<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 16, 1994
REGISTRATION NO. 33-56245
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
INTERNATIONAL RECTIFIER CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 95-1528961
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
233 KANSAS STREET
EL SEGUNDO, CALIFORNIA 90245
(310) 322-3331
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
ERIC LIDOW
PRESIDENT AND CHIEF EXECUTIVE OFFICER
INTERNATIONAL RECTIFIER CORPORATION
233 KANSAS STREET
EL SEGUNDO, CALIFORNIA 90245
(310) 322-3331
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
------------------------
COPIES TO:
Gerald A. Koris, Esq.
233 Kansas Street
El Segundo, California 90245
(310) 640-6552
<TABLE>
<S> <C>
Kendall R. Bishop, Esq. John R. Light, Esq.
O'Melveny & Myers Latham & Watkins
1999 Avenue of the Stars, 7th 633 West Fifth Street, Suite 4000
Floor Los Angeles, California 90071
Los Angeles, California 90067-6035 (213) 485-1234
(310) 553-6700
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains a Prospectus relating to a public
offering in the United States and Canada (the "U.S. Offering") of an aggregate
of 3,600,000 shares of Common Stock, $1.00 par value, of International Rectifier
Corporation (the "Common Stock"), together with separate Prospectus pages
relating to a concurrent offering outside the United States and Canada of an
aggregate of 900,000 shares of Common Stock (the "International Offering"). The
prospectuses for the U.S. Offering and the International Offering will be
identical with the exception of the following alternate pages for the
International Offering: a front cover page, a back cover page, and a "Certain
United States Federal Tax Consequences to Non-United States Holders" section.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
Subject to Completion, dated November 16, 1994
PROSPECTUS
4,500,000 SHARES
[LOGO]
INTERNATIONAL RECTIFIER CORPORATION
COMMON STOCK
----------------
All of the 4,500,000 shares of Common Stock, par value $1.00 per share (the
"Shares"), offered hereby are being sold by International Rectifier Corporation
("IR" or the "Company"). Of the 4,500,000 shares of Common Stock offered,
3,600,000 shares will be offered initially in the United States and Canada by
the U.S. Underwriters (the "U.S. Offering") and 900,000 shares will be offered
concurrently outside the United States and Canada by the International Managers
(the "International Offering" and, together with the U.S. Offering, the
"Offerings"). The offering price and underwriting discounts and commissions for
the U.S. Offering and the International Offering will be identical. See
"Underwriting."
The Company's Common Stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange under the symbol "IRF." On October 27, 1994, the closing
price for the Company's Common Stock on the New York Stock Exchange Composite
Tape was $23.625 per share. See "Price Range of Common Stock and Dividend
Policy."
---------------------
SEE "RISK FACTORS" FOR CERTAIN MATTERS RELEVANT TO AN INVESTMENT IN THE
COMPANY'S COMMON STOCK.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Discounts
Price and Proceeds to
to Public Commissions (1) Company (2)
<S> <C> <C> <C>
Per Share.............................. $ $ $
Total (3).............................. $ $ $
<FN>
(1) The Company has agreed to indemnify the U.S. Underwriters and the
International Managers against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses of the Offerings of $475,000 payable by
the Company.
(3) The Company has granted the U.S. Underwriters and the International
Managers a 30-day option to purchase up to 675,000 additional shares of
Common Stock on the same terms and conditions as set forth above solely to
cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ and $ , respectively.
See "Underwriting."
</TABLE>
---------------------
The shares of Common Stock offered by this Prospectus are offered by the
U.S. Underwriters subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
U.S. Underwriters and to certain further conditions. It is expected that
delivery of the Shares will be made at the offices of Lehman Brothers Inc., New
York, New York, on or about , 1994.
---------------------
LEHMAN BROTHERS
KIDDER, PEABODY & CO.
INCORPORATED
MONTGOMERY SECURITIES
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
, 1994
<PAGE>
[INSIDE FRONT COVER PHOTO]
[PHOTO1]
Schematic illustration of generic automobile showing color-coded application
points for International Rectifier components.
[CAPTION]
In recent model years the proliferation of safety and comfort features that use
electronic components has made automobiles the fastest-growing market for
International Rectifier products.
IN CONNECTION WITH THE OFFERINGS, THE U.S. UNDERWRITERS AND THE
INTERNATIONAL MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR
MAINTAIN THE MARKET PRICE OF THE COMPANY'S COMMON STOCK AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL
INFORMATION IN THE PROSPECTUS ASSUMES NO EXERCISE OF THE U.S. UNDERWRITERS' AND
INTERNATIONAL MANAGERS' OVER-ALLOTMENT OPTION (SEE "UNDERWRITING"). THE
COMPANY'S FISCAL YEAR END IS JUNE 30 (SEE "NOTE 1 -- NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS").
THE COMPANY
International Rectifier Corporation ("IR" or the "Company") is a major
worldwide supplier of power semiconductors, which convert electricity in
products using electrical current. The Company's trademarked HEXFET-R- power
MOSFETs (Metal Oxide Semiconductor Field Effect Transistors), IGBTs (Insulated
Gate Bipolar Transistors), rectifiers and thyristors enable IR to provide
customers with integrated solutions to their power conversion needs.
According to statistics published by the Semiconductor Industry Association
("SIA") for calendar 1993, the Company had a 17% market share of the $1.1
billion power MOS transistor segment, comprised of power MOSFETs and IGBTs. In
addition, the Company sold approximately $19.1 million of power MOSFET and IGBT
chips and wafers to third parties in calendar 1993. Accordingly, the Company
believes it is the world leader in the power MOS transistor market. Power
MOSFETs, IGBTs, chips and wafers comprised over two-thirds of the Company's
fiscal 1994 sales. SIA data indicates that industry-wide sales of power MOS
transistors in calendar 1993 increased 23% over 1992 levels, and that, over the
past five years, power MOSFET and IGBT sales have grown at an average annual
rate of 26%.
Applications for the Company's products include:
AUTOMOBILES: anti-lock braking systems, fuel injection systems, air bags and
power accessories;
COMMUNICATIONS EQUIPMENT: telephone networks, satellites and modems;
COMPUTERS AND PERIPHERALS: power supplies and disk drives in desktop,
mainframe and portable computers and printers;
CONSUMER ELECTRONICS AND LIGHTING: fluorescent lighting ballasts, home
entertainment equipment and household appliances;
INDUSTRIAL EQUIPMENT: motor-driven production lines, instrumentation and
test equipment, machine tools, fork lifts and welders; and
OFFICE EQUIPMENT: copiers and facsimile machines.
The Company has operated internationally for 35 years. In fiscal 1994, over
50% of the Company's sales were to foreign customers, divided almost evenly
between Europe and Asia, and the remainder were to customers in North America.
The Company's customers include global industry leaders such as AT&T
Technologies Inc., Conner Peripherals, Inc., General Motors Corporation, Hewlett
Packard Co., International Business Machines Corp., Matsushita Electric Industry
Company, Ltd., Sanken Electric Company, Ltd., Siemens AG and Sony Corporation.
To meet rising demand for power MOS transistors, the Company is expanding
its wafer fabrication capacity at HEXFET America, its power MOSFET plant in
Temecula, California. The estimated $75.0 million expansion, which will be
funded in part with the proceeds of the Offerings, should be completed by the
end of calendar 1995. The expansion is estimated ultimately to increase HEXFET
America's wafer fabrication capacity by about 75%. See "Use of Proceeds" and
"Business -- Manufacturing."
At September 30, 1994, the Company had an order backlog of approximately
$132.5 million as compared to $85.6 million at September 30, 1993 and $121.8
million at June 30, 1994.
Reference is made to the Glossary for the definition of certain technical
terms used in this Prospectus.
3
<PAGE>
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by the Company.............................. 4,500,000 shares
Common Stock outstanding after the Offerings..................... 24,892,323(1)
New York Stock Exchange Symbol................................... IRF
Use of Proceeds.................................................. To expand the Company's wafer fabrication capacity at its HEXFET
America facility, repay debt and for general corporate purposes
including working capital.
<FN>
- ------------------------
(1) Based on 20,392,323 shares outstanding on September 30, 1994 and excluding
an aggregate of 268,320 shares issuable upon exercise of options
outstanding on September 30, 1994 under the Company's stock option plans.
</TABLE>
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SEPTEMBER
30, (UNAUDITED) FISCAL YEARS ENDED JUNE 30,
---------------- ----------------------------
1994 1993 1994 1993 1992
------- ------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Revenues...................... $92,253 $73,094 $328,882 $281,732 $265,495
Gross profit.................. 31,514 23,420 108,938 79,048 79,058
Operating profit.............. 8,917 3,260 23,549 2,328 10,882
Interest expense, net......... (912) (760) (3,625) (2,250) (1,436)
Income (loss) before income
taxes........................ 7,826 2,306 18,874 (2,597) 10,512
Net income (loss)............. 6,498 1,976 15,714 (3,033) 9,237
Net income (loss) per share... $ 0.32 $ 0.10 $ 0.78 $ (0.15) $ 0.46
Average common and common
equivalent shares
outstanding.................. 20,596 20,360 20,428 20,087 20,107
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
(UNAUDITED)
----------------------
ACTUAL ADJUSTED (1)
-------- ------------
<S> <C> <C>
(IN THOUSANDS)
BALANCE SHEET
Working capital................................... $ 66,888 $167,901
Total assets...................................... 348,489 432,602
Short-term debt................................... 41,467 24,567
Long-term debt, less current maturities........... 28,605 28,605
Stockholders' equity.............................. 210,303 311,316
<FN>
- ------------------------
(1) Adjusted to reflect the sale of 4,500,000 shares by the Company pursuant to
the Offerings, and the application of the net proceeds.
