally
accepted accounting principles consistently applied, should be
established in connection with the business conducted by the Borrower
and its Subsidiaries.
"CONSOLIDATED NET INCOME" shall mean the net income (or
deficit) from operations of the Borrower and its Subsidiaries, after
taxes, determined in accordance with generally accepted accounting
principles consistently applied.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean, at any date as
of which the amount thereof shall be determined, the consolidated
assets of the Borrower and its Subsidiaries less the sum of (a)
Consolidated Intangible Assets and (b) the consolidated liabilities of
the Borrower and its Subsidiaries.
"DEFAULT" shall mean an Event of Default or an event or
condition which with the passage of time or giving of notice, or both,
would become such an Event of Default.
"DISTRIBUTION" shall mean as to any Person: (a) the purchase,
redemption, or other acquisition or retirement of any shares of any
class of capital stock of such Person directly or indirectly, and (b)
any setting apart or allocating any sum for the purchase, redemption or
retirement of any shares of capital stock of such Person.
"ENVIRONMENTAL LAW" means any judgment, decree, order, law,
license, rule or regulation pertaining to environmental matters, or any
federal, state, county or local
3
<PAGE> 8
statute, regulation, ordinance, order or decree relating to public
health, welfare, the environment, or to the storage, handling, use or
generation of hazardous substances in or at the workplace, worker
health or safety, whether now existing or hereafter enacted.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"EVENT OF DEFAULT" shall have the meaning set forth in Section
10.1 hereof.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" shall mean
generally accepted accounting principles as defined by controlling
pronouncements of the Financial Accounting Standards Board, as from
time to time supplemented and amended.
"GUARANTY" or "GUARANTEE" or "GUARANTIES" shall include any
arrangement whereby a Person is or becomes liable in respect of any
Indebtedness or other obligation of another and any other arrangement
whereby credit is extended to another obligor on the basis of any
promise of a guarantor, whether that promise is expressed in terms of
an obligation to pay the Indebtedness of such obligor, or to purchase
or lease assets under circumstances that would enable such obligor to
discharge one or more of its obligations, or to maintain the capital,
the working capital, solvency or general financial condition of such
obligor, whether or not such arrangement is listed in the balance sheet
of the guarantor or referred to in a footnote thereto.
"INDEBTEDNESS" shall mean, as to any Person, all obligations,
contingent and otherwise, which in accordance with generally accepted
accounting principles consistently applied should be classified upon
such Person's balance sheet as liabilities, but in any event including
liabilities secured by any mortgage, pledge, security interest, lien,
charge or other encumbrance existing on property owned or acquired by
such Person whether or not the liability secured thereby shall have
been assumed, letters of credit open for account, obligations under
acceptance facilities, Capitalized Lease Obligations and all
obligations on account of Guaranties, endorsements and any other
contingent obligations in respect of the Indebtedness of others whether
or not reflected on such balance sheet or in a footnote thereto.
"INTEREST PERIOD" shall mean with respect to each LIBOR Rate
Loan, the period commencing on the date of such LIBOR Rate Loan and
ending one, two or three months thereafter, as the Borrower may request
in a Pricing Notice, provided that:
(i) any Interest Period (other than an Interest
Period determined pursuant to clause (iii) below) that would otherwise
end on a day that is not a Business Day shall be extended to the next
succeeding Business Day unless such Business Day falls in the next
calendar month, in which case such Interest Period shall end on the
immediately preceding Business Day;
(ii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the
4
<PAGE> 9
calendar month at the end of such Interest Period) shall, subject to
clause (iii) below, end on the last Business Day of a calendar month;
(iii) any Interest Period that would otherwise end
after the Revolving Credit Termination Date with respect to a LIBOR
Rate Loan representing a Revolving Credit Advance shall end on the
Revolving Credit Termination Date; and
(iv) notwithstanding clause (iii) above, no Interest
Period shall have a duration of less than one month, and if any
Interest Period applicable to any LIBOR Rate Loan would be for a
shorter period, such Interest Period shall not be available hereunder.
"INVESTMENT" shall mean (a) any stock, evidence of
Indebtedness or other security of another Person, (b) any loan,
advance, contribution to capital, extension of credit (except for
current trade and customer accounts receivable for inventory sold or
services rendered in the ordinary course of business and payable in
accordance with customary trade terms) to another Person, and (c) any
purchase of (i) stock or other securities of another Person or (ii) any
business or undertaking of another Person (whether by purchase of
assets or securities), any commitment or option to make any such
purchase if, in the case of an option, the aggregate consideration paid
for such option was in excess of $100, or (d) any other investment, in
all cases whether existing on the date of this Agreement or thereafter
made.
"LIBOR PRICING OPTION" shall mean the option granted to the
Borrower pursuant to Section 2.4 hereof to have interest on all or a
portion of the Revolving Credit Advances computed on the basis of the
Applicable LIBOR Rate for an applicable Interest Period.
"LIBOR RATE" shall mean for any Interest Period for any LIBOR
Rate Loan, the quotient of (i) the rate of interest determined by the
Bank, at about 10:00 a.m. (Boston time) on the LIBOR Rate Fixing Day as
being the rate at which deposits in U.S. dollars are offered to it by
first-class banks in the London interbank market for deposit for such
Interest Period in amounts comparable to the aggregate principal amount
of LIBOR Rate Loans to which such Interest Period relates, divided by
(ii) the difference between one (1) minus the Reserve Requirement
(expressed as a decimal) applicable to that Interest Period. The LIBOR
Rate shall be adjusted automatically as of the effective date of any
change in the Reserve Requirement.
"LIBOR RATE FIXING DAY" shall mean, in the case of any LIBOR
Rate Loan, the second Business Day preceding the Business Day on which
an Interest Period begins.
"LIBOR RATE LOAN" shall mean any Revolving Credit Advance
hereunder upon which interest will accrue on the basis of a formula
including as a component thereof the LIBOR Rate. The expiration date of
any LIBOR Rate Loan shall be the last day of the Interest Period
applicable to such LIBOR Rate Loan.
"MAXIMUM REVOLVING CREDIT AMOUNT" shall mean as of any date of
determination, the lesser of (a) $25,000,000 less the "Converted
Amount," if any, as defined in Section 2.12, or (b) the amount to which
the Maximum Revolving Credit Amount may have been
5
<PAGE> 10
reduced pursuant to Section 2.8; provided that if the obligation of the
Bank to make further Revolving Credit Advances is terminated upon the
occurrence of an Event of Default, the Maximum Revolving Credit Amount
as of any date of determination thereafter shall be deemed to be $0.
"1995 FINANCIAL STATEMENTS" shall mean the Consolidated
Balance Sheet of the Borrower and its Subsidiaries as of January 31,
1995 and the related Consolidated Statements of Operations,
Stockholders' Equity and Cash Flows for the year then ended and notes
to such financial statements.
"PENSION PLAN" shall mean an employee benefit plan or other
plan maintained for the employees of the Borrower or any Subsidiary as
described in Section 4021(a) of ERISA.
"PERSON" shall mean an individual, corporation, partnership,
joint venture, association, estate, joint stock company, trust,
organization, business, or a government or agency or political
subdivision thereof.
"PRICING NOTICE" shall have the meaning set forth in Section
2.4.
"PRIME RATE" shall mean the rate of interest from time to time
announced and made effective by the Bank at its main office in
Burlington, Massachusetts as its "Prime Rate," it being understood that
such rate is a reference rate, not necessarily the lowest, which serves
as the basis upon which effective rates of interest are calculated for
obligations making reference thereto.
"PRIME RATE LOANS" shall mean any Revolving Credit Advance
hereunder upon which, or the Term Loan for the period of time during
which, interest will accrue at the Prime Rate.
"REPORTABLE EVENT" shall mean an event reportable to the
Pension Benefit Guaranty Corporation under Section 4043 of Title IV of
ERISA.
"REVOLVING CREDIT ADVANCE" shall mean any loan or advance from
the Bank to the Borrower pursuant to Section 2.1 this Agreement.
"REVOLVING CREDIT NOTE" shall mean the Revolving Credit Note
executed in connection herewith substantially in the form of EXHIBIT A
hereto.
"REVOLVING CREDIT TERMINATION DATE" shall mean October 20,
1998.
"SUBSIDIARY" shall mean any Person of which the Borrower or
other specified parent shall now or hereafter at the time own, directly
or indirectly through one or more Subsidiaries or otherwise, sufficient
voting stock (or other beneficial interest) to entitle it to elect at
least a majority of the board of directors or trustees or similar
managing body.
"TERM LOAN" shall have the meaning set forth in Section 2.12.
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<PAGE> 11
"TERM LOAN MATURITY DATE" shall have the meaning set forth in
Section 2.12.
"UNUSED REVOLVING CREDIT AMOUNT" shall mean at any time the
Maximum Revolving Credit Amount less the aggregate of all outstanding
Revolving Credit Advances.
"WAFER FACTORY COSTS" shall mean any costs or related costs
for the construction of any semi-conductor silicon wafer factory to be
built by the Borrower or any of its Subsidiaries and the cost of any
equipment included in the operation of such factory.
Section 1.2. ACCOUNTING TERMS. All accounting terms used and not
defined in this Agreement shall be construed in accordance with generally
accepted accounting principles consistently applied, and all financial data
required to be delivered hereunder shall be prepared in accordance with such
principles.
ARTICLE 2. THE CREDITS
Section 2.1. THE REVOLVING CREDIT. Subject to the terms and conditions
hereof and so long as there is no Default, the Bank will make Revolving Credit
Advances to the Borrower, from time to time, until the Revolving Credit
Termination Date, as requested by the Borrower in accordance with Section 2.2;
provided that the aggregate principal amount of all Revolving Credit Advances at
any time outstanding hereunder shall not exceed the Maximum Revolving Credit
Amount. The Borrower shall execute and deliver to the Bank the Revolving Credit
Note to evidence the Revolving Credit Advances. Subject to the foregoing
limitations and the provisions of Section 4.1 below, the Borrower may borrow,
repay pursuant to Section 4.2 and reborrow Revolving Credit Advances hereunder
from the date of this Agreement to the Revolving Credit Termination Date.
Section 2.2. REQUESTS FOR REVOLVING CREDIT ADVANCES. Each Revolving
Credit Advance shall be made on notice given by the Borrower to the Bank not
later than 12:00 noon (Boston time) on the date of the proposed Borrowing (a
"Notice of Revolving Credit Borrowing"); PROVIDED, HOWEVER that if the Borrower
elects a LIBOR Pricing Option with respect to any Revolving Credit Advance in
accordance with Section 2.4 hereof, such Notice of Revolving Credit Borrowing
shall be given by the Borrower contemporaneously with a Pricing Notice in the
manner and within the time specified in Section 2.4. Each such Notice of
Revolving Credit Borrowing shall be by telephone or telecopy, in each case
confirmed immediately in writing by the Borrower, specifying therein (a) the
requested date of such Revolving Credit Advance, and (b) the amount of such
Revolving Credit Advance (which must be a minimum of $250,000 in the case of
requests for Prime Rate Loans and $500,000 and increments of $100,000 in the
case of requests for LIBOR Rate Loans). The Borrower agrees to indemnify and
hold the Bank harmless for any action, including the making of any Revolving
Credit Advances hereunder, or loss or expense, taken or incurred by the Bank in
good faith reliance upon such telephone request. At the time of the initial
request for a Revolving Credit Advance made under this Section 2.2, the Borrower
shall have provided the Bank with a Compliance Certificate. The Borrower hereby
agrees (i) that the Bank shall be entitled to rely upon the Compliance
Certificate most recently
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<PAGE> 12
delivered to the Bank until it is superseded by a more recent Compliance
Certificate, and (ii) that each request for a Revolving Credit Advance, whether
by telephone or in writing or otherwise, shall constitute a confirmation of the
representations and warranties contained in the most recent Compliance
Certificate then in the Bank's possession.