</TABLE>
4
<PAGE>
THE COMPANY
IR is a major worldwide supplier of power semiconductors which convert
electricity at relatively high voltage and current levels in products such as
automobiles, communications equipment, computers and peripherals, consumer
electronics and lighting, industrial equipment and office equipment. The process
of power conversion can be viewed in four stages: input rectification, control,
switching and output rectification. Input rectification conditions off-line
electricity, typically rectifying alternating current to direct current. The
control function measures incoming electricity and sends a signal to a switch.
The switch packages the current into discrete units. Output rectification
reconfigures the elements into a form useable by electrically operated
equipment. IR supplies products that perform each of these four basic functions.
IR was founded as a California corporation in 1947 and reincorporated in
Delaware in 1979. Its executive offices are located at 233 Kansas Street, El
Segundo, California 90245 and its telephone number is (310) 322-3331.
RISK FACTORS
Prospective investors should carefully consider the following factors in
addition to the other information provided elsewhere in this Prospectus or
incorporated by reference herein in evaluating an investment in the Company's
Common Stock.
EXPANSION RISKS
The Company is expanding wafer fabrication capacity at HEXFET America, its
power MOSFET plant in Temecula, California. Although the Company has not yet
experienced, and does not anticipate, any delays in construction or existing
production at HEXFET America, there can be no assurance that the Company will
not experience such delays or other delays in ramping up production or in
changing process technologies. See "Business -- Manufacturing."
MANUFACTURING RISKS
The Company's manufacturing processes are highly complex, require advanced
and costly equipment and are continuously being modified in an effort to improve
yields and product performance. Minute impurities or other difficulties in the
manufacturing process can lower yields. In the past, the Company has experienced
assembly output limitations that have constrained sales. There can be no
assurance that the Company will not experience manufacturing difficulties in the
future. In addition, although HEXFET America is designed to resist large
magnitude earthquakes and other natural disasters, the Company's operations
would be materially adversely affected if production at this facility were
interrupted. See "Business -- Manufacturing."
CONCENTRATION OF SUPPLIERS AND ASSEMBLERS
Although the Company generally uses materials and parts available from
multiple suppliers, the Company has only a limited number of suppliers for
certain materials and parts. The Company has not experienced any substantial
production delays from materials or parts shortages in the past. The Company
believes that alternate suppliers for these materials and parts are available,
but there can be no assurance that the Company will not experience interruption
of such supplies in the future.
During IR's recent expansion program at HEXFET America, a subcontractor that
provided assembly for up to 30% of IR's fastest-growing product line
discontinued this kind of production, resulting in product shortages.
Approximately 25% of the Company's power MOSFETs are currently assembled by two
subcontractors in Southeast Asia. The Company believes that these subcontractors
and alternative assembly subcontractors provide adequate assembly capacity.
Interruptions in assembly could, however, have a material adverse impact on the
Company's operations. There can be no assurance that the Company will not
experience interruption of such assembly operations in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
SIGNIFICANT INTERNATIONAL OPERATIONS
Over 50% of the Company's revenues were derived from sales in foreign
markets in fiscal 1994. The Company expects revenues from foreign markets to
continue to represent a significant portion of total revenues. The Company owns
and uses subcontract manufacturing and assembly facilities in England, Italy,
5
<PAGE>
Mexico, Japan and the Philippines, among others, and sells products manufactured
domestically to foreign customers. The Company's foreign operations are subject
to the usual risks that may affect such operations, including currency
fluctuations, difficulty collecting receivables and possible governmental
actions, tariffs, taxes, future import and export restrictions and political and
governmental changes.
TECHNOLOGICAL CHANGE
The power semiconductor market is subject to technological change and
evolving industry standards. To remain competitive, the Company must continue to
devote significant resources to advance process technologies to reduce
semiconductor die size, increase product performance and improve manufacturing
yields. There can be no assurance that the Company's competitors will not
develop new technologies that are substantially equivalent or superior to the
Company's patented technology or that the Company will be able to continue
enhancing existing processes or developing new technologies. See "Business --
Research and Development," and "-- Competition."
PROTECTION OF INTELLECTUAL PROPERTY
The Company relies on its patents and technological know-how to protect its
market position. See "Business -- Intellectual Property." There can be no
assurance that the Company will be able to protect its intellectual property
rights effectively. In addition, protection of the Company's intellectual
property rights in foreign markets is not as strong as the protection afforded
to its intellectual property in the United States. From time to time, the
Company and certain companies have asserted patent rights against each other.
The Company is presently engaged in such litigation, involving power MOSFET and
IGBT patents, with one of its competitors. There can be no assurance that the
Company will be successful with respect to litigation or other proceedings
involving patent rights or that such litigation might not increase the Company's
costs of doing business, expose the Company to substantial monetary damages or
interfere with the sale of its products. The Company has incurred, and could
incur in the future, substantial costs protecting its intellectual property or
defending infringement claims. See "Business -- Legal Proceedings."
SECURITIES LAWS LITIGATION
The Company, its directors and certain officers have been named as
defendants in three class action lawsuits in California which allege certain
intentional and negligent misrepresentations and violations of the federal
securities laws in connection with the Company's public offering of common stock
in April 1991 and the redemption in June 1991 of the Company's 9% Convertible
Subordinated Debentures and certain other matters. Although the Company believes
that the allegations in these lawsuits are without merit, the ultimate outcome
cannot be presently determined, and a substantial judgment or settlement, if
any, could have a material adverse effect on the Company's financial condition
and results of operations. See "Business -- Legal Proceedings."
COMPETITION
The Company competes with a number of different manufacturers in each of its
major product areas. Many of these companies have substantially greater
financial, technical, manufacturing and marketing resources than the Company.
IR's ability to compete depends upon a number of factors, including new product
and process technologies introduced by the Company and its competitors, customer
acceptance of the Company's products, cost-effective manufacturing, enforcement
of intellectual property rights and general market and economic conditions. Some
of these factors are out of the Company's control. There can be no assurance
that the Company will be able to compete successfully in the future against
existing or potential competitors. See "Business -- Competition."
CHANGE OF CONTROL PROVISIONS
The Company's Certificate of Incorporation and Bylaws contain provisions
that make it more difficult for a third party to acquire, or that discourage a
third party from attempting to acquire, control of the Company. In addition, as
a Delaware corporation, the Company is subject to the restrictions imposed under
Section 203 of the Delaware General Corporation Law which prevent the Company
from engaging in certain change of control transactions with certain of its
stockholders under certain circumstances. See "Description of Capital Stock."
6
<PAGE>
STOCK PRICE VOLATILITY
The Company's Common Stock has experienced substantial price volatility
which also may occur in the future, particularly as a result of
quarter-to-quarter variations in the actual or anticipated financial results of
the Company or other companies in the semiconductor industry or in the markets
served by the Company, or announcements by the Company or its competitors
regarding new product introductions. In addition, the stock market has
experienced extreme price and volume fluctuations that have affected the market
price of many technology companies' stocks in particular and that have often
been unrelated to the operating performance of these companies. These factors
may adversely affect the market price of the Common Stock. See "Price Range of
Common Stock."
7
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 4,500,000 shares of
Common Stock offered hereby are estimated to be approximately $101.0 million
($116.2 million if the Underwriters' over-allotment option is exercised in
full). The Company anticipates spending approximately $70.1 million of the
proceeds to expand its wafer fabrication capacity at HEXFET America. See
"Business -- Manufacturing." Approximately $9.9 million of the proceeds will be
used to repay amounts outstanding under the Company's domestic revolving credit
facility and approximately $7.0 million of the proceeds will be used to repay
amounts outstanding under short-term foreign loans. The interest rate on
domestic borrowings to be repaid is either LIBOR plus 1.25% or prime and the
weighted average rate on foreign debt that will be repaid was 7.9% at September
30, 1994. The remainder of the proceeds will be used for working capital and
general corporate purposes. Notwithstanding the debt repayments, the Company may
reborrow in the future to support potential expansion and growth activities.
Pending application of the funds, the net proceeds may be used to pay down
additional short-term debt obligations and may be invested in short-term,
interest-bearing obligations.