Section 2.3. INTEREST ON REVOLVING CREDIT ADVANCES. Subject to the
terms of Section 2.4 relating to LIBOR Pricing Options, the Borrower shall pay
interest on the unpaid balance of the Revolving Credit Advances from time to
time outstanding at a per annum rate equal to the Prime Rate. Interest on the
Revolving Credit Advances shall be payable monthly in arrears on the last day of
each month, commencing November 30, 1995 and continuing until all of the
Indebtedness of the Borrower to the Bank under the Revolving Credit Note shall
have been paid in full.
Section 2.4. ELECTION OF LIBOR PRICING OPTIONS. Subject to all the
terms and conditions hereof and so long as there exists no Default, the Borrower
may, by delivering a notice (a "Pricing Notice") to the Bank received at or
before 10:00 a.m. Boston time on the date two Business Days prior to the
commencement of the Interest Period selected in such Pricing Notice, elect to
have all or a portion of the outstanding Revolving Credit Advances, as the
Borrower may specify in such Pricing Notice, accrue and bear daily interest
during the Interest Period so selected at a per annum rate equal to the
Applicable LIBOR Rate for such Interest Period; PROVIDED, HOWEVER, that any such
election made with respect to the Revolving Credit Advances shall be in an
amount not less than $500,000 and in increments of $100,000; and PROVIDED
FURTHER that no such election will be made if it would result in there being
more than four (4) LIBOR Pricing Options in the aggregate outstanding at any one
time. Interest on Revolving Credit Advances bearing interest at the Applicable
LIBOR Rate shall be paid for the applicable Interest Period on the last day
thereof and when such LIBOR Rate Loan is due (whether at maturity, by reason of
acceleration or otherwise). Each Pricing Notice shall be substantially in the
form of EXHIBIT D attached hereto and shall specify: (i) the selection of a
LIBOR Pricing Option; (ii) the effective date and amount of Revolving Credit
Advances subject to such LIBOR Pricing Option, subject to the limitations set
forth herein; and (iii) the duration of the applicable Interest Period. Each
Pricing Notice shall be irrevocable.
Section 2.5. ADDITIONAL PAYMENTS. During the continuance of any Event
of Default, the Borrower shall pay to the Bank additional interest on the unpaid
principal balance of the Revolving Credit Note and, to the extent permitted by
law, on any overdue installments of interest, at a rate per annum equal to the
stated interest applicable to the Revolving Credit Advances or Term Loan plus
2%.
Section 2.6. SET-OFF; COMPUTATION OF INTEREST; ETC. The Borrower hereby
authorizes and directs the Bank, without prior notice to the Borrower, to charge
the Borrower's deposit accounts with the Bank for all payments of principal and
interest on the Revolving Credit Note and for all other amounts due under
Sections 2.3, 2.5, 2.9, 2.11, 2.12, 4.1, 12 or 13.7 or any other provision
hereof or of any other Bank Agreement. Interest hereunder and under the
Revolving Credit Note shall be computed on the basis of a 360-day year for the
number of days actually elapsed. Any increase or decrease in the interest rate
on the Revolving Credit Note resulting from a change in the Base Rate shall be
effective immediately from the date of such change. No interest payment or
interest rate charged hereunder shall exceed the maximum rate authorized
8
<PAGE> 13
from time to time by applicable law. If the due date for any payment of
principal is extended by operation of law, interest shall be payable for such
extended time. If any payment required by this Agreement becomes due on a day
that is not a Business Day such payment may be made on the next succeeding
Business Day, and such extension shall be included in computing interest in
connection with such payment. The outstanding amount of the Revolving Credit
Advances as reflected on the Bank's records from time to time shall be
considered correct and binding on the Borrower (absent manifest error) unless
within 30 days after receipt of any notice by the Bank of such outstanding
amount, the Borrower notifies the Bank in writing to the contrary.
Section 2.7. COMMITMENT FEE. For the period commencing from February 1,
1996, through the Revolving Credit Termination Date, the Borrower shall pay to
the Bank a commitment fee of 3/8% per annum of the actual daily Unused Revolving
Credit Amount. The facility fee shall be payable in arrears on May 1, 1996 and
on the first day of each February, May, August and November thereafter.
Section 2.8. REDUCTION OF COMMITMENT BY THE BORROWER. The Borrower at
its option may, at any time and from time to time, irrevocably reduce in part
(in integral multiples of $1,000,000) the unused portion of the Maximum
Revolving Credit Amount on not less than five (5) Business Days' prior written
notice to the Bank. No such reduction may be reinstated by the Borrower.
Section 2.9. INCREASED COSTS, ETC.
(a) Anything herein to the contrary notwithstanding, if any
changes in present or future applicable law (which term "applicable law", as
used in this Agreement, includes statutes and rules and regulations thereunder
and interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time heretofore or hereafter made upon or otherwise issued
to the Bank by any central bank or other fiscal, monetary or other authority,
whether or not having the force of law), including without limitation any change
according to a prescribed schedule of increasing requirements, whether or not
known or in effect as of the date hereof, shall (i) subject the Bank to any tax,
levy, impost, duty, charge, fee, deduction or withholding of any nature with
respect to this Agreement or the payment to the Bank of any amounts due to it
hereunder, or (ii) materially change the basis of taxation of payments to the
Bank of the principal of or the interest on the Revolving Credit Advances or any
other amounts payable to the Bank hereunder, or (iii) impose or increase or
render applicable any special or supplemental deposit or reserve or similar
requirements or assessment against assets held by, or deposits in or for the
account of, or any liabilities of, or loans by an office of the Bank in respect
of the transactions contemplated herein, or (iv) impose on the Bank any other
condition or requirement with respect to this Agreement or any Revolving Credit
Advance, and the result of any of the foregoing is (A) to increase the cost to
the Bank of making, funding or maintaining all or any part of the Revolving
Credit Advances or its commitment hereunder, or (B) to reduce the amount of
principal, interest or other amount payable to the Bank hereunder, or (C) to
require the Bank to make any payment or to forego any interest or other sum
payable hereunder, the amount of which payment or foregone interest or other sum
is calculated by reference to the gross amount of any sum receivable or deemed
received by the Bank from the Borrower hereunder, then, and in each such case
not otherwise provided for hereunder, the
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<PAGE> 14
Borrower will upon demand made by the Bank promptly following the Bank's receipt
of notice pertaining to such matters accompanied by calculations thereof in
reasonable detail, pay to the Bank such additional amounts as will be sufficient
to compensate the Bank for such additional cost, reduction, payment or foregone
interest or other sum; provided that the foregoing provisions of this sentence
shall not apply in the case of any additional cost, reduction, payment or
foregone interest or other sum resulting from any taxes charged upon or by
reference to the overall net income, profits or gains of the Bank. In
determining the additional amounts payable hereunder, the Bank may use any
reasonable method of averaging, allocating or attributing such additional costs,
reductions, payments, foregone interest or other sums among its customers.
(b) Anything herein to the contrary notwithstanding, if, after
the date hereof, the Bank shall have determined that any present or future
applicable law, rule, regulation, guideline, directive or request (whether or
not having force of law), including without limitation any change according to a
prescribed schedule of increasing requirements, whether or not known or in
effect as of the date hereof, regarding capital requirements for banks or bank
holding companies generally, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Bank with any of the foregoing, either imposes a requirement upon the
Bank to allocate additional capital resources or increases the Bank's
requirement to allocate capital resources or the Bank's commitment to make, or
to the Bank's maintenance of, the Revolving Credit Advances hereunder, which has
or would have the effect of reducing the return on the Bank's capital to a level
below that which the Bank could have achieved (taking into consideration the
Bank's then existing policies with respect to capital adequacy and assuming full
utilization of the Bank's capital) but for such applicability, change,
interpretation, administration or compliance, by any amount deemed by the Bank
to be material, the Bank shall promptly after its determination of such
occurrence give notice thereof to the Borrower. The Borrower and the Bank shall
thereafter attempt to negotiate in good faith an adjustment to the compensation
payable hereunder which will adequately compensate the Bank for such reduction.
If the Borrower and the Bank are unable to agree to such adjustment within
thirty (30) days of the day on which the Borrower receives such notice, then
commencing on the date of such notice (but not earlier than the effective date
of any such applicability, change, interpretation, administration or
compliance), the fees payable hereunder shall increase by an amount which will,
in the Bank's reasonable determination, evidenced by calculations in reasonable
detail furnished to the Borrower, compensate the Bank for such reduction, the
Bank's determination of such amount to be conclusive and binding upon the
Borrower, absent manifest error. In determining such amount, the Bank may use
any reasonable methods of averaging, allocating or attributing such reduction
among its customers. The provisions of this Section 2.9 shall be applied to the
Borrower so as not to discriminate against the Borrower vis-a-vis other
customers of the Bank.
Section 2.10. USE OF PROCEEDS. The proceeds of all Revolving Credit
Advances shall be used by the Borrower for working capital and general corporate
purposes. The Borrower will not, directly or indirectly, use any part of such
proceeds for the purpose of purchasing or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
or to extend credit to any Person for the purpose of purchasing or carrying any
such margin stock.
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<PAGE> 15
Section 2.11. CHANGED CIRCUMSTANCES. In the event that:
(a) on any date on which the Applicable LIBOR Rate would
otherwise be set the Bank shall have determined in good faith (which
determination shall be final and conclusive) that adequate and fair means do not
exist for ascertaining the LIBOR Rate, as applicable; or
(b) at any time the Bank shall have determined in good faith
(which determination shall be final and conclusive) that
(i) the implementation of LIBOR Pricing Option has been
made impracticable or unlawful by (A) the occurrence of a contingency
that materially and adversely affects the London interbank market, or
(B) compliance by the Bank in good faith with any applicable law or
governmental regulation, guideline or order or interpretation or change
thereof by any governmental authority charged with the interpretation
or administration thereof or with any request or directive of any such
governmental authority (whether or not having the force of law); or
(ii) the LIBOR Rate shall no longer represent the
effective cost to the Bank for U.S. dollar deposits in the London
interbank market, as applicable for deposits in which they regularly
participate;
then, and in such event, the Bank shall forthwith so notify the Borrower
thereof. Until the Bank notifies the Borrower that the circumstances giving rise
to such notice no longer apply, the obligation of the Bank to allow election by
the Borrower of a LIBOR Pricing Option shall be suspended. If at the time the
Bank so notifies the Borrower, the Borrower has previously given the Bank a
Pricing Notice with respect to a LIBOR Pricing Option, but the LIBOR Pricing
Option requested therein has not yet gone into effect, such Pricing Notice shall
automatically be deemed to be withdrawn and be of no force or effect. Upon such
date as shall be specified in such notice (which shall not be earlier than the
date such notice is given), the LIBOR Pricing Option with respect to all LIBOR
Rate Loans shall be terminated and the Borrower shall pay all interest due on
such LIBOR Rate Loans and any amounts required to be paid pursuant to Section
4.4.
Section 2.12. CONVERSION TO TERM LOAN.
(a) At the Borrower's election, which may be exercised only
once upon three (3) Business Days prior written notice to the Bank prior to
October 20, 1998 (the "Election Date"), the Borrower may elect to convert all or
a portion of the principal amount of the Revolving Credit Advances outstanding
(the "Converted Amount") on the Election Date (the "Term Loan Amount") to a term
loan (the "Term Loan"). Interest on the Term Loan shall accrue from the Election
Date at the Prime Rate, subject to the Borrower's right to have the Term Loan
bear interest at a fixed rate as provided in paragraph (b) below, and in either
case interest shall be payable monthly in arrears on the last day of each month,
commencing on the month immediately following the month of the Election Date.
The principal of the term loan shall be repaid in thirty-six equal monthly
installments in an amount equal to l/36 of the Term Loan Amount, payable monthly
on the last day of each month, commencing on the month immediately following the
month of the Election Date, with the outstanding principal balance and all
accrued and unpaid interest and other charges due no later than October 20, 2001
(the "Term Loan Maturity Date").
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(b) Subject to the terms and conditions of this Agreement and
so long as there exists no Default, from time to time on any Business Day from
and after the Revolving Credit Termination Date, the Borrower may request that
the outstanding principal amount of the Term Loan bear interest at a fixed rate
through the Term Loan Maturity Date, and, if such financing is then available
and being offered to borrowers in the Bank's ordinary course of business, the
Bank shall promptly quote a proposed fixed rate to the Borrower. If the Borrower
accepts such proposed fixed rate at the time it is offered, the interest rate on
the Term Loan shall accrue at such fixed rate from such date through the Term
Loan Maturity Date, and the Borrower, at the request of the Bank, shall execute
and deliver such confirmation thereof, including a revised note reflecting such
change, as requested by the Bank. If the Borrower does not accept such proposed
fixed rate at the time it is offered, the offer shall be deemed to be rejected,
but the Borrower may thereafter request further fixed rate quotations in
accordance with this Section 2.12(b).
ARTICLE 3. CONDITIONS OF THE REVOLVING CREDIT ADVANCES
Section 3.1. CONDITIONS TO FIRST REVOLVING CREDIT ADVANCE. The Bank's
obligation to make the first Revolving Credit Advance shall be subject to
compliance by the Borrower with its agreements contained in this Agreement, and
to the condition precedent that the Bank shall have received each of the
following, in form and substance satisfactory to the Bank and its counsel or in
the form attached hereto as an Exhibit, as the case may be:
(a) The Revolving Credit Note duly executed by the Borrower.
(b) Copies of the resolutions of the Board of Directors of the
Borrower authorizing the execution, delivery and performance of this Agreement,
the Revolving Credit Note and the other Bank Agreements to which the Borrower is
a party, certified by the Secretary or an Assistant Secretary of the Borrower
(which certificate shall state that such resolutions are in full force and
effect).
(c) A certificate of the Secretary or an Assistant Secretary
of the Borrower certifying the name and signatures of the officers of the
Borrower authorized to sign this Agreement, the Revolving Credit Note, the other
Bank Agreements to which the Borrower is a party and the other documents to be
delivered by the Borrower hereunder.
(d) Certificates of legal existence and corporate good
standing for the Borrower of recent date issued by the appropriate Maryland,
Massachusetts and New Hampshire governmental authorities.
(e) Certificate of tax good standing for the Borrower of
recent date issued by the appropriate Maryland, Massachusetts and New Hampshire
governmental authorities.
(f) The opinion of Allan R. Campbell, General Counsel of the
Borrower, dated the date of execution of this Agreement, in form and substance
satisfactory to the Bank.
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(g) A certificate of a duly authorized officer of the
Borrower, dated the date of the first Revolving Credit Advance, to the effect
that all conditions precedent on the part of the Borrower to the execution and
delivery hereof and the making of the First Revolving Credit Advance have been
satisfied.
(h) A Compliance Certificate dated the date of the first
Revolving Credit Advance.
(i) Such other documents, certificates and opinions as the
Bank may reasonably request.
Section 3.2. CONDITIONS TO ALL REVOLVING CREDIT ADVANCES. The Bank's
obligation to make any Revolving Credit Advance pursuant to this Agreement shall
be subject to compliance by the Borrower with its agreements contained in this
Agreement and each other Bank Agreement, and to the satisfaction, at or before
the making of each Revolving Credit Advance, of all of the following conditions
precedent:
(a) The representations and warranties herein and those made
by or on behalf of the Borrower in any other Bank Agreement shall be correct as
of the date on which any Revolving Credit Advance is made, with the same effect
as if made at and as of such time (except as to transactions permitted hereunder
and described in a Compliance Certificate previously delivered to the Bank and
except that the references in Article 5 of this Agreement to the 1995 Financial
Statements shall be deemed to refer to the most recent annual audited
consolidated financial statements of the Borrower and its Subsidiaries furnished
to the Bank.)
(b) On the date of any Revolving Credit Advance hereunder,
there shall exist no Default.
(c) The making of the requested Revolving Credit Advance shall
not be prohibited by any law or governmental order or regulation applicable to
the Bank or to the Borrower, and all necessary consents, approvals and
authorizations of any Person for any such Revolving Credit Advance shall have
been obtained.
ARTICLE 4. PAYMENT AND REPAYMENT
Section 4.1. MANDATORY PREPAYMENT.
(a) If at any time the aggregate outstanding principal balance
of all Revolving Credit Advances made hereunder exceeds the Maximum Revolving
Credit Amount, the Borrower shall immediately repay to the Bank an amount equal
to such excess.
(b) The Borrower will make all required principal payments on
the Term Loan on the dates when due.
Section 4.2. VOLUNTARY PREPAYMENTS.
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(a) The Borrower may make prepayments to the Bank of any
outstanding principal amount of the Revolving Credit Advances or the Term Loan
equal to $250,000 or an integral multiple thereof which are Prime Rate Loans in
accordance with Section 4.2 at any time prior to 12:00 noon (Boston time) on any
Business Day without premium or penalty.
(b) The Borrower may not make prepayments to the Bank of any
Revolving Credit Advances which are LIBOR Rate Loans or on the Term Loan after a
fixed rate has been elected under Section 2.12.
Section 4.3. PAYMENT AND INTEREST CUTOFF. Notice of each prepayment
pursuant to Section 4.2(a) shall be given to the Bank in the case of prepayment
of Prime Rate Loans, not later than 12:00 noon (Boston time) on the date of
payment, and shall specify the total principal amount of the Revolving Credit
Advances to be paid on such date. Notice of prepayment having been given in
compliance with this Section 4.3, the amount specified to be prepaid shall
become due and payable on the date specified for prepayment and from and after
said date (unless the Borrower shall default in the payment thereof) interest
thereon shall cease to accrue. Unpaid interest on the principal amount of any
Revolving Credit Advances or the Term Loan so prepaid accrued to the date of
prepayment shall be due on the date of prepayment.
Section 4.4. PAYMENTS NOT AT END OF INTEREST PERIOD. If the Borrower
for any reason makes any payment of principal with respect to any LIBOR Rate
Loan on any day other than the last day of the Interest Period applicable to
such LIBOR Rate Loan, including without limitation by reason of acceleration, or
fails to borrow a LIBOR Rate Loan after electing a LIBOR Pricing Option with
respect thereto pursuant to Section 2.4, the Borrower shall pay to the Bank, an
amount computed pursuant to the following formula:
L = (R - T) x P x D
---------------
360
L = amount payable to the Bank
R = the effective rate of interest on such LIBOR Rate Loan
T = the effective interest rate per annum at which any readily
marketable bond or other obligation of the United States,
selected in the Bank's sole discretion, maturing on or near
the last day of the then applicable Interest Period of such
LIBOR Rate Loan and in approximately the same amount as such
LIBOR Rate Loan can be purchased by the Bank on the day of
such payment of principal or failure to borrow
P = the amount of principal prepaid or the amount of the requested
LIBOR Rate Loan
D = the number of days remaining in the Interest Period as of
the date of such payment or the number of days of the
requested Interest Period
Section 4.5. INDEMNIFICATION FOR LOSSES UPON PREPAYMENT OF FIXED RATE
TERM LOAN. If the Borrower shall at any time repay or prepay any principal of
the Term Loan which is bearing interest at a fixed rate on a date other than on
the scheduled date for payment thereof (as a consequence of acceleration
pursuant to Section 10.2 hereof, or otherwise), then the Borrower shall, on
demand made by the Bank at any time, pay to the Bank a sum (in this Section 4.5
called
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the "Reimbursable Cost") which shall be determined by the Bank in the following
manner after each such repayment or prepayment:
(a) FIRST, the Bank shall determine the amount by which:
(i) the total amount of interest which would have
otherwise accrued under the Term Loan on the principal so paid, during
the period (the "Reemployment Period") beginning on the date of such
payment and ending on the stated maturity of such principal;
shall exceed
(ii) the total amount of interest which would accrue,
during the Reemployment Period, on any readily marketable bond or other
obligation customarily issued by the United States designated by the
Bank in its sole discretion at or about the time of such payment (such
bond or other obligation of the United States to be in an amount equal
(as nearly as may be) to the amount of principal so paid and to have a
maturity comparable to the Reemployment Period, and the interest to
accrue thereon to take account of amortization of any discount from par
or accretion of premium above par at which the same is selling at the
time of designation).
(b) SECOND, the Bank shall divide such excess by the number of
interest payments which Acquisition would have been required to make during the
Reemployment Period, in accordance with the terms of the Term Loan in respect of
the principal so paid, with the resulting amount being hereinafter called an
"Installment Amount."
(c) THIRD, an Installment Amount shall be treated as payable
on each date on which interest would have been payable by the Borrower during
the Reemployment Period had the principal amount not been so paid.
(d) FOURTH, the amount to be paid on each such date shall be
the present value of an Installment Amount determined by discounting the amount
thereof from the date on which such Installment Amount is to be treated as
payable, at the same annual interest rate as that payable on the bond or other
obligation of the United States designated as aforesaid by the Bank.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement and make the
Revolving Credit Advances and the Term Loan as contemplated hereby, the Borrower
hereby makes the following representations and warranties:
Section 5.1. CORPORATE EXISTENCE, CHARTER DOCUMENTS, ETC. The Borrower
and each Subsidiary is a corporation validly organized, legally existing and in
good standing under the laws of the jurisdiction in which it is organized and
has corporate power to own its properties and conduct its business as now
conducted and as proposed to be conducted by it, except where any failure or
violation of the foregoing by any Subsidiary would not have a material adverse
effect on
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its or the Borrower's business, condition (financial or otherwise), results of
operations, prospects or assets. Certified copies of the charter documents and
By-Laws of the Borrower and each Subsidiary have been delivered to the Bank and
are true, accurate and complete as of the date hereof.