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company at September 30, 1994, and as adjusted for the sale by the Company
of the 4,500,000 shares of Common Stock offered hereby, and the application of
the net proceeds therefrom as described under "Use of Proceeds."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
----------------------
AS
ACTUAL ADJUSTED
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Bank loans.............................................................................. $ 34,853 $ 17,953
Long-term debt -- due within one year, including current maturities..................... 6,614 6,614
---------- ----------
$ 41,467 $ 24,567
---------- ----------
---------- ----------
Long-term debt, less current maturities:
Capitalized lease obligations payable in varying monthly installments primarily at rates
from 6.9% to 16.6%..................................................................... $ 11,747 $ 11,747
10.55% property mortgage due in equal monthly installments to 2011...................... 4,170 4,170
Domestic bank loans collateralized by equipment, payable in varying monthly installments
at rates from 7.1% to 9.0%, due in 1995 through 1999................................... 4,834 4,834
Foreign bank loans collateralized by property and/or equipment, payable in varying
monthly installments at rates from 6.5% to 10.8%, due in 1997 through 2000............. 3,787 3,787
Foreign unsecured bank loans payable in varying monthly installments at rates from 4.0%
to 11.9%, due in 1998 through 2006..................................................... 4,067 4,067
---------- ----------
28,605 28,605
---------- ----------
Stockholders' equity:
Common shares, $1.00 par value, 30,000,000 shares authorized, 20,392,323 shares issued
and outstanding (24,892,323 shares as adjusted)(1)..................................... 20,392 24,892
Capital contributed in excess of par value of shares.................................... 168,508 265,021
Retained earnings....................................................................... 25,998 25,998
Cumulative translation adjustments...................................................... (4,595) (4,595)
---------- ----------
Total stockholders' equity............................................................ 210,303 311,316
---------- ----------
Total capitalization.................................................................. $ 238,908 $ 339,921
---------- ----------
---------- ----------
<FN>
- ------------------------
(1) Excludes 268,320 shares issuable upon exercise of options pursuant to the
Company's stock option plans as of September 30, 1994.
</TABLE>
8
<PAGE>
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the New York Stock Exchange and the
Pacific Stock Exchange under the symbol "IRF." The following table sets forth
the range of high and low closing prices of the Common Stock on the New York
Stock Exchange Composite Tape for the periods presented.
<TABLE>
<CAPTION>
PRICE RANGE
----------------------
FISCAL YEAR HIGH LOW
- -------------------------------------------------- -------- --------
<S> <C> <C>
1993
First Quarter................................... $ 10 $ 8
Second Quarter.................................. 13 8 7/8
Third Quarter................................... 13 1/2 11
Fourth Quarter.................................. 12 5/8 10
1994
First Quarter................................... 13 1/8 10 1/4
Second Quarter.................................. 14 7/8 10 1/4
Third Quarter................................... 19 13 7/8
Fourth Quarter.................................. 17 1/8 13 1/2
1995
First Quarter................................... 22 1/4 15 1/8
Second Quarter (through October 27)............. 24 19 1/4
</TABLE>
The closing price of the Company's Common Stock is set forth on the cover
page of this Prospectus. On October 20, 1994, the Company had 1,759 stockholders
of record.
DIVIDEND POLICY
No dividends have been declared or paid since October 1, 1981. The Company
does not intend to pay cash dividends in the foreseeable future as all funds
will be reinvested in its operations. Furthermore, under certain credit
agreements, the Company is not permitted to pay any cash dividends.
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data as of June 30, 1994 and 1993 and
for the fiscal years ended June 30, 1994, 1993 and 1992 are derived from the
audited consolidated financial statements of the Company and should be read in
conjunction with the audited consolidated financial statements and notes with
respect thereto included herein. The selected consolidated financial data as of
June 30, 1992, 1991 and 1990, and for the fiscal years ended June 30, 1991 and
1990 are derived from audited consolidated financial statements of the Company
which are not included herein. Information at September 30, 1994 and 1993 and
for the three month periods ended September 30, 1994 and 1993 is unaudited but
reflects all material adjustments (consisting of normal recurring adjustments)
which in the Company's opinion are necessary to present the information in
accordance with generally accepted accounting principles. The operating results
for the three month period ended September 30, 1994 are not necessarily
indicative of the operating results for the full fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, FISCAL YEARS ENDED JUNE 30,
-------------------- -----------------------------------------------------
1994 1993 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1)
Revenues................................. $ 92,253 $ 73,094 $ 328,882 $ 281,732 $ 265,495 $ 252,800 $ 229,863
Cost of sales............................ 60,739 49,674 219,944 202,684 186,437 167,044 162,075
--------- --------- --------- --------- --------- --------- ---------
Gross profit............................. 31,514 23,420 108,938 79,048 79,058 85,756 67,788
Selling and administrative expense....... 18,486 16,350 69,008 62,637 58,771 51,544 41,526
Research and development expense......... 4,111 3,810 16,381 14,083 9,405 7,538 6,585
Restructuring charge..................... -- -- -- -- -- 1,000 --
--------- --------- --------- --------- --------- --------- ---------
Operating profit......................... 8,917 3,260 23,549 2,328 10,882 25,674 19,677
Interest expense, net.................... (912) (760) (3,625) (2,250) (1,436) (13,266) (17,062)
Other income (expense)................... (179) (194) (1,050) (2,675) 1,066 5,825 8
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary item...................... 7,826 2,306 18,874 (2,597) 10,512 18,233 2,623
Provision for income taxes............... 1,328 330 3,160 436 1,275 1,086 466
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary
item.................................... 6,498 1,976 15,714 (3,033) 9,237 17,147 2,157
Extraordinary item, net.................. -- -- -- -- -- 726 --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)........................ $ 6,498 $ 1,976 $ 15,714 $ (3,033) $ 9,237 $ 16,421 $ 2,157
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
INCOME (LOSS) PER SHARE:
Before extraordinary item.............. $ 0.32 $ 0.10 $ 0.78 $ (0.15) $ 0.46 $ 1.30 $ 0.18
Extraordinary item..................... -- -- -- -- -- (0.06) --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) per share............ $ 0.32 $ 0.10 $ 0.78 $ (0.15) $ 0.46 $ 1.24 $ 0.18
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Average common and common equivalent
shares outstanding...................... 20,596 20,360 20,428 20,087 20,107 13,210 11,733
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
AT SEPTEMBER 30, AT JUNE 30,
-------------------- -----------------------------------------------------
1994 1993 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital.......................... $ 66,888 $ 61,319 $ 67,165 $ 58,116 $ 67,538 $ 74,900 $ 25,889
Total assets............................. 348,489 287,461 330,574 278,448 285,880 250,263 217,532
Short-term debt.......................... 41,467 29,852 33,310 27,539 27,135 15,821 27,309
Long-term debt, less current
maturities.............................. 28,605 14,158 26,817 11,810 11,535 11,921 120,139
Stockholders' equity..................... 210,303 188,295 202,943 186,074 191,703 179,535 21,572
<FN>
- ------------------------------
(1) Certain reclassifications have been made to previously reported amounts to
conform with current year presentation.
</TABLE>
10
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following table presents certain unaudited quarterly information for
each of the Company's last nine quarters. Quarterly results of operations are
not necessarily indicative of the results expected for the full year period. For
a discussion of seasonality, see "Management's Discussion and Analysis of
Financial Condition and Operations -- Seasonality."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30,
1994 1994 1994 1993 1993 1993 1993 1992 1992
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.......... $92,253 $92,432 $84,252 $79,104 $73,094 $75,728 $70,572 $70,452 $64,980
Cost of sales..... 60,739 60,637 56,142 53,491 49,674 53,547 50,059 51,035 48,043
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
Gross profit.... 31,514 31,795 28,110 25,613 23,420 22,181 20,513 19,417 16,937
Selling and
administrative
expense.......... 18,486 18,402 17,465 16,791 16,350 16,182 15,827 15,502 15,126
Research and
development
expense.......... 4,111 4,401 4,201 3,969 3,810 3,929 3,606 3,593 2,955
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
Operating profit
(loss)......... 8,917 8,992 6,444 4,853 3,260 2,070 1,080 322 (1,144)
Other income
(expense)
Interest --
net............ (912) (910) (1,161) (794) (760) (698) (574) (445) (533)
Other -- net.... (179) (341) (218) (297) (194) (432) (180) (1,674) (389)
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
Income (loss)
before income
taxes............ 7,826 7,741 5,065 3,762 2,306 940 326 (1,797) (2,066)
Provision for
income taxes..... 1,328 1,279 859 692 330 227 201 196 (188)
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
Net income
(loss)........... $ 6,498 $ 6,462 $ 4,206 $ 3,070 $ 1,976 $ 713 $ 125 $(1,993) $(1,878)
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
Net income (loss)
per share........ $ 0.32 $ 0.32 $ 0.21 $ 0.15 $ 0.10 $ 0.04 $ 0.01 $ (0.10) $ (0.09)
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
Average common and
common equivalent
shares
outstanding...... 20,596 20,476 20,477 20,398 20,360 20,315 20,299 19,982 19,968
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
------------- -------- --------- ------------ ------------- -------- --------- ------------ -------------
</TABLE>
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth certain items included in selected
consolidated financial data as a percentage of revenues.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED) FISCAL YEARS ENDED JUNE 30,
------------------ -----------------------------
1994 1993 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues...................... 100.0% 100.0% 100.0% 100.0% 100.0 %
Cost of sales................. 65.8 68.0 66.9 71.9 70.2
------- ------- ------- ------- -------
Gross profit.................. 34.2 32.0 33.1 28.1 29.8
Selling and administrative
expense...................... 20.1 22.3 21.0 22.2 22.1
Research and development
expense...................... 4.5 5.2 5.0 5.0 3.5
------- ------- ------- ------- -------
Operating profit.............. 9.6 4.5 7.1 0.9 4.2
Interest expense, net......... (1.0) (1.0) (1.1) (0.8) (0.6)
Other income (expense)........ (0.2) (0.3) (0.3) (1.0) 0.4
------- ------- ------- ------- -------
Income (loss) before income
taxes........................ 8.4 3.2 5.7 (0.9) 4.0
Provision for income taxes.... 1.4 0.5 0.9 0.2 0.5
------- ------- ------- ------- -------
Net income (loss)............. 7.0% 2.7% 4.8% (1.1)% 3.5%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 1993
Revenues for the three months ended September 30, 1994 increased 26.2% to
$92.3 million from $73.1 million in the prior year period. The Company's revenue
increase reflected rising demand for the Company's power MOSFETs and related
devices, which resulted in a 29% increase in revenues from these products.
Revenues from the thyristor and rectifier product lines increased 20% which
reflected unseasonally strong demand in Europe. Changes in foreign exchange
rates positively impacted revenues by approximately $1.0 million. Revenues in
the current quarter included $2.2 million of net patent royalties compared to
$2.4 million in the prior year period.
Gross profit for the three months ended September 30, 1994 was 34.2% of
revenues ($31.5 million) versus 32.0% of revenues ($23.4 million) in the prior
year period. The increased margin reflected greater manufacturing volume and
efficiencies in both the Company's growth and mature products.
In the three months ended September 30, 1994, selling and administrative
expense was 20.1% of revenues ($18.5 million) versus 22.3% of revenues ($16.4
million) in the prior year period. The decreased percentage reflects the
Company's continued commitment to reducing operating expenses as a percentage of
revenues.
In the three months ended September 30, 1994, the Company's research and
development expenditures increased $0.3 million to $4.1 million (4.5% of
revenues) from $3.8 million (5.2% of revenues) in the prior year period. The
Company's research and development program was, and continues to be, focused on
the advancement and diversification of the HEXFET product line, the expansion of
the related IGBT products and the development of Control ICs and power products
that work in combination with HEXFETs and IGBTs to improve system performance.
FISCAL YEAR 1994 COMPARED WITH FISCAL YEAR 1993
The Company operates on a fiscal calendar under which the twelve months
ended July 3, 1994 consisted of 52 weeks compared to 53 weeks in the twelve
months ended July 4, 1993.
12
<PAGE>
Revenues for fiscal 1994 increased 16.7% to $328.9 million from $281.7
million in the prior year. The Company's revenue increase reflected continued
growing demand for the Company's power MOSFETs and related devices which
resulted in a 23.4% increase in revenues from these products. Offsetting this
revenue increase was a 6.2% decrease in revenues from the Company's thyristor
and rectifier product lines. This downturn reflected slow starting economies in
key European markets in the first half, and the planned consolidation of these
mature product lines. Changes in foreign exchange rates negatively impacted
revenues by approximately $2.0 million. Revenues for fiscal 1994 also included
$9.0 million of net patent royalties compared to $9.5 million in the prior
period.
Gross profit was 33.1% of revenues ($108.9 million) in fiscal 1994 versus
28.1% of revenues ($79.0 million) in fiscal 1993. The increased margin reflected
IR's recovery from production constraints in fiscal 1993. In addition, greater
MOSFET manufacturing volume and efficiencies resulted in lower per unit product
costs and enabled the Company to balance output to market demand and return to a
normal mix of original equipment manufacturers, distribution and higher margin
spot market business.
In the fourth quarter of fiscal 1993 the Company extended the useful lives
of certain assets. This change positively impacted gross profit by approximately
$2.6 million (0.8% of revenues) during fiscal 1994.
In fiscal 1994, selling and administrative expense was 21.0% of revenues
($69.0 million) versus 22.2% of revenues ($62.6 million) in fiscal 1993. The
decreased percentage reflects the Company's continued commitment to reducing
operating expenses as a percentage of revenues.
In fiscal 1994, the Company's research and development expenditures
increased $2.3 million to $16.4 million (5.0% of revenues) from $14.1 million
(5.0% of revenues) in the prior period. The Company's research and development
program was focused on the advancement and diversification of the HEXFET product
line, the expansion of the related IGBT products and the development of Control
ICs and power products that work in combination with HEXFETs and IGBTs to
improve system performance. Included in 1994 research and development expenses
are the costs associated with efforts started in Japan in fiscal 1994 to reduce
assembly costs and to develop new assembly processes.
The major components of other expense include a $0.9 million charge for the
consolidation of the Company's power products operations, $0.4 million of
severance costs and $0.3 million on the disposal of property, plant and
equipment, offset by $0.4 million in foreign currency transaction gains.
FISCAL YEAR 1993 COMPARED WITH FISCAL YEAR 1992
The Company operates on a fiscal calendar year under which the twelve months
ended July 4, 1993 consisted of 53 weeks compared to 52 weeks in the twelve
months ended June 28, 1992.
Revenues for fiscal 1993 increased 6.1% to $281.7 million from $265.5
million in the prior year. The Company's revenue increase was primarily a result
of higher sales of the Company's power MOSFET devices and increased net patent
royalties. Changes in foreign exchange rates negatively impacted revenues by
approximately $2.5 million. Revenues for fiscal 1993 also include $9.5 million
of net patent royalties compared to $5.7 million in the prior period.
During fiscal 1992 and the first three fiscal quarters of 1993, sales of the
Company's power MOSFET devices were constrained because of assembly output
limitations. In the second half of fiscal 1992, the Company began a program to
expand assembly capacity for power MOSFETs at HEXFET America. During this
expansion program a subcontractor that provided assembly for up to 30% of IR's
fastest-growing product line discontinued this kind of production. Delays in
receiving and ramping up equipment at HEXFET America were compounded by the need
to replace the subcontractor. Product shortages curtailed IR's growth and
negatively affected its share of the power MOSFET market.
Gross profit was 28.1% of revenues ($79.0 million) in fiscal 1993 versus
29.8% of revenues ($79.1 million) in fiscal 1992. Margins reflected less
efficient operation during the above assembly expansion ramp-up and product
allocation that favored industry-leading original equipment manufacturer
customers over higher-margin spot market business. Gross profit for the first
half of fiscal 1993 was 26.8% of revenues as compared to 29.2% of revenues for
the last half of fiscal 1993. First-half margins also reflected a decrease in
wafer fabrication rates to accommodate a lower assembly production rate.
Second-half margins reflected greater manufacturing volume and efficiencies and
an increase in net patent royalties.
13
<PAGE>
In fiscal 1993, selling and administrative expense increased $3.8 million to
$62.6 million (22.2% of revenues) from $58.8 million (22.1% of revenues) in the
prior period. These increases reflect planned revenue increases, as well as
increases associated with an additional week of operations reported in fiscal
1993.
In fiscal 1993, the Company's research and development expenditures
increased $4.7 million to $14.1 million (5.0% of revenues) from $9.4 million
(3.5% of revenues) in the prior period. The Company's research and development
program is focused on the advancement and diversification of the HEXFET product
line and expansion of the related IGBT products. Efforts are also directed to
the development of Control ICs and power products that work in combination with
HEXFETs and IGBTs to improve system performance. The increase in research and
development expenditures in fiscal 1993 contributed to more new product
introductions in fiscal 1993.
Other expense included a $1.1 million charge for the settlement of a breach
of contract lawsuit, $1.1 million of severance costs and $0.2 million related to
the buyout of a lease upon early termination.
SEASONALITY
The Company has experienced moderate seasonality in its business in recent
years. On average over the past three years, the Company has reported
approximately 47% of annual revenues in the first half and 53% in the second
half of its fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1994, the Company had established $79.0 million in domestic
and foreign revolving credit facilities, of which $34.9 million had been
borrowed by the Company. Based upon covenant and collateral limitations under
the revolving credit facilities, the Company had $23.9 million available for
borrowing at September 30, 1994. In addition, at September 30, 1994 the Company
had available $16.6 million of unused lines of credit for capital equipment,
$11.6 million of cash and cash equivalents and had made purchase commitments of
approximately $9.2 million for capital equipment. See "Note 2 -- Notes to
Consolidated Financial Statements -- Long-Term Debt and Other Loans."
The Company intends to spend approximately $75.0 million (of which $4.9
million has been spent through September 30, 1994) to expand wafer fabrication
capacity at its HEXFET America facility, most of which is expected to be
expended in fiscal 1995. In addition, the Company intends to spend approximately
$35.0 million (of which $10.2 million has been spent in the three months ended
September 30, 1994) to expand and maintain assembly capacity, to enhance its
Management Information Systems infrastructure and to maintain its existing
facilities. The Company intends to fund these capital expenditures and meet its
short-term liquidity requirements through cash and cash equivalents on hand,
anticipated cash flows from operations, funds available from existing credit
facilities and from funds received from the Offerings. The Company is also
negotiating with the Industrial Development Authority of the County of
Riverside, California for an issuance of $25.0 million of taxable industrial
development bonds which will be indirectly backed by the U.S. Department of
Housing and Urban Development. The proceeds will be loaned to IR for the
expansion at HEXFET America and will be collateralized by the real property at
HEXFET America. However, there can be no assurance that any financing will be
available under cost-effective terms.