Section 5.2. PRINCIPAL PLACE OF BUSINESS; LOCATION OF RECORDS. Except
as set forth on SCHEDULE 5.2, the Borrower's and each Subsidiary's principal
place of business is located at 7 Continental Boulevard, Merrimack, NH 03054
(the "NH location") and the Borrower and each Subsidiary has had no other
principal place of business during the last six months except for 8 Suburban
Park Drive, Billerica, MA. All of the books and records or true and complete
copies thereof relating to the accounts and contracts of the Borrower are and
will be kept at the NH location. All such books and records of each Subsidiary
are and will be kept at such locations set forth on SCHEDULE 5.2.
Section 5.3. QUALIFICATION. The Borrower and each Subsidiary is duly
qualified, licensed and authorized to do business and is in good standing as a
foreign corporation in each jurisdiction where its failure to be so qualified
would have a material adverse effect on the business, assets or condition,
financial or otherwise, of the Borrower or any Subsidiary.
Section 5.4. SUBSIDIARIES. The Borrower has no Subsidiaries except for
those listed in SCHEDULE 5.4. All of the issued and outstanding capital stock of
each Subsidiary listed on SCHEDULE 5.4 is owned of record and beneficially by
the Borrower or other Person as set forth on SCHEDULE 5.4.
Section 5.5. CORPORATE POWER. The execution, delivery and performance
of this Agreement, the Revolving Credit Note and all other Bank Agreements and
other documents delivered or to be delivered by the Borrower or any Subsidiary
to the Bank, and the incurrence of Indebtedness to the Bank hereunder or
thereunder, now or hereafter owing,
(a) are within the corporate powers of the Borrower and each
Subsidiary, as the case may be, having been duly authorized by its Board of
Directors or other similar governing body, and, if required by law, by its
charter documents or by its By-Laws, by its stockholders;
(b) do not require any approval or consent of, or filing with,
any governmental agency or other Person (or such approvals and consents have
been obtained and delivered to the Bank) and are not in contravention of law or
the terms of the charter documents or By-Laws of the Borrower and each
Subsidiary or any amendment thereof;
(c) do not and will not
(i) result in a breach of or constitute a default under
any indenture or loan or credit agreement or any other agreement, lease
or instrument to which the Borrower or any Subsidiary is a party or by
which the Borrower, any Subsidiary or any of their respective
properties are bound or affected,
(ii) result in, or require, the creation or imposition of
any mortgage, deed of trust, pledge, lien, security interest or other
charge or encumbrance of any nature
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on any property now owned or hereafter acquired by the Borrower or any
Subsidiary, except as provided in the Bank Agreements, or
(iii) result in a violation of or default under any law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award, now in effect having applicability to the
Borrower or any Subsidiary, or to any of their respective properties.
Section 5.6. VALID AND BINDING OBLIGATIONS. This Agreement, the
Revolving Credit Note, and all the other Bank Agreements executed in connection
herewith and therewith constitute, or will constitute when delivered, the valid
and binding obligations of the Borrower and its Subsidiaries, as the case may
be, enforceable in accordance with their respective terms, except as the
enforceability thereof may be subject to bankruptcy, insolvency, moratorium and
other laws affecting the rights and remedies of creditors and secured parties
and to the exercise of judicial discretion in accordance with general equitable
principles.
Section 5.7. OTHER AGREEMENTS. Neither the Borrower nor any Subsidiary
is a party to any indenture, loan or credit agreement, or any lease or other
agreement or instrument, or subject to any charter or corporate restriction,
which is likely to have a material adverse effect on the business, properties,
assets, operations or condition, financial or otherwise, of the Borrower or any
Subsidiary, or which restricts the ability of the Borrower or any Subsidiary to
carry out any of the provisions of this Agreement, the Revolving Credit Note or
any of the Bank Agreements executed in connection herewith and therewith.
Section 5.8. PAYMENT OF TAXES. The Borrower and its Subsidiaries have
filed all tax returns which are required to be filed by them and have paid, or
made adequate provision for the payment of, all taxes which have or may become
due pursuant to said returns or to assessments received. All federal tax returns
of the Borrower and its Subsidiaries through their fiscal year ended in 199_
have been audited by the Internal Revenue Service or are not subject to such
audit by virtue of the expiration of the applicable period of limitation, and
the results of such audits are fully reflected in the balance sheet contained in
the 1995 Financial Statements. The Borrower knows of no material additional
assessments since such date for which adequate reserves appearing in the balance
sheet contained in the 1995 Financial Statements have not been established. The
Borrower and its Subsidiaries have made adequate provisions for all current
taxes, and to the best of the Borrower's knowledge there will not be any
additional assessments for any fiscal periods prior to and including that which
ended on the date of said balance sheet in excess of the amounts reserved
therefor.
Section 5.9. FINANCIAL STATEMENTS. All balance sheets, statements and
other financial information furnished to the Bank in connection with this
Agreement and the transactions contemplated hereby (each of which is listed on
SCHEDULE 5.9), including, without limitation, the 1995 Financial Statements,
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except for the absence of
footnotes with interim statements) and present fairly the consolidated financial
condition of the Borrower and its Subsidiaries and all such information so
furnished was true, correct and complete as of the date thereof.
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Section 5.10. OTHER MATERIALS FURNISHED. No written information,
exhibits, memoranda or reports furnished to the Bank by or on behalf of the
Borrower or any Subsidiary in connection with the negotiation of this Agreement
contains any material misstatement of fact or omits to state a material fact or
any fact necessary to make the statements contained therein not misleading.
Section 5.11. CHANGES IN CONDITION. Since the date of the balance sheet
contained in the 1995 Financial Statements, there has been no material adverse
change in the business or assets or in the condition, financial or otherwise, of
the Borrower or any Subsidiary, and neither the Borrower nor any Subsidiary has
entered into any transaction outside of the ordinary course of business which is
material to the Borrower or any Subsidiary. Neither the Borrower nor any
Subsidiary has any contingent liabilities of any material amount which are not
referred to in the 1995 Financial Statements.
Section 5.12. ASSETS, LICENSES, ETC.
(a) The Borrower and its Subsidiaries have good and
marketable title to, or valid leasehold interests in, all of their assets, real
and personal, including the assets carried on their books and reflected in the
1995 Financial Statements, subject to no liens, charges or encumbrances, except
for (i) liens, charges and encumbrances described in SCHEDULE 5.15 and permitted
by Section 9.2 hereof, and (ii) assets sold, abandoned or otherwise disposed of
in the ordinary course of business.
(b) The Borrower and its Subsidiaries own all material
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, and trade names necessary to continue to conduct their
business as heretofore conducted by them, now conducted by them and proposed to
be conducted by them. To their knowledge, the Borrower and its Subsidiaries
conduct their respective businesses without infringement or claim of
infringement of any license, patent, copyright, service mark, trademark, trade
name, trade secret or other intellectual property right of others. To the best
knowledge of the Borrower, there is no infringement or claim of infringement by
others of any material license, patent, copyright, service mark, trademark,
trade name, trade secret or other intellectual property right of Borrower and
its Subsidiaries.
Section 5.13. LITIGATION. There is no litigation, at law or in equity,
or any proceeding before any federal, state, provincial or municipal board or
other governmental or administrative agency pending or, to the knowledge of the
Borrower, threatened, or any basis therefor, which involves a material risk of
any judgment or liability which could result in any material adverse change in
the business or assets or in the condition, financial or otherwise, of the
Borrower or any Subsidiary, and no judgment, decree, or order of any federal,
state, provincial or municipal court, board or other governmental or
administrative agency has been issued against the Borrower or any Subsidiary
which has or may have a material adverse effect on the business or assets or on
the condition, financial or otherwise, of the Borrower or any Subsidiary.
Section 5.14. PENSION PLANS. No employee benefit plan established or
maintained by the Borrower or any Subsidiary or any other Person a member of the
same "control group," as the Borrower (a "Pension Affiliate"), within the
meaning of Section 302(f)(6)(b) of ERISA, (including any multi-employer plan to
which the Borrower or any Subsidiary contributes) which is subject to Part 3 of
Subtitle B of Title I of the ERISA, had a material accumulated funding
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deficiency (as such term is defined in Section 302 of ERISA) as of the last day
of the most recent fiscal year of such plan ended prior to the date hereof, or
would have had an accumulated funding deficiency (as so defined) on such day if
such year were the first year of such plan to which Part 3 of Subtitle B of
Title I of ERISA applied, and no material liability under Title IV of ERISA has
been, or is expected by the Borrower or any Subsidiary to be, incurred with
respect to any such plan by the Borrower or any Subsidiary or any Pension
Affiliate. The execution and delivery by the Borrower of this Agreement and the
other Bank Agreements executed on the date hereof will not involve any
prohibited transaction within the meaning of ERISA or Section 4975 of the Code.
The Borrower and its Subsidiaries have no Pension Plan other than those
described on SCHEDULE 5.14.
Section 5.15. OUTSTANDING INDEBTEDNESS. The outstanding amount of
Indebtedness for borrowed money, including Capitalized Lease Obligations and
Guaranties of borrowed money, of the Borrower and its Subsidiaries as of the
date hereof, is correctly set forth in SCHEDULE 5.15 hereto, and said Schedule
correctly describes the credit agreements, guaranties, leases and other
instruments pursuant to which such Indebtedness has been incurred and all
security interests securing such Indebtedness. Said schedule also describes all
agreements and other arrangements pursuant to which the Borrower or any
Subsidiary may borrow any money.
Section 5.16. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE
5.16,
(a) None of the Borrower, any Subsidiary or any operator of
any of their respective properties is in violation, or to the Borrower's
knowledge is in alleged violation, of any Environmental Law, which violation
would have a material adverse effect on the business, assets or financial
condition of the Borrower or any Subsidiary.
(b) None of the Borrower, any Subsidiary or any operator of
any of their respective properties has received notice from any third party,
including without limitation any federal, state, county, or local governmental
authority, (i) that it has been identified as a potentially responsible party
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 as amended ("CERCLA") or any equivalent state law, with respect to any
site or location; (ii) that any hazardous waste, as defined in 42 U.S.C.
[section] 6903(5), any hazardous substances, as defined in 42 U.S.C. [section]
9601(14), any pollutant or contaminant, as defined in 42 U.S.C. [section]
9601(33), or any toxic substance, oil or hazardous materials or other
chemicals or substances regulated by any Environmental Laws ("Hazardous
Substances") which it has generated, transported or disposed of, has been
found at any site at which a federal, state, county, or local agency or other
third party has conducted or has ordered the Borrower, any Subsidiary or
another third party or parties (E.G. a committee of potentially responsible
parties) to conduct a remedial investigation, removal or other response
action pursuant to any Environmental Law; or (iii) that it is or shall be a
named party to any claim, action, cause of action, complaint (contingent or
otherwise) or legal or administrative proceeding arising out of any actual or
alleged release or threatened release of Hazardous Substances. For purposes of
this Agreement, "release" means any past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, disposing or dumping of Hazardous Substances into the environment.
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(c) (i) The Borrower, each Subsidiary and each operator of
any real property owned or operated by the Borrower is in compliance, in all
material respects, with all provisions of the Environmental Laws relating to the
handling, manufacturing, processing, generation, storage or disposal of any
Hazardous Substances; (ii) to the best of the Borrower's knowledge, no portion
of property owned, operated or controlled by the Borrower or any Subsidiary has
been used for the handling, manufacturing, processing, generation, storage or
disposal of Hazardous Substances except in accordance with applicable
Environmental Laws; (iii) to the best of the Borrower's knowledge, there have
been no releases or threatened releases of Hazardous Substances on, upon, into
or from any property owned, operated or controlled by the Borrower or any
Subsidiary, which releases could have a material adverse effect on the value of
such properties or adjacent properties or the environment; (iv) to the best of
the Borrower's knowledge, there have been no releases of Hazardous Substances
on, upon, from or into any real property in the vicinity of the real properties
owned, operated or controlled by the Borrower or any Subsidiary which, through
soil or groundwater contamination, may have come to be located on the properties
of the Borrower or any Subsidiary; (v) to the best of the Borrower's knowledge,
there have been no releases of Hazardous Substances on, upon, from or into any
real property formerly but no longer owned, operated or controlled by the
Borrower or the Subsidiary.
(d) None of the properties of the Borrower or the Subsidiary
is or shall be subject to any applicable environmental cleanup responsibility
law or environmental restrictive transfer law or regulation by virtue of the
transactions set forth herein and contemplated hereby.
Section 5.17. FOREIGN TRADE REGULATIONS. Neither the Borrower nor any
Subsidiary is (a) a person included within the definition of "designated foreign
country" or "national" of a "designated foreign country" in Executive Order No.
8389, as amended, in Executive Order No. 9193, as amended, in the Foreign Assets
Control Regulations (31 C.F.R., Chapter V, Part 500, as amended), in the Cuban
Assets Control Regulations of the United States Treasury Department (31 C.F.R.,
Chapter V, Part 515, as amended) or in the Regulations of the Office of Alien
Property, Department of Justice (8 C.F.R., Chapter II, Part 507, as amended) or
within the meanings of any of the said Orders or Regulations, or of any
regulations, interpretations, or rulings issued thereunder, or in violation of
said Orders or Regulations or of any regulations, interpretations or rulings
issued thereunder; or (b) an entity listed in Section 520.101 of the Foreign
Funds Control Regulations (31 C.F.R., Chapter V, Part 520, as amended).
Section 5.18. GOVERNMENTAL REGULATIONS. None of the Borrower, any
Subsidiary or any Affiliate of the Borrower is subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Investment Company Act of 1940, or is a common carrier under the Interstate
Commerce Act, or is engaged in a business or activity subject to any statute or
regulation which regulates the incurring by the Borrower of Indebtedness for
borrowed money, including statutes or regulations relating to common or contract
carriers or to the sale of electricity, gas, steam, water, telephone or
telegraph or other public utility services.
Section 5.19. MARGIN STOCK. Neither the Borrower nor any Subsidiary
owns any "margin stock" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, or any regulations, interpretations or
rulings thereunder, nor is the Borrower or any Subsidiary engaged principally or
as one of its important activities in extending credit which is used for the
purpose of purchasing or carrying margin stock.
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ARTICLE 6. REPORTS AND INFORMATION
Section 6.1. QUARTERLY FINANCIAL STATEMENTS. As soon as available, and
in any event within forty-five (45) days after the end of each of the first
three quarters of each fiscal year of the Borrower, the Borrower shall furnish
to the Bank (a) consolidated and consolidating balance sheets of the Borrower
and its Subsidiaries as of the end of such quarter and consolidated and
consolidating statements of operations and cash flows of the Borrower and its
Subsidiaries for such quarter and for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, setting forth in
each case in comparative form the corresponding figures for the corresponding
period of the preceding fiscal year, all in reasonable detail; and (b) a
Compliance Certificate.
Section 6.2. ANNUAL FINANCIAL STATEMENTS. As soon as available, but in
any event within ninety (90) days after the end of each fiscal year of the
Borrower, the Borrower shall furnish to the Bank (a) consolidated and
consolidating balance sheets of the Borrower and its Subsidiaries as of the end
of such fiscal year and consolidated and consolidating statements of operations,
stockholders' equity and cash flows of the Borrower and its Subsidiaries for
such fiscal year, in each case (other than the consolidating statements)
reported on by Coopers & Lybrand L.L.P., or other independent certified public
accountants of recognized national standing acceptable to the Bank, which report
shall express, without reliance upon others, a positive opinion regarding the
fairness of the presentation of such financial statements in accordance with
generally accepted accounting principles consistently applied, said report to be
without qualification, except in cases of unresolved litigation and accounting
changes with which such accountants concur, together with the statement of such
accountants that they have caused the provisions of this Agreement to be
reviewed and that nothing has come to their attention to lead them to believe
that any Default exists hereunder or specifying any Default and the nature
thereof, and (b) a Compliance Certificate.
Section 6.3. PRO FORMA STATEMENTS AND BUDGET. As soon as available, but
in any event not less than thirty (30) days prior to the commencement of each
fiscal year, beginning with the fiscal year commencing February 1, 1996, the
Borrower shall furnish to the Bank management prepared pro-forma balance sheets
and statements of operations and cash flows for the succeeding fiscal year, on a
quarter-by-quarter basis and all revisions to such projections made by the
Borrower during such fiscal year.
Section 6.4. NOTICE OF DEFAULTS. As soon as possible, and in any event
within five (5) days after the occurrence of each Default, the Borrower shall
furnish to the Bank the statement of its chief executive officer or chief
financial officer setting forth details of such Default and the action which the
Borrower has taken or proposes to take with respect thereto.
Section 6.5. NOTICE OF LITIGATION. Promptly after the commencement
thereof, the Borrower shall furnish the Bank written notice of all actions,
suits and proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, affecting the
Borrower or any Subsidiary, which, if adversely determined,
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would have a material adverse affect on the business, assets, or condition,
financial or otherwise, of the Borrower or any Subsidiary.
Section 6.6. COMMUNICATIONS WITH OTHERS. The Borrower shall furnish the
Bank with copies of all regular, periodic and special reports and all
registration statements which the Borrower files with the Securities and
Exchange Commission or any governmental authority which may be substituted
therefor, or with any national or regional securities exchange.
Section 6.7. REPORTABLE EVENTS. At any time that the Borrower or any
Subsidiary has a Pension Plan, the Borrower shall furnish to the Bank, as soon
as possible, but in any event within thirty (30) days after the Borrower knows
or has reason to know that any Reportable Event with respect to any Pension Plan
has occurred, the statement of its chief executive officer or chief financial
officer setting forth the details of such Reportable Event and the action which
the Borrower or any Subsidiary has taken or proposes to take with respect
thereto, together with a copy of the notice of such Reportable Event to the
Pension Benefit Guaranty Corporation.
Section 6.8. REPORTS TO OTHER CREDITORS. Promptly after filing the
same, the Borrower shall furnish to the Bank copies of any compliance
certificate and other information furnished to any other holder of the
securities (including debt obligations) of the Borrower or any Subsidiary
pursuant to the terms of any indenture, loan or credit or similar agreement and
not otherwise required to be furnished to the Bank pursuant to any other
provision of this Agreement.
Section 6.9. COMMUNICATIONS WITH INDEPENDENT PUBLIC ACCOUNTANTS. At any
reasonable time and from time to time, the Borrower shall provide the Bank and
any agents or representatives of the Bank access to the independent public
accountants of the Borrower to discuss the Borrower's financial condition,
including, without limitation any recommendations of such independent public
accountants concerning the management, finances, financial controls or
operations of the Borrower and its Subsidiaries. Promptly after the receipt
thereof, the Borrower shall furnish to the Bank copies of any written
recommendations concerning the management, finances, financial controls, or
operations of the Borrower or any Subsidiary received from the Borrower's
independent public accountants.
Section 6.10. ENVIRONMENTAL REPORTS. The Borrower shall furnish to the
Bank: (a) not later than seven days after notice thereof, notice of any
enforcement actions, or, to the knowledge of the Borrower, threatened
enforcement actions affecting the Borrower or any Subsidiary by any Governmental
Agency related to Environmental Laws; (b) copies, promptly after they are
received, of all orders, notices of responsibility, notices of violation,
notices of enforcement actions, and assessments, and other written
communications pertaining to any such orders, notices, claims and assessments
received by the Borrower or any Subsidiary from any Governmental Agency; (c) not
later than seven days after notice thereof, notice of any civil claims or
threatened civil claims affecting the Borrower or any Subsidiary by any third
party alleging any violation of Environmental Laws or harm to human health or
the environment; (d) copies of all cleanup plans, site assessment reports,
response plans, remedial proposals, or other submissions of the Borrower or any
Subsidiary, other third party (e.g., committee of potentially responsible
parties at a Superfund site), or any combination of same, submitted to a
Governmental Agency in response to any communication referenced in subsections
(a) and (b) herein simultaneously with their submission to such Governmental
Agency; and (e) from time to time, on request of Bank,
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<PAGE> 27
evidence satisfactory to the Bank of the Borrower's and its Subsidiaries'
insurance coverage, if any, for any environmental liabilities.
Section 6.11. MISCELLANEOUS. The Borrower shall provide the Bank with
such other information as the Bank may from time to time reasonably request
respecting the business, properties, prospects, condition or operations,
financial or otherwise, of the Borrower and its Subsidiaries.
ARTICLE 7. FINANCIAL COVENANTS
On and after the date hereof, until all of the Bank Obligations shall
have been paid in full and the Bank shall have no commitment hereunder, the
Borrower and its Subsidiaries shall observe the following covenants:
Section 7.1. CONSOLIDATED NET INCOME. The Borrower and its Subsidiaries
shall earn Consolidated Net Income of not less than $1 for each fiscal quarter,
commencing with the quarter ending July 29, 1995.
Section 7.2. CONSOLIDATED CURRENT RATIO. The Borrower and its
Subsidiaries at all times shall maintain a minimum ratio of Consolidated Current
Assets to Consolidated Current Liabilities of not less than (a) 1.10-to-1 as of
the end of each fiscal quarter through January 31, 1996, (b) 1.20-to-1 as of the
end of each fiscal quarter from February 1, 1996 through January 31, 1997, and
(c) 1.30-to-1 as of the end of each fiscal quarter thereafter.
Section 7.3. RATIO OF CONSOLIDATED LIABILITIES TO CONSOLIDATED TANGIBLE
NET WORTH. The Borrower and its Subsidiaries shall not permit the ratio of
consolidated total liabilities to Consolidated Tangible Net Worth to be greater
than 0.75-to-1 as of the end of any fiscal quarter.