Although the Company believes that the class action lawsuits brought against
the Company and its Board of Directors (See "Business -- Legal Proceedings") are
without merit, the ultimate outcome, and any effect on liquidity, thereof cannot
be presently determined. For the possible effects of environmental and patent
matters on liquidity, see "Business -- Environmental Matters," "-- Intellectual
Property" and "-- Legal Proceedings." The Company has not made any provision for
liability, if any, that may result upon adjudication of these matters.
INCOME TAXES
Due in part to the utilization of net operating loss carryforwards ("NOLs"),
the Company's effective income tax rate for the three months ended September 30,
1994 and fiscal 1994 was approximately 17%. At September 30, 1994, the Company
had NOLs of approximately $23.5 million for federal income tax purposes. These
NOLs expire beginning in 2004. The Company also has approximately $5.3 million
of tax credits available to offset future U.S. taxes. In addition, the Company
anticipates that it will be eligible to receive California state tax credits
equal to 6% of the cost of most of the Company's equipment purchased and placed
in service in California on or after January 1, 1994. When the NOLs and other
available tax credits are fully utilized, the Company will be subject to a
normalized tax rate in the range of 35% to 40%.
14
<PAGE>
BUSINESS
The Company is a major worldwide supplier of power semiconductors which
convert electricity at relatively high voltage and current levels in products
such as automobiles, communications equipment, computers and peripherals,
consumer electronics and lighting, industrial equipment and office equipment.
The Company designs, manufactures and markets power semiconductors which are
used for power conversion. In the same way that oil is refined to produce
gasoline to power a car, electricity has to be converted to create useable power
to operate equipment. This process of power conversion can be viewed in four
stages: input rectification, control, switching and output rectification. Input
rectification conditions off-line electricity, typically rectifying alternating
current to direct current. The control function measures incoming electricity
and sends a signal to a switch. A switch packages the current into discrete
units. Output rectification reconfigures the elements into a form usable by
electrically operated equipment. The ability of power conversion products to
minimize energy lost at each stage in the power conversion process is central to
their value.
Because IR supplies products that perform each of the four basic functions
in power conversion, many circuits use more than one type of IR product. This
allows IR to develop and package products that work together to optimize overall
circuit performance and enables the Company to capitalize more broadly on
market-leading products.
[CHART]
ILLUSTRATION DESCRIPTION:
Block diagram demonstrating sequence of four power conversion functions with
detail of associated processes and products.
IR's products are used in all major market sectors. Applications for power
semiconductors in automobiles include anti-lock braking and fuel injection
systems, power accessories and air bags. Communications applications include
telephone networks, satellites and modems. Computer and peripheral applications
include power supplies and disk drives for desktop, mainframe and portable
computers and printers. Consumer electronics and lighting applications include
home entertainment equipment, household appliances and fluorescent lighting
ballasts. Power semiconductors are also used widely in industrial applications
such as motor-driven production lines, instrumentation and test equipment,
machine tools, fork lifts and welders. Office equipment applications include
copiers and facsimile machines.
According to statistics for calendar 1993 published by the SIA, the Company
had a 17% market share of the $1.1 billion power MOS transistor segment. In
addition, the Company sold approximately $19.1 million of power MOSFET and IGBT
chips and wafers to third parties in calendar 1993. Accordingly, the Company
believes it is the world leader in the power MOS transistor market. SIA data
indicates that industry-wide sales of power MOS transistors in calendar 1993
increased 23% over 1992 levels, and that, over the past five years, power MOS
transistor sales have grown at an average rate of 26% per year.
The Company's major customers include industry leaders such as AT&T
Technologies Inc., Conner Peripherals, Inc., General Motors Corporation, Hewlett
Packard Co., International Business Machines Corp., Matsushita Electric
Industrial Company, Ltd., Sanken Electric Company, Ltd., Siemens AG and Sony
Corporation. In fiscal 1994, over 50% of the Company's sales were to foreign
customers, divided almost evenly between Europe and Asia, and the remainder were
to customers in North America.
15
<PAGE>
POWER SEMICONDUCTOR INDUSTRY
Semiconductors are silicon-based chips that conduct and block electricity.
The semiconductor industry consists principally of the integrated circuit ("IC")
and power semiconductor segments. Power semiconductors operate differently from
ICs that operate at low power levels and process and convey information in
electronic form. IC capability is largely defined by circuit density, which
increases as its features are miniaturized. The applications for ICs are
generally concentrated in the computer industry and have been subject to
frequent redesign, short product life cycles and rapid obsolescence. As a
result, the demand for ICs has been highly cyclical.
In contrast to ICs, power semiconductors operate at higher power levels and
perform a single function: they convert electricity to operate a power supply,
control a motor or light a lamp. Their capability is largely defined by the
level of power that they can handle and their efficiency in converting electric
current into a more useful form. The amount of electric current handled and the
heat generated limit the rate at which power semiconductors can be miniaturized.
Advances in power semiconductor performance and decreases in
cost-per-function have been achieved through the use of MOS technology. Power
MOS transistors (power MOSFETs and IGBTs) have gained an increasing share of the
power transistor market. Power MOS transistors offer significant benefits over
bipolar transistors, which are power semiconductors that also serve the
switching function. Power MOS transistors provide much greater switching speed,
which allows the design of higher frequency, more compact circuits. Power MOS
transistors are activated by voltage rather than current, so they require less
external circuitry to operate, making them more compatible with IC controls.
They also offer more reliable long-term performance and are more rugged, so they
can better withstand adverse operating conditions. In addition, power MOSFETs
and IGBTs compare favorably to bipolar power transistors on a price/ performance
basis. The graph below presents SIA data on sales of bipolar transistors and
sales of power MOS transistors from calendar 1987 to 1993.
SALES OF BIPOLAR TRANSISTORS AND POWER MOS TRANSISTORS
[GRAPH]
GRAPH DESCRIPTION:
Area graph of SIA figures on worldwide bipolar and MOS power transistor sales in
dollars for calendar years 1987-1993.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Power Bipolar
<S> <C> <C>
1987 0.2 1.2
1988 0.3 1.5
1989 0.4 1.4
1990 0.6 1.5
1991 0.7 1.4
1992 0.9 1.4
1993 1.1 1.6
</TABLE>
APPLICATIONS
Power semiconductors are used in a broad spectrum of commercial and
industrial applications, including many products with long life cycles. The
Company believes that the demand for power semiconductors is less cyclical than
ICs, given power semiconductors' longer product lives and diverse
16
<PAGE>
applications. Power semiconductor demand is driven by growth in their end-user
markets, replacement of bipolar transistors and proliferation of new end-product
applications. The Company believes that markets driving future demand for power
semiconductors include:
PORTABLE ELECTRONICS. Advances in power semiconductors help extend battery
life and reduce product size and weight in a variety of products such as laptop
and notebook computers, personal digital organizers, cellular telephones,
battery-operated appliances and hand tools.
AUTOMOTIVE ELECTRONIC SYSTEMS. The concentration of solid state electronics
in recent model year automobiles has increased rapidly with the proliferation of
safety and comfort features. Applications include anti-lock braking systems, air
bags, fuel injection systems, electric windows and adjustable mirrors and seats.
Adoption of battery operated electric vehicles to reduce emissions would
dramatically increase consumption of power MOS transistors.
ELECTRONIC LIGHTING BALLASTS. Electronic lighting ballasts, which
incorporate power MOS transistors, significantly reduce the amount of energy
consumed in lighting. Conversion to electronic ballasts has been driven by lower
end-user operating costs, longer product life and incentives from electric
utilities to encourage energy efficiency.
VARIABLE SPEED MOTORS. Variable-speed, solid-state controls increase energy
efficiency and performance in a broad range of industrial and appliance motors.
In addition, clean air legislation is driving the conversion from traditional
chlorofluorocarbons to less toxic refrigerants which compromise energy
efficiency. Manufacturers of refrigerators and air conditioners compensate for
these less efficient chemicals by using more efficient variable-speed motors
controlled by power semiconductors.
PRODUCTS
The Company's power MOS transistors (principally power MOSFETs), chips and
wafers comprised over two-thirds of fiscal 1994 sales. IR also supplies Control
ICs, high performance diodes and high power rectifiers and thyristors. The
Company believes that this complete line of power conversion products represents
a competitive advantage, as IR is able to provide customers with integrated
solutions to their power conversion needs.