Section 7.4. RATIO OF CONSOLIDATED CASH FLOW TO CONSOLIDATED FIXED
CHARGES. The Borrower and its Subsidiaries shall not permit as of the end of any
fiscal quarter, commencing with the quarter ending July 29, 1995, the ratio of
(a) Consolidated Cash Flow for the four-quarter period ending on such date to
(b) Consolidated Fixed Charges to be less than 1.50-to-1.
Section 7.5. CONSOLIDATED TANGIBLE NET WORTH. The Borrower and its
Subsidiaries at all times shall maintain a Consolidated Tangible Net Worth of
not less than the sum of (a) Sixty-Five Million Dollars ($65,000,000) plus (b)
75% of cumulative Consolidated Net Income (without deduction for any losses) for
each fiscal quarter, commencing with the fiscal quarter ending July 29, 1995.
Section 7.6. CONSOLIDATED CAPITAL EXPENDITURES.
(a) The Borrower and its Subsidiaries shall not make or incur
any expenditure for Wafer Factory Costs or for fixed or capital assets,
including assets financed under Capitalized Leases, if, after giving effect
thereto, the aggregate of all such expenditures made by the Borrower and its
Subsidiaries would at any time exceed $120,000,000 from the date hereof through
October 20, 1998, without the prior written approval of the Bank.
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(b) The Borrower and its Subsidiaries shall not make or incur
any expenditure (excluding Wafer Factory Costs) for fixed or capital assets,
including assets financed under Capital Leases, if after giving effect thereto,
the aggregate of all such expenditures made by the Borrower and its Subsidiaries
would exceed $20,000,000 in any fiscal year, without prior written approval of
the Bank, PROVIDED, HOWEVER, the Borrower may carry over any unused portion of
such $20,000,000 in any fiscal year to be used for such expenditures in any
subsequent fiscal year.
ARTICLE 8. AFFIRMATIVE COVENANTS
On and after the date hereof, until all of the Bank Obligations shall
have been paid in full and the Bank shall have no commitment hereunder, the
Borrower covenants that it will, and will cause each of its Subsidiaries to,
comply with the following covenants and provisions:
Section 8.1. EXISTENCE AND BUSINESS. The Borrower and each Subsidiary
will (a) subject to Section 9.6, preserve and maintain its corporate existence
and qualify and remain qualified as a foreign corporation in each jurisdiction
in which such qualification is required, (b) preserve and maintain in full force
and effect all material rights, licenses, patents and franchises, (c) comply in
all material respects with all valid and applicable statutes, rules and
regulations necessary for the conduct of business, and (d) engage only in the
businesses which it is conducting on the date of this Agreement - the design,
manufacture and sale of analog/linear integrated circuits and related lines of
business.
Section 8.2. TAXES AND OTHER OBLIGATIONS. The Borrower and each
Subsidiary (a) will duly pay and discharge, or cause to be paid and discharged,
before the same shall become in arrears, all material taxes, assessments and
other governmental charges, imposed upon it and its properties, sales and
activities, or upon the income or profits therefrom, as well as the claims for
labor, materials, or supplies which if unpaid might by law result in a lien or
charge upon any of its properties; provided, however, that the Borrower and any
Subsidiary may contest any such charges or claims in good faith so long as (i)
an adequate reserve therefor has been established and is maintained if and as
required by generally accepted accounting principles and (ii) no action to
foreclose any such lien has been commenced, and (b) will promptly pay or cause
to be paid when due, or in conformance with customary trade terms (but not later
than 60 days from the due date in the case of trade debt), all lease
obligations, trade debt and all other Indebtedness incident to its operations.
The Borrower and each Subsidiary shall cause all applicable tax returns and all
amounts due thereunder to be filed and paid, as the case may be, in order to
maintain its good standing with the Internal Revenue Service and state, local
and foreign tax authorities.
Section 8.3. MAINTENANCE OF PROPERTIES AND LEASES. The Borrower and
each Subsidiary shall maintain, keep and preserve all of its properties
(tangible and intangible) in good repair and working order, ordinary wear and
tear excepted. The Borrower and each Subsidiary shall replace and improve its
properties as necessary for the conduct of its business. The Borrower and each
Subsidiary shall comply in all material respects with all leases naming it as
lessee.
Section 8.4. INSURANCE. The Borrower and each Subsidiary (a) will keep
its principal assets which are of an insurable character insured by financially
sound and reputable insurers
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<PAGE> 29
against loss or damage by fire, explosion or hazards, by extended coverage in an
amount satisfactory to the Bank, and (b) will maintain with financially sound
and reputable insurers insurance against other hazards and risks and liability
to persons and property to the extent and in a manner reasonably satisfactory to
the Bank, and in any event as customary for companies in similar businesses
similarly situated; PROVIDED, HOWEVER, that on prior notice to the Bank it may
effect workmen's compensation insurance through an insurance fund operated by
such state or jurisdiction and may also be a self-insurer with respect to
workmen's compensation and with respect to group medical benefits under any
medical benefit plan. On request of the Bank from time to time, the Borrower
will render to the Bank a statement in reasonable detail as to all insurance
coverage required by this Section. A description of the material elements of
insurance coverage of the Borrower and its Subsidiaries as of the date hereof is
set forth on SCHEDULE 8.4.
Section 8.5. RECORDS, ACCOUNTS AND PLACES OF BUSINESS. The Borrower and
each Subsidiary shall maintain comprehensive and accurate records and accounts
in accordance with generally accepted accounting principles consistently
applied. The Borrower and each Subsidiary shall maintain adequate and proper
reserves. The Borrower and each Subsidiary will promptly notify the Bank of (a)
any changes in the places of business of the Borrower and its Subsidiaries and
(b) any additional places of business which may arise hereafter.
Section 8.6. INSPECTION. At any reasonable time and from time to time,
the Borrower shall permit the Bank and any of the Bank's agents or
representatives to examine and make copies of and abstracts from the records and
books of account of, and visit the properties of, the Borrower and its
Subsidiaries and to discuss the affairs, finances and accounts of the Borrower
and its Subsidiaries with any of its officers or directors and with the
Borrower's independent accountants.
Section 8.7. MAINTENANCE OF ACCOUNTS. The Borrower and its domestic
Subsidiaries shall maintain the Bank as their primary depository for their
operating, concentration and disbursement accounts.
ARTICLE 9. NEGATIVE COVENANTS
On and after the date hereof, until all of the Bank Obligations shall
have been paid in full and the Bank shall have no commitment hereunder, the
Borrower covenants that neither it nor any of its Subsidiaries will:
Section 9.1. RESTRICTIONS ON INDEBTEDNESS. Create, incur, suffer or
permit to exist, or assume or guarantee, either directly or indirectly, or
otherwise become or remain liable with respect to, any Indebtedness, except the
following:
(a) Indebtedness outstanding at the date of this Agreement as
set forth on SCHEDULE 5.15 but no refinancings thereof.
(b) Indebtedness on account of Consolidated Current
Liabilities (other than for money borrowed) incurred in the normal and ordinary
course of business.
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(c) Indebtedness in respect of (i) taxes, assessments,
governmental charges or levies and claims for labor, materials and supplies to
the extent that payment thereof shall not at the time be required to be made in
accordance with the provisions of Section 8.2 hereof, (ii) judgments or awards
which have been in force for less than the applicable appeal period so long as
execution is not levied thereunder or in respect of which the Borrower or any
Subsidiary shall at the time in good faith be prosecuting an appeal or
proceedings for review in a manner satisfactory to the Bank and in respect of
which a stay of execution shall have been obtained pending such appeal or review
and for which adequate reserves have been established in accordance with
generally accepted accounting principles, and (iii) endorsements made in
connection with the deposit of items for credit or collection in the ordinary
course of business.
(d) Indebtedness in an amount not to exceed $5,000,000 in
respect of purchase money security interests permitted under Section 9.2(b)
hereof, without prior written approval from the Bank.
(e) Indebtedness to the Bank.
Section 9.2. RESTRICTION ON LIENS. Create or incur or suffer to be
created or incurred or to exist any encumbrance, mortgage, pledge, lien, charge
or other security interest of any kind upon any of its property or assets of any
character, whether now owned or hereafter acquired, or transfer any of such
property or assets for the purposes of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors, or acquire or agree or have an option to acquire any
property or assets upon conditional sale or other title retention agreement,
device or arrangement (including Capitalized Leases) or suffer to exist for a
period of more than 30 days after the same shall have been incurred any
Indebtedness against it which if unpaid might by law or upon bankruptcy or
insolvency, or otherwise, be given any priority whatsoever over its general
creditors, or sell, assign, pledge or otherwise transfer for security any of its
accounts, contract rights, general intangibles, or chattel paper (as those terms
are defined in the Massachusetts Uniform Commercial Code) with or without
recourse; PROVIDED, HOWEVER, that the Borrower or any Subsidiary may create or
incur or suffer to be created or incurred or to exist:
(a) Existing liens and security interests described in
SCHEDULE 5.15 securing presently outstanding Indebtedness permitted by Section
9.1(a).
(b) Purchase money security interests (which term shall
include mortgages, conditional sale contracts, Capitalized Leases and all other
title retention or deferred purchase devices) to secure the purchase price of
property acquired hereafter by the Borrower, or to secure Indebtedness incurred
solely for the purpose of financing such acquisitions; PROVIDED, HOWEVER, that
no such purchase money security interests shall extend to or cover any property
other than the property the purchase price of which is secured by it, and that
the principal amount of Indebtedness (whether or not assumed) with respect to
each item of property subject to such a security interest shall not exceed the
fair value of such item on the date of its acquisition.
(c) Deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age pensions or
other social security; liens in respect of judgments or awards to the extent
such judgments or awards are permitted as
26
<PAGE> 31
Indebtedness by the provisions of Section 9.1(c); and liens for taxes,
assessments or governmental charges or levies and liens to secure claims for
labor, material or supplies to the extent that payment thereof shall not at the
time be required to be made in accordance with Section 8.2.
(d) Encumbrances in the nature of zoning restrictions,
easements, and rights or restrictions of record on the use of real property
which do not materially detract from the value of such property or impair its
use in the business of the owner or lessee.
(e) Liens (other than judgments and awards) created by or
resulting from any litigation or legal proceeding, provided the execution or
other enforcement thereof is effectively stayed and the claims secured thereby
are being actively contested in good faith by appropriate proceedings
satisfactory to the Bank.
(f) Liens arising by operation of law to secure landlords,
lessors or renters under leases or rental agreements made in the ordinary course
of business and confined to the premises or property rented.
Nothing contained in this Section 9.2 shall permit the Borrower to
incur any Indebtedness or take any other action or permit to exist any other
condition which would be in contravention of any other provision of this
Agreement.
Section 9.3. INVESTMENTS. Have outstanding or hold or acquire or make
or commit itself to acquire or make any Investment except the following:
(a) Investments having a maturity of less than one year from
the date thereof by the Borrower in: (i) obligations of the Bank; (ii)
obligations of the United States of America or any agency or instrumentality
thereof; (iii) repurchase agreements involving securities described in clauses
(i) and (ii) with the Bank; and (iv) commercial paper or other financial
instruments which are rated not less than prime-one or A-1 or their equivalents
by Moody's Investor Service, Inc. or Standard & Poor's Corporation,
respectively, or their successors.