The Company's fastest-growing products have comprised a greater proportion
of its total revenues during each of the past three fiscal years. The table
below shows revenues of IR's growth and mature products in dollar amounts and as
a percentage of revenues for the periods indicated. Dollar amounts in the table
below are in millions.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED) FISCAL YEARS ENDED JUNE 30,
--------------------------------- ------------------------------------------------------
1994 1993 1994 1993 1992
--------------- --------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth (1).......... $ 77.1 83.6% $ 60.5 82.8% $ 269.3 81.9% $ 218.2 77.5% $ 201.2 75.8%
Mature (2).......... 15.2 16.4 12.6 17.2 59.6 18.1 63.5 22.5 64.3 24.2
----- -------- ----- -------- ------ -------- ------ -------- ------ --------
Total............ $ 92.3 100.0% $ 73.1 100.0% $ 328.9 100.0% $ 281.7 100.0% $ 265.5 100.0%
----- -------- ----- -------- ------ -------- ------ -------- ------ --------
----- -------- ----- -------- ------ -------- ------ -------- ------ --------
<FN>
- ------------------------
(1) Growth product revenues consist of revenues from HEXFETs, Schottky diodes,
Fast Recovery diodes, IGBTs, Control ICs and patent royalties.
(2) Mature product revenues consist of revenues from high power rectifiers and
thyristors.
</TABLE>
SWITCHING PRODUCTS
Power MOS transistors (power MOSFETs and IGBTs) serve the switching function
in power conversion to provide an even, useable flow of power for electronic
equipment.
POWER MOSFETS. Through its HEXFET product line, the Company believes it
is the world leader in power MOSFETs. The breadth and diversity of the market
for these products provide an element of stability in demand.
17
<PAGE>
Applications for MOSFETs in automobiles include anti-lock brakes, fuel
injection systems, power accessories and air bags. Computer/peripheral
applications include power supplies, disk drives and printers. Office equipment
applications include copiers and facsimile machines. Consumer electronics
applications include home entertainment, videocameras, household appliances and
power tools. Lighting applications include electronic fluorescent ballasts and
compact fluorescent bulbs. Industrial applications include welding,
instrumentation and test equipment and automated production lines.
Communications applications include telephone networks and modems. Government
and aerospace applications include commercial and military satellites,
communications equipment, command-and-control systems and missiles.
Market acceptance and brand recognition of HEXFETs have benefited from the
Company's emphasis on quality control and reliability, and the Company believes
its standards to be among the most stringent in the industry. Cumulative and
current data on long and short-term product reliability is made available to
customers quarterly.
IGBTS. IGBTs are particularly effective in providing the switching
function in power conversion applications that require higher current and
voltage. IGBTs combine the ease of voltage-driven power MOSFET technology with
the conduction efficiency of bipolar transistor technology. The performance and
ruggedness of these devices enable them to replace bipolar transistors and
thyristors in many high-voltage, high-current motor control and power
conditioning applications. Energy-efficient, variable-speed motor controls are
an emerging application, and the Company believes electric vehicles will require
large quantities of IGBTs for each vehicle. The Company's IGBT technology is
closely related to its HEXFET technology, and the Company views them as
complementary products.
CONTROL PRODUCTS
Control ICs serve the control function in power conversion. These devices
perform the functions of several discrete components. This integration allows
circuit designers to simplify circuit design and assembly, improve reliability
and reduce overall system size and cost. In sensing and responding to adverse
operating conditions, Control IC performance is superior to a safety or
diagnostic circuit using discrete components. IR's Control ICs draw on the
Company's power MOSFET technology and are designed to operate at very high
voltages and optimize the performance of both MOSFETs and IGBTs.
Control ICs are used in a wide variety of power supply, motor control and
lighting applications. These include industrial motor controls, stepper motor
controls, solenoid drivers, welding equipment, telecom switchers, computer and
peripherals, instrumentation and test equipment, fluorescent lighting ballasts
and compact fluorescent light bulbs.
INPUT RECTIFICATION PRODUCTS
The Company also manufactures a broad line of rectifiers, diodes and
thyristors that serve the input rectification function in power conversion.
These products convert power to make it more efficient and useable, principally
in industrial end products that require power-handling capability from one amp
to 5,000 amps and from 120 volts to 5,000 volts. Applications include motor
controls and lighting, welding equipment, fork lifts, machine tools, induction
heating, locomotives, motor-driven production lines, smelting equipment and
power supplies.
OUTPUT RECTIFICATION PRODUCTS
The Company's Schottky diodes and Fast Recovery diodes serve the output
rectification function in power conversion. Output rectification reconfigures
electricity into a form useable by electrically operated equipment. Schottky
diodes are used with power MOSFETs in high-frequency applications such as
computers and peripherals. The Company's trademarked HEXFRED-R- Fast Recovery
diodes are used with IGBTs in higher current, lower frequency applications such
as motor controls.
MANUFACTURING
Semiconductor manufacturing involves two phases of production: wafer
fabrication and assembly (or packaging). Wafer fabrication is a sequence of
process steps that exposes silicon wafers to chemicals that change their
electrical properties. The chemicals are applied in sequences that create cells
or circuits within
18
<PAGE>
numerous individual devices (often termed "die" or "chips") on each wafer.
Packaging or assembly is the sequence of production steps that divide the wafer
into individual chips and enclose the chips in external structures (termed
packages) that make them useable in a circuit. Wafer fabrication generally
employs process technology and equipment already proven in IC manufacturing.
The Company has production facilities in California, England, Italy and
Mexico. In addition, the Company has equipment at, or manufacturing supply
agreements with, assembly subcontractors located in the United States, the
Philippines, Japan, Taiwan and Malaysia. IR fabricates substantially all of its
power MOSFET wafers at HEXFET America in Temecula, California. A wafer
fabrication facility for IGBTs and other power MOSFET devices, and assembly
operations for government and other advanced products are located in El Segundo,
California. Facilities that assemble HEXFETs and other growth products are
located in the United States and overseas, in Company-owned and subcontract
facilities, in order to take advantage of low assembly costs and provide maximum
customer service. In Tijuana, Mexico, the Company assembles power MOSFET
products, IGBTs and other modules. The Company's Oxted, England facility, which
qualifies as a duty-free warehouse, assembles power MOSFETs and IGBTs as well as
products used in certain military applications. Since completion of
consolidation of its three input rectification manufacturing sites in the third
quarter of fiscal 1994, the Company has manufactured substantially all its high
power rectifiers and thyristors at its Turin, Italy facility. In addition, the
Company has an assembly facility for rectifiers and thyristors in a duty-free
zone in India.
To meet rising demand for power MOS transistors, the Company is expanding
wafer fabrication capacity at HEXFET America. Planned to be in production by the
end of calendar 1995, the Company believes that the estimated $75 million
expansion will ultimately increase HEXFET America's wafer capacity in power MOS
transistors by about 75%. The expansion will position IR to aggressively address
the fastest growing segments of the power transistor market, high density power
MOSFETs and IGBTs. Next-generation devices designed for production in the new
fabrication facility incorporate design and process advancements in the
Company's proprietary HEXFET and IGBT technologies. The facility is designed to
combine the flexibility of manufacturing both power MOSFETs and IGBTs with
efficient, high-volume manufacturing techniques that reduce cycle times. The
fabrication will be performed on six-inch wafers and will use a continuous-flow
layout similar to the one already in use at HEXFET America. The facility is
different from the functional layout that the Company believes is commonly used
by other semiconductor manufacturers. Highly automated processing and supply
systems for gases, water, and other processing chemicals have also contributed
to continuous improvements in wafer yields at this facility. Pilot runs of the
new products on the specified equipment are already underway at the Company's
facility in El Segundo, California.
HEXFET America was selected for the fabrication expansion because the
Company believes it offers several important benefits. Expanding at an existing
facility should allow the Company to invest less in construction and more in
production capacity. It should require fewer additional employees than a totally
new facility would and will enable IR to start up and operate the fabrication
with experienced staff already on site. The Company believes that the
accessibility of HEXFET America to the Company's research and development staff
in El Segundo has eased in the past, and should ease in the future, the
transition of the products from development to manufacturing. See "Risk Factors
- -- Expansion Risks" and "-- Manufacturing Risks."
MARKETING, SALES AND DISTRIBUTION
The Company markets its products through sales personnel, representatives
and distributors. The Company believes its ability to offer products that serve
each of the four functions of power conversion enhances its competitive position
in the overall power semiconductor market.
In fiscal year 1994, more than half of the Company's sales were to foreign
customers, divided almost evenly between Europe and Asia, and the remainder were
to customers in North America. The Company's domestic direct sales force is
organized in four sales zones. In Europe, the Company's products are sold
through its own sales force as well as through sales agents and distributors.
The Company has European sales and representative offices in England, Italy,
Sweden, France, Germany, Finland, Denmark, Poland, the
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<PAGE>
Czech Republic and Hungary. In Asia, IR has sales and representative offices in
Japan, Singapore, Hong Kong, Korea and India. IR has well established, exclusive
relationships with agents and representatives in most major markets which are
not served directly by IR personnel. See "Risk Factors -- Significant
International Operations."
Because many applications require products from several product groups, the
Company has organized its marketing efforts by market sector, rather than
product type. These business management groups focus on several key commercial
sectors and on government and aerospace business. In addition, the Company's
staff of applications engineers provides customers with technical advice and
support regarding the use of IR's products.