(b) Existing Investments of the Borrower in its Subsidiaries,
as described on Schedule 5.4 and other existing Investments described in note C
of the 1995 Financial Statements.
(c) Investments consisting of normal travel and similar
advances to employees of the Borrower and its Subsidiaries not exceeding
$1,000,000 in the aggregate at any one time outstanding.
(d) Other Investments, including strategic joint ventures;
provided that the amount of such Investments made in any fiscal year plus the
amount incurred by the Borrower in connection with mergers and acquisitions
under Section 9.6(b) in any fiscal year does not exceed $5,000,000 without the
Bank's prior written consent.
Section 9.4. DISPOSITIONS OF ASSETS. Sell, lease or otherwise dispose
of any assets except for the sale, lease or other disposition of inventory or
other property (not including receivables) in the ordinary course of business or
the real property set forth on SCHEDULE 9.4.
27
<PAGE> 32
Section 9.5. ASSUMPTIONS, GUARANTIES, ETC. OF INDEBTEDNESS OF OTHER
PERSONS. Assume, guarantee, endorse or otherwise be or become directly or
contingently liable (including, without limitation, by way of agreement,
contingent or otherwise, to purchase, provide funds for payment, supply funds to
or otherwise invest in any Person or otherwise assure the creditors of any such
Person against loss) in connection with any Indebtedness of any other Person,
except for guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.
Section 9.6. MERGERS, ACQUISITIONS, ETC. Enter into any merger or
consolidation with or acquire all or substantially all of the assets of any
Person, or sell, assign, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to any Person, except that (a)
any Subsidiary may merge into the Borrower or any other Subsidiary, and (b) the
Borrower and any Subsidiary may enter into a merger with or acquire all or
substantially all of the assets of another entity, provided that (i) the Board
of Directors of the target entity has approved such acquisition and made a
favorable recommendation to its stockholders and (ii) immediately after and
giving effect thereto, no event shall occur and be continuing which constitutes
or which, upon the passage of time or giving of notice or both would constitute,
a Default (including under Section 8.1 and including under Article 7, assuming
that the financial restrictions set forth in Article 7 are applied immediately
after and giving effect to such merger or acquisition) and provided further that
the Borrower or such Subsidiary is the surviving corporation to any such merger
and provided further that the Borrower and its Subsidiaries shall not enter into
any agreement for or consummate any merger or acquisition under this clause (b)
if the aggregate amount incurred by the Borrower and its Subsidiaries for all
such mergers and acquisitions in any twelve-month period plus the amount of
Investments made by the Borrower under Section 9.3(d) in such fiscal year would
exceed $5,000,000, without the Bank's prior written consent.
Section 9.7. ERISA. At any time while the Borrower or any Subsidiary
has a Pension Plan, permit any accumulated funding deficiency to occur with
respect to any Pension Plan or other employee benefit plans established or
maintained by the Borrower or any Subsidiary or to which contributions are made
by the Borrower or any Subsidiary (the "Plans"), and which are subject to the
"Pension Reform Act" and the rules and regulations thereunder or to Section 412
of the Code, and at all times comply in all material respects with the
provisions of the Act and Code which are applicable to the Plans. The Borrower
will not permit the Pension Benefit Guaranty Corporation to cause the
termination of any Pension Plan under circumstances which would cause the lien
provided for in Section 4068 of the Pension Reform Act to attach to the assets
of the Borrower or any Subsidiary.
Section 9.8. DISTRIBUTIONS. Make any Distribution or make any other
payment on account of the purchase, acquisition, redemption, or other retirement
of any shares of stock, whether now or hereafter outstanding in an amount in
excess of $20,000,000 during the fiscal year ending January 31, 1996 and
$10,000,000 in each fiscal year thereafter.
Section 9.9. SALE AND LEASEBACK. Sell or transfer any of its properties
with the intention of taking back a lease of the same property or leasing other
property for substantially the same use as the property being sold or
transferred.
28
<PAGE> 33
Section 9.10. TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate, except that the Borrower and its
Subsidiaries may pay salaries, fees and bonuses, grant stock options and other
forms of compensation to its directors, officers and employees as are usual and
customary in the Borrower's or its Subsidiaries' business.
ARTICLE 10. EVENTS OF DEFAULT AND REMEDIES
Section 10.1. EVENTS OF DEFAULT. Each of the following events shall be
deemed to be Events of Default hereunder:
(a) The Borrower shall fail to make any payment in respect of
(i) the principal of any of the Bank Obligations as the same shall become due,
whether at the stated payment dates or by acceleration or otherwise, or (ii)
interest or commitment fees on or in respect of any of the Bank Obligations as
the same shall become due, and such failure shall continue for a period of five
(5) days.
(b) The Borrower or any Subsidiary shall fail to perform or
observe any of the terms, covenants, conditions or provisions of Articles 6, 7,
8 or 9 hereof.
(c) The Borrower or any Subsidiary shall fail to perform or
observe any other covenant, agreement or provision to be performed or observed
by the Borrower under this Agreement or any other Bank Agreement, and such
failure shall not be rectified or cured to the Bank's satisfaction within thirty
(30) days after the occurrence thereof.
(d) The Bank shall determine that any representation or
warranty of the Borrower herein or in any other Bank Agreement or any amendment
to any thereof shall have been materially false or misleading at the time made
or intended to be effective.
(e) The Borrower shall fail to make any payment of
Indebtedness for money borrowed by the Borrower in an outstanding principal
amount of not less than $100,000 when such payment is due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) or shall fail
to perform or observe any provision of any agreement or instrument relating to
such Indebtedness, and such failure shall permit the holder thereof to
accelerate such Indebtedness.
(f) The Borrower or any Subsidiary shall be involved in
financial difficulties as evidenced:
(1) by its commencement of a voluntary case under Title
11 of the United States Code as from time to time in effect, or by its
authorizing, by appropriate proceedings of its board of directors or
other governing body, the commencement of such a voluntary case;
(2) by its filing an answer or other pleading admitting
or failing to deny the material allegations of a petition filed against
it commencing an involuntary case under
29
<PAGE> 34
said Title 11, or seeking, consenting to or acquiescing in the relief
therein provided, or by its failing to controvert timely the material
allegations of any such petition;
(3) by the entry of an order for relief in any
involuntary case commenced under said Title 11;
(4) by its seeking relief as a debtor under any
applicable law, other than said Title 11, of any jurisdiction relating
to the liquidation or reorganization of debtors or to the modification
or alteration of the rights of creditors, or by its consenting to or
acquiescing in such relief;
(5) by the entry of an order by a court of competent
jurisdiction (1) by finding it to be bankrupt or insolvent, (2)
ordering or approving its liquidation, reorganization or any
modification or alteration of the rights of its creditors, or (3)
assuming custody of, or appointing a receiver or other custodian for
all or a substantial part of its property and such order shall not be
vacated or stayed on appeal or otherwise stayed within 30 days;
(6) by the filing of a petition against the Borrower or
any Subsidiary under said Title 11 which shall not be vacated within 30
days; or
(7) by its making an assignment for the benefit of, or
entering into a composition with, its creditors, or appointing or
consenting to the appointment of a receiver or other custodian for all
or a substantial part of its property.
(g) There shall have occurred a judgment against the Borrower
or any Subsidiary in any court (i) for an amount in excess of 10% of the
Consolidated Tangible Net Worth of the Borrower at the time of such judgment,
and from which no appeal has been taken or with respect to which all appeal
periods have expired, unless such judgment is, to the Bank's satisfaction,
insured in an amount sufficient to reduce such judgment to less than 5% of the
Consolidated Tangible Net Worth of the Borrower at the time of such judgment, or
(ii) which shall have a material adverse effect upon the assets, properties or
condition, financial or otherwise, of the Borrower.
(h) Any "Event of Default" under any other Bank Agreement
shall have occurred.
(i) Any Person or "group" (within the meaning of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership of capital stock of the Borrower having 20% or
more of the ordinary voting power in the election of directors.
Section 10.2. REMEDIES. Upon the occurrence of an Event of Default, in
each and every case, the Bank may proceed to protect and enforce its rights by
suit in equity, action at law and/or other appropriate proceeding either for
specific performance of any covenant or condition contained in this Agreement or
any other Bank Agreement or in any instrument delivered to the Bank pursuant
hereto or thereto, or in aid of the exercise of any power granted in this
Agreement,
30
<PAGE> 35
any Bank Agreement or any such instrument, and (unless there shall have occurred
an Event of Default under Section 10.1(f), in which case the unpaid balance of
Bank Obligations shall automatically become due and payable) may, by notice in
writing to the Borrower declare (a) its obligation to make Revolving Credit
Advances to be terminated, whereupon such obligation shall be terminated and (b)
declare all or any part of the unpaid balance of the Bank Obligations then
outstanding to be forthwith due and payable, whereupon such unpaid balance or
part thereof shall become so due and payable without presentation, protest or
further demand or notice of any kind, all of which are hereby expressly waived.
In such event, the Bank may proceed to enforce payment of such balance or part
thereof in such manner as it may elect, and the Bank may offset and apply toward
the payment of such balance or part thereof any Indebtedness of it or any
Subsidiary to the Borrower, or to any obligor on the Bank Obligations, including
any Indebtedness represented by deposits in any general or special account
maintained with the Bank or with any other bank controlling, controlled by or
under common control with the Bank.
ARTICLE 11. WAIVERS; AMENDMENTS; REMEDIES
No delay or omission on the part of the Bank in exercising its rights
and remedies against the Borrower or any other interested party shall constitute
a waiver of any rights or remedies of the Bank. A breach by the Borrower of its
obligations under this Agreement may be waived only by a written waiver executed
by the Bank. The Bank's waiver of a breach by the Borrower in one or more
instances shall not constitute or otherwise be an implicit waiver of subsequent
breaches. To the extent permitted by applicable law, the Borrower hereby agrees
to waive, and does hereby absolutely and irrevocably waive (a) all presentments,
demands for performance, notices of nonperformance, protests, notices of protest
and notices of dishonor in connection with any of the Indebtedness evidenced by
the Revolving Credit Note, (b) any requirement of diligence or promptness on the
Bank's part in the enforcement of its rights under the provisions of this
Agreement or any Bank Agreement, and (c) any and all notices of every kind and
description which may be required to be given by any statute or rule of law with
respect to the Borrower's liability (i) under this Agreement or in respect of
the Indebtedness evidenced by the Revolving Credit Note or any other Bank
Obligation or (ii) under any other Bank Agreement. No course of dealing between
the Borrower and the Bank shall operate as a waiver of any of the Bank's rights
under this Agreement or any Bank Agreement or with respect to any of the Bank
Obligations. This Agreement shall be amended only by a written instrument
executed by the parties hereto making explicit reference to this Agreement. The
Bank's rights and remedies under this Agreement and under all subsequent
agreements between the Bank and the Borrower shall be cumulative and any rights
and remedies expressly set forth herein shall be in addition to, and not in
limitation of, any other rights and remedies which may be available to the Bank
in law or at equity.