CUSTOMERS
In most cases, the Company's devices are incorporated in larger systems
manufactured by end product manufacturers. The Company's customers in the
automotive segment include Robert Bosch, Ltd., Ford Motor Company, General
Motors Corporation, NipponDenso Co., Ltd., and Siemens AG. In the computer
segment, IR's customers include Apple Computer, Inc., Compaq Computer
Corporation, Hewlett Packard Co. and International Business Machines Corp.
Consumer electronics customers include Bose Corporation, Philips Electronics
N.V. and Sony Corporation. Customers in the telecommunications segment include
AT&T Technologies, Inc. and Nokia. The Company also sells its products to
distributors including Arrow Electronics, Inc. and Future Electronics, Inc.
BACKLOG
As of September 30, 1994, the Company's backlog of orders was $132.5 million
compared to $85.6 million as of September 30, 1993 and $121.8 million as of June
30, 1994. Backlog represents purchase orders which have been released for
shipment and are scheduled to be shipped within the following 12 months. In
accordance with industry practice, IR may in certain circumstances release
customers from purchase orders without penalty. Increasingly, major customers
are operating their businesses with shorter lead times and are placing orders on
a periodic rather than an annual basis. Orders are cancelable and backlog is not
necessarily indicative of sales for any future period.
RESEARCH AND DEVELOPMENT
The Company is involved in ongoing research and development directed toward
new processes, devices and packages as well as continued improvement of quality
and reliability in existing products. In fiscal years 1994, 1993 and 1992, the
Company spent approximately $16.4 million, $14.1 million and $9.4 million,
respectively, on research and development activities. In fiscal 1994, the
Company introduced a variety of products designed to address growth
opportunities identified by market sector: high-density, high-efficiency HEXFETs
and surface-mount packages for portable electronics; Control ICs for lighting
and motor control applications; IGBT modules for motor controls; and HEXFETs
with diagnostic and safety features for auto applications. IR's research and
development program is focused on advancing and diversifying the power MOSFET
product line, expanding the related IGBT products and developing Control ICs and
other power products that work in combination with power MOSFETs and IGBTs to
improve system performance. IR's research and development staff also works with
the marketing staff to develop new products that address specific customer
needs. Efforts are directed towards developing new processes that enable the
Company to produce smaller, more efficient devices. Efforts are also directed at
reducing assembly costs and developing new package designs and assembly
processes.
INTELLECTUAL PROPERTY
The Company has made significant investments in developing and protecting
its intellectual property. Through successful enforcement of its patents, the
Company has entered into a number of license agreements, generated royalty
income and received substantial payments in settlement of litigation. The
Company currently has 61 U.S. patents and 37 U.S. patents pending. Those patents
fundamental to the Company's operations expire between 2000 and 2010. In
addition, the Company has 67 foreign patents and 57 foreign patents pending in a
number of countries. IR is also licensed to use certain patents owned by others.
Under the terms of an agreement with Unitrode Corporation that terminates in
March 2000, the
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<PAGE>
Company pays Unitrode Corporation approximately 12% of IR's net patent royalty
income. The Company has several registered trademarks in the United States and
abroad including trademarks for HEXFET. The Company believes that its
proprietary technology and intellectual property contribute to its competitive
advantage. See "Risk Factors -- Protection of Intellectual Property."
Since the Company believes that its power MOSFET patents are broadly
applicable, it is committed to enforcing its rights under those patents and is
pursuing additional license agreements. The Company presently has
royalty-bearing license agreements with 11 companies: Harris Corporation;
Hitachi, Ltd.; Matsushita Electronics Corporation; National Semiconductor
Corporation; NEC Corporation; Nihon Inter Electronics Corporation; Sanken
Electric Company, Ltd.; SGS-Thomson Microelectronics, Inc.; Siliconix
incorporated; Toshiba Corporation; and Unitrode Corporation. In fiscal 1994,
$9.0 million of revenues were derived from such royalty-bearing license
agreements.
Certain of the Company's fundamental power MOSFET patents have been
subjected, and continue to be subjected, to reexamination in the United States
Patent and Trademark Office ("PTO"). In September 1994 the PTO undertook the
reexamination of U.S. patent 5,008,725, one of the Company's principal power MOS
transistor patents. This patent has previously been confirmed on reexamination.
See "Note 9 -- Notes to Consolidated Financial Statements--Intellectual Property
Rights." Although no assurance can be given as to the ultimate outcome of the
Company's patent enforcement efforts, the PTO reexamination proceedings or the
success of the Company's patent licensing program, the Company believes that its
patent portfolio will be the source of continuing royalty income.
COMPETITION
The Company encounters differing degrees of competition for its various
products, depending upon the nature of the product and the particular market
served. Generally, the semiconductor industry is highly competitive, and many of
the Company's competitors are larger companies with greater financial resources
than IR. The Company believes that its breadth of product line and its ability
to bundle products that serve the different power conversion functions into one
package distinguish it from its competitors. IR's products compete with products
manufactured by others based on quality, price, reliability, overall performance
of the products, breadth and availability of products, delivery time to the
customer and service (including technical advice and support). The Company's
competitors include Eupec, Harris Corporation, Hitachi Ltd., Motorola, Inc., NEC
Corporation, Philips International B.V., Powerex, Inc., Samsung Semiconductor
Inc., SGS-Thomson Microelectronics, Siemens AG, Siliconix incorporated, Toshiba
Corporation and Westcode Semiconductors Ltd. See "Risk Factors -- Competition."
ENVIRONMENTAL MATTERS
Federal, state and local laws and regulations impose various restrictions
and controls on the discharge of certain materials, chemicals and gases used in
semiconductor processing. The Company does not believe that compliance with such
laws and regulations will have a material adverse effect on its financial
position.
The Company and Rachelle Laboratories, Inc. ("Rachelle"), its former
pharmaceutical subsidiary which discontinued operations in 1986, have been named
among several hundred entities as potentially responsible parties ("PRPs") under
the provisions of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), in connection with the United States
Environmental Protection Agency's ("EPA") investigation of the disposal of
allegedly hazardous substances at a major superfund site in Monterey Park,
California (the "OII site"). Certain PRPs who settled certain claims with the
EPA under consent decrees filed suit in Federal Court in May 1992 against a
number of other PRPs, including IR, for cost recovery and contribution under
CERCLA. The lawsuit against IR, relating to the first and second consent
decrees, was settled in August 1993 for the sum of $40,000 to avoid protracted
and expensive litigation. Claims have been made with the Company's insurers with
respect to the OII site matter; however, there can be no assurance that the
insurance coverage attaches to these claims. There remains the potential for
litigation against IR and Rachelle relating to the OII site. The Company does
not believe that either it or Rachelle is responsible for the disposal at the
OII site of any material constituting hazardous substances under CERCLA.
Although the ultimate resolution of this matter is unknown, the Company believes
that it will not have a material adverse impact on its financial position.
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<PAGE>
In May 1993 the Company purchased property from its Employee Profit Sharing
and Retirement Plan. It was determined that the property required clean up of
seepage from a storage tank, at an estimated additional cost of $500,000. The
Company commenced the clean up in fiscal year 1994, and the costs to be incurred
will be capitalized as additional costs of the property.
On July 18, 1994, the Company received a letter from the State of Washington
Department of Ecology (the "Department") notifying the Company of a proposed
finding that the Company is a potentially liable person ("PLP") for alleged PCE
contamination (also known as perchloroethylene, tetrachloroethylene, and other
names) of real property and groundwater in Yakima County, Washington. The letter
alleges that the Company arranged for disposal or treatment of the PCE or
arranged with a transporter for the disposal or treatment of the PCE in Yakima
County. The Company replied by a letter dated August 11, 1994 stating that it
has not contributed to PCE or other solvent contamination at the Yakima County
site and that it should not be designated a PLP. On October 11, 1994 the Company
received a letter from the Department notifying the Company of its finding that
the Company is a PLP in the above matter.
The Company received a letter dated September 9, 1994, from the State of
California Department of Toxic Substances Control stating that the Company may
be a PRP for the deposit of hazardous substances at a facility in Whittier,
California. The Company's investigation of this matter has just begun and
therefore an opinion cannot be expressed as to any ultimate responsibility.
LEGAL PROCEEDINGS
The Company and SGS-Thomson Microelectronics, Inc. ("SGS") are engaged in
various legal proceedings relating to their respective power MOSFET patents. SGS
filed suit against the Company in June 1991 in Federal District Court in Texas,
charging infringement of U.S. patent 4,553,314. On motion by the Company, the
suit was transferred to the Federal District Court in Los Angeles, California,
and thereafter SGS amended its complaint to charge infringement of U.S. patents
4,495,513 and 4,712,127. SGS alleges, in substance, that the Company's power
MOSFET and IGBT products infringe the '314 patent, that the Company's IGBT
products infringe the '513 patent and that certain packages for IR's products
(including certain power MOSFET packages) infringe the '127 patent. The
complaint, as amended, seeks unspecified actual damages (but no less than an
unspecified reasonable royalty) and an injunction restraining further sales of
such products. On February 1, 1993, the District Court dismissed SGS's claims
for infringement of the '127 and '513 patents for lack of standing and on March
15, 1993 ruled that the SGS '314 patent is unenforceable due to inequitable
conduct. SGS appealed these rulings, as well as the order transferring the case
to California, to the Court of Appeals for the Federal Circuit. IR
cross-appealed a separate ruling by the District Court denying IR's motion for
summary judgment that the '314 patent is invalid. In July 1994, the Federal
Circuit reversed the District Court's grants of summary judgment as to the '513,
'127 and '314 patents and affirmed the District Court's denial of IR's motion
for summary judgment of invalidity of the '314 patent. The Federal Circuit
ordered, however, that the case should proceed in California. Cross-petitions
for writs of certiorari are pending before the U.S. Supreme Court as to the
jurisdictional and venue rulings of the Federal Circuit. No trial date has yet
been set and the ultimate outcome of the case as to the three SGS patents is
unknown.