ARTICLE 12. INDEMNIFICATION
Without limitation of any other obligation or liability of the Borrower
or right or remedy of the Bank contained herein, the Borrower hereby covenants
and agrees to indemnify and hold the Bank, and the shareholders, directors,
agents, officers, partners, subsidiaries and affiliates of the Bank, harmless
from and against any and all damages, losses, settlement payments,
31
<PAGE> 36
obligations, liabilities, claims, including, without limitation, claims for
finder's or broker's fees, actions or causes of action, and reasonable costs and
expenses incurred, suffered, sustained or required to be paid by an indemnified
party in each case by reason of or resulting from any claim relating to the
transactions contemplated hereby other than any such claims which are determined
by a final, non-appealable order of a court to be the result of the Bank's gross
negligence or willful misconduct. Promptly upon receipt by any indemnified party
hereunder of notice of the commencement of any action against such indemnified
party for which a claim is to be made against the Borrower hereunder, such
indemnified party shall notify the Borrower in writing of the commencement
thereof, although the failure to provide such notice shall not affect the
indemnification rights of any such indemnified party hereunder. The Borrower
shall have the right, at its option upon notice to the indemnified parties, to
defend any such matter at its own expense and with its own counsel, except as
provided below, which counsel must be reasonably acceptable to the indemnified
parties. The indemnified party shall cooperate with the Borrower in the defense
of such matter. The indemnified party shall have the right to employ separate
counsel and to participate in the defense of such matter at its own expense. In
the event that (a) the employment of separate counsel by an indemnified party
has been authorized in writing by the Borrower, (b) the Borrower has failed to
assume the defense of such matter or (c) the named parties to any such action
(including impleaded parties) include any indemnified party who has been advised
by counsel that there may be one or more legal defenses available to it or
prospective bases for liability against it, which are different from those
available to or against the Borrower, then the Borrower shall not have the right
to assume the defense of such matter with respect to such indemnified party. The
Borrower shall not be liable for any compromise or settlement of any such matter
effected without its written consent, which consent may not be unreasonably
delayed. The Borrower shall not compromise or settle any such matter against an
indemnified party without the written consent of the indemnified party, which
consent may not be unreasonably withheld or delayed.
ARTICLE 13. MISCELLANEOUS
Section 13.1. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall bind and shall be enforceable by the
respective successors and assigns of the parties hereto. The representations and
warranties made by the Borrower in this Agreement shall bind the Borrower's
successors and assigns.
(b) The Bank and any subsequent holder of all or a portion of
the Bank's interests hereunder shall have the right from time to time and at any
time to sell, assign, transfer, negotiate and grant participation interests in
all or any part of its commitments hereunder, the Revolving Credit Note and its
rights under any other Bank Agreement to one or more Persons. In the case of any
such sale, assignment, transfer, negotiation or participation of all or any
portion of such commitments, the Revolving Credit Note and its rights under any
other Bank Agreement, the assignee, transferee or recipient thereof shall have,
to the extent of such sale, assignment, transfer, negotiation or participation,
the same rights, benefits and obligations as the Bank hereunder. The Borrowers
hereby acknowledge and agree that any such transfer, assignment or other
disposition described in this Section 13.1(b) (other than participations) will
give rise to direct obligations of the Borrowers to the buyer, assignee or
transferee, as the case may be, and in
32
<PAGE> 37
such event the term "Bank" as used herein shall include each such buyer,
assignee or transferee, each of which, to the extent of its interest therein,
may rely on, and possess all rights of the Bank hereunder, under the Revolving
Credit Note and under all other Bank Agreements.
Section 13.2. NOTICES. All notices and other communications made or
required to be given pursuant to this Agreement shall be in writing and shall be
mailed by United States mail, postage prepaid, or sent by nationally-recognized
overnight carrier service, addressed as follows:
(a) If to the Bank, at 7 New England Executive Park,
Burlington, MA 01803, Attention: Stephen C. Buzzell, Assistant Vice President,
or at such other address(es) or to the attention of such other Person as the
Bank shall from time to time designate in writing to the Borrower.
(b) If to the Borrower, at 7 Continental Boulevard,
Merrimack, NH 03054, Attention: Cosmo S. Trapani, Executive Vice President and
Chief Executive Officer, or at such other address(es) or to the attention of
such other Person as the Borrower shall from time to time designate in writing
to the Bank with a copy to Allan R. Campbell, Esq., Senior Vice President and
General Counsel.
Any notice so addressed and mailed by registered or certified mail
shall be deemed to have been given when mailed.
Section 13.3. MERGER. This Agreement and the other Bank Agreements
contemplated hereby constitute the entire agreement of the Borrower and the Bank
and express the entire understanding of the Borrower and the Bank with respect
to credit advanced or to be advanced by the Bank to the Borrower.
Section 13.4. GOVERNING LAW. This Agreement shall be governed by and
construed and enforced under the laws of The Commonwealth of Massachusetts.
Section 13.5. COUNTERPARTS. This Agreement and all amendments to this
Agreement may be executed in several counterparts, each of which shall be an
original. The several counterparts shall constitute a single Agreement.
Section 13.6. EXPENSES. The Borrower agrees to pay on demand, all of
the Bank's reasonable expenses in preparing, executing, delivering and
administering this Agreement, all amendments hereto, and related instruments and
documents, including, without limitation, the reasonable fees and out-of-pocket
expenses of the Bank's special counsel, Goodwin, Procter & Hoar. The Borrower
also agrees to pay on demand, all reasonable out-of-pocket expenses incurred by
the Bank, including, without limitation, legal and accounting fees, in
connection with the collection of amounts upon the occurrence of an Event of
Default hereunder, the revision, protection or enforcement of any of the Bank's
rights against the Borrower under the Agreement and the Revolving Credit Note
and the administration of special problems that may arise under this Agreement
or any other Bank Agreement. The Borrower also agrees to pay all stamp and other
taxes in connection with the execution and delivery of this Agreement and
related instruments and documents.
33
<PAGE> 38
Section 13.7. WAIVER OF JURY TRIAL. THE BANK AND THE BORROWER AGREE
THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL
IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON OR
ARISING OUT OF, THIS AGREEMENT, THE REVOLVING CREDIT NOTE, ANY BANK AGREEMENT,
ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP
BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE BANK AND THE
BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE
BANK NOR THE BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
34
<PAGE> 39
IN WITNESS WHEREOF, the Borrower and the Bank have caused this Credit
Agreement to be executed by their duly authorized officers as of the date set
forth above.
UNITRODE CORPORATION
By /s/ Cosmo S. Trapani
-------------------------------
EVP & CFO
BAYBANK
By /s/ S. Buzzell, AVP
-------------------------------
35
<PAGE> 1
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
Exhibit 11
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Calculation of Primary and Fully Diluted Net Income Per Share
<TABLE>
<CAPTION>
Years Ended January 31 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before cumulative effect
of change in accounting principle $17,518,904 $9,248,527 $ 8,348,375
Cumulative effect of change in
accounting for income taxes - - 8,100,000
----------- ---------- -----------
Net income $17,518,904 $9,248,527 $16,448,375
=========== ========== ===========
Calculation of primary earnings per share:
- ------------------------------------------
Weighted average of common shares
outstanding 11,497,179 11,975,808 12,511,877
Common equivalent shares 409,922 384,597 412,228
----------- ---------- -----------
Weighted average common and common
equivalent shares outstanding 11,907,101 12,360,405 12,924,105
=========== ========== ===========
Income before cumulative effect of
change in accounting principle $ 1.47 $ .75 $ .65
=========== ========== ===========
Cumulative effect of change in accounting
principle $ - $ - $ .63
=========== ========== ===========
Net income $ 1.47 $ .75 $ 1.27
=========== ========== ===========
Calculation of fully diluted earnings per share:
- ------------------------------------------------
Weighted average common and common equivalent
shares outstanding (as determined for the
primary earnings per share calculation
above) 11,907,101 12,360,405 12,924,105
Incremental shares to reflect full
dilution 26,604(1) 14,134(1) 15,125(1)
----------- ---------- -----------
Weighted average of common and common
equivalent shares outstanding, as
adjusted 11,933,705 12,374,539 12,939,230
=========== ========== ===========
Income before cumulative effect of change
in accounting principle $ 1.47 $ .75 $ .65
=========== ========== ===========
Cumulative effect of change in accounting
principle $ - $ - $ .63
=========== ========== ===========
Net income $ 1.47 $ .75 $ 1.27
=========== ========== ===========
</TABLE>
(1) This calculation is submitted in accordance with Regulation S-K item 601(b)
(11) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15
because it results in dilution of less than 3%.
<PAGE> 1
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
Exhibit 21
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Subsidiaries of the Registrant
All operating subsidiaries of the Registrant as of January 31, 1996 (except
subsidiaries which considered in the aggregate do not constitute a significant
subsidiary) were as follows:
<TABLE>
<CAPTION>
% of Voting
Jurisdiction of Securities
Name of Subsidiary Incorporation Owned
- ------------------ ------------- -----------
<S> <C> <C>
Unitrode B.V. Netherlands 100%
Unitrode Electronics Asia Ltd. Hong Kong 100%
Unitrode Electronics GmbH West Germany 100%
Unitrode Electronics (Singapore) Singapore 100%
Pte. Ltd.
Unitrode Ireland Limited Ireland 100%
Unitrode S.r.l. Italy 100%
Unitrode U.K. Limited United Kingdom 100%
</TABLE>
<PAGE> 1
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Annual Report on Form 10-K
- --------------------------------------------------------------------------------
Exhibit 23
UNITRODE CORPORATION AND CONSOLIDATED SUBSIDIARIES
Consent of Independent Accountants
We consent to the incorporation by reference in the Registration
Statements of Unitrode Corporation and Consolidated Subsidiaries on Form S-8
(File Nos. 33-12353, 33-54542, 33-54544 and 333-00107) and related prospectuses
of our report dated February 28, 1996, on our audits of the consolidated
financial statements and financial statement schedule of Unitrode Corporation
and Consolidated Subsidiaries as of January 31, 1996 and 1995 and for each of
the three years in the period ended January 31, 1996, which report is included
in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
April 24, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<EXCHANGE-RATE> 1
<CASH> 36,228,314
<SECURITIES> 0
<RECEIVABLES> 18,272,341
<ALLOWANCES> 367,804
<INVENTORY> 9,971,427
<CURRENT-ASSETS> 71,342,000
<PP&E> 79,078,555
<DEPRECIATION> 43,789,869
<TOTAL-ASSETS> 118,424,206
<CURRENT-LIABILITIES> 24,194,684
<BONDS> 0
<COMMON> 2,293,590
0
0
<OTHER-SE> 90,123,584
<TOTAL-LIABILITY-AND-EQUITY> 118,424,206
<SALES> 116,147,740
<TOTAL-REVENUES> 118,543,642
<CGS> 55,165,336
<TOTAL-COSTS> 55,165,336
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 199,900
<INTEREST-EXPENSE> 85,204
<INCOME-PRETAX> 27,951,904
<INCOME-TAX> 10,433,000
<INCOME-CONTINUING> 17,518,904
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,518,904
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.47
</TABLE>