In separate proceedings before the same California District Court, IR sought
enforcement of a prior license agreement between IR and SGS. The Court in July
1994 granted the Company's motions to enforce the license agreement with SGS,
requiring SGS to pay additional past and prospective royalties under IR's U.S.
patents 4,959,699 and 4,642,666 on SGS's sales of power MOSFET, IGBT and power
IC products. SGS has filed a separate appeal of this ruling with the Federal
Circuit.
The Company has also filed a separate action in the same District Court
against SGS and its Italian affiliate, SGS-Thomson Microelectronics, S.r.l.,
seeking an injunction against infringement of the Company's U.S. patents
5,008,725 and 5,130,767. Trial of the Company's action has been set for January
25, 1995.
The Company, its directors and certain officers have been named as
defendants in three class action lawsuits filed in federal court in California.
These suits seek unspecified but substantial compensatory and punitive damages
for alleged intentional and negligent misrepresentations and violations of the
federal
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securities laws. The complaints generally allege that the Company and the other
defendants made materially false statements or omitted to state material facts
in connection with the public offering of the Company's common stock completed
in April 1991 and the redemption and conversion in June 1991 of the Company's 9%
Convertible Subordinated Debentures Due 2010. They also allege that the
Company's projections for growth in fiscal 1992 were materially misleading.
Although the Company believes that the claims alleged in the suits are without
merit, the ultimate outcome cannot be presently determined. A substantial
judgment or settlement, if any, could have a material adverse effect on the
Company's financial condition and results of operations. Two of these suits also
name Kidder, Peabody & Co. Incorporated and Montgomery Securities as defendants.
No provision for any liability that may result upon adjudication of these
matters has been made in the consolidated financial statements.
EMPLOYEES
As of September 30, 1994, the Company employed approximately 3,150 people,
of whom approximately 2,140 are employed in North America, 960 in Europe and 50
in Asia. The Company is not a party to any collective bargaining agreements. The
Company considers its relations with its employees to be good.
PROPERTIES
The Company's operations occupy a total of approximately 864,000 square
feet, of which approximately 477,000 square feet are located within the United
States. Of the worldwide total, approximately 247,000 square feet are leased and
the balance is owned by the Company.
IR's leases expire between 1995 and 2012. If the Company is unable to renew
these leases upon expiration, it believes that it could find other suitable
premises without any material adverse impact on its operations.
The Company's major facilities are in the following locations:
<TABLE>
<CAPTION>
TOTAL SQUARE FEET
-----------------------
FACILITY OWNED LEASED EXPIRATION OF LEASE
- ------------------------------------------ --------- ------------ -----------------------------------
<S> <C> <C> <C>
Temecula, California...................... 287,000 -- --
El Segundo, California.................... 93,000 91,000 July 31, 1995 - July 31, 2004
Tijuana, Mexico........................... -- 89,000 (1)
Oxted, England............................ 45,000 15,000 March 27, 2012
Turin, Italy.............................. 110,000 6,000 June 30, 1995 - March 31, 1998
<FN>
- ------------------------
(1) Since the Company's lease on its assembly facility in Mexico expired, it
has rented the same space on a month to month basis due to pending rezoning
of the neighborhood. The Company has identified comparable space available
for lease on comparable terms if such assembly facility needs to be moved.
</TABLE>
The Company believes that these facilities are adequate for its current and
anticipated near term operating needs. IR estimates that it currently utilizes
approximately 81% of its worldwide manufacturing capacity. To meet rising demand
for power MOS transistors, the Company is expanding wafer fabrication at HEXFET
America. Planned to be in production by the end of calendar 1995, the Company
believes that the estimated $75 million expansion will ultimately increase
HEXFET America's wafer fabrication capacity by about 75%.
The Company has nine sales offices located throughout the United States, and
other sales and technical support offices in Canada, France, Germany, Hong Kong,
India, China, Singapore, and Scandinavia that operate in leased facilities.
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<PAGE>
MANAGEMENT
The executive officers and directors of IR are:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---------------------------- --- ----------------------------------------------------------
<S> <C> <C>
Eric Lidow 81 President; Chairman of the Board; Chief Executive Officer
Alexander Lidow 39 Executive Vice President - Operations; Director
Derek B. Lidow 41 Executive Vice President; Director
Robert J. Mueller 65 Executive Vice President - External Affairs and Business
Development; Director
Michael P. McGee 35 Vice President - Chief Financial Officer
Donald S. Burns 69 Director
George Krsek 73 Director
James D. Plummer 49 Director
Jack O. Vance 69 Director
Rochus E. Vogt 64 Director
</TABLE>
Eric Lidow is a founder of the Company and has been the Chief Executive
Officer and a director of the Company since its inception in 1947.
Alexander Lidow, Ph.D., has been employed by the Company since 1977. He
served as the Semiconductor Division's Vice President - Research and Development
since July 1979, was promoted to Semiconductor Division Executive Vice President
- -Manufacturing and Technology in March 1985, and became the President of the
Electronic Products Division in July 1989. In August 1992, Dr. Lidow was elected
Executive Vice President of Operations. He was elected a director in September
1994. Dr. Lidow is a son of Eric Lidow.
Derek B. Lidow, Ph.D., has been employed by the Company since 1976. He
served as the Semiconductor Division's Vice President - Operations since March
1980, was promoted to Semiconductor Division Executive Vice President -
Marketing and Administration in March 1985, and became President of the Power
Products Division in July 1989. In August 1992, Dr. Lidow was elected Executive
Vice President and in July 1993 assumed responsibilities for worldwide sales and
marketing. He was elected a director in September 1994. Dr. Lidow is a son of
Eric Lidow.
Robert J. Mueller has been employed by the Company since November 1961. He
served as Vice President of Marketing for the U.S. Semiconductor Division from
1963 until October 1969 when he was promoted to Corporate Vice President -
Foreign Operations. Mr. Mueller became Executive Vice President - World
Marketing and Foreign Operations in April 1978, Corporate Executive Vice
President - External Affairs and Worldwide Sales in July 1989, and in July 1993
became Executive Vice President - External Affairs and Business Development. He
was elected a director in 1990.
Michael P. McGee has been employed by the Company since 1990. He joined the
Company in July 1990 as Director of Corporate Accounting and was promoted to
Corporate Controller in December 1990. Mr. McGee became Vice President,
Controller and Principal Accounting Officer in 1991, and in 1993, became Vice
President - Chief Financial Officer. From 1985 until he joined the Company, Mr.
McGee was a senior manager and audit manager at Ernst & Young.
Donald S. Burns has been Chairman, President and Chief Executive Officer of
Prestige Holdings, Ltd., a property management and business consulting firm,
since 1978. Mr. Burns was elected a director of the Company in 1993. He is also
a director of ESI Corporation and International Technology Corporation.
George Krsek, Ph.D., was President of Houba, Inc. a pharmaceutical firm from
1975 to July 1994, and is currently President of Konec L.L.C., a management
consulting company. He has been a director of the Company since 1979.
James D. Plummer, Ph.D., has been the John M. Fluke Professor of Electrical
Engineering, Stanford University since 1988 and Director of Stanford's
Integrated Circuits Laboratory since 1984. Dr. Plummer was elected a director of
the Company in September 1994.
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<PAGE>
Jack O. Vance became the Managing Director of Management Research, a
management consulting firm, in November 1990. From 1960 through 1989 he was a
director of McKinsey & Co., Inc., a management consulting firm. During the years
1973 through 1989 he was also the Managing Director of the firm's Los Angeles
office. He has been a director of the Company since 1988. He is also a director
of Hillhaven Corporation, International Technology Corporation, Escorp, The
Olson Company, University Restaurant Group, and FCG Enterprises, Inc.
Rochus E. Vogt, Ph.D., is a Professor of Physics, California Institute of
Technology, and acted as Provost from 1983 through 1987. He has been a director
of the Company since 1984.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000 shares of
Common Stock, $1.00 par value per share, and 1,000,000 shares of Preferred
Stock, $1.00 par value per share. No shares of Preferred Stock are outstanding.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share held of
record on each matter submitted to a vote of shareholders. Subject to the
current prohibition in the Company's loan agreements on the payment of dividends
and to preferences which may be granted to the holders of Preferred Stock, each
holder of Common Stock is entitled to share ratably in distributions to
shareholders and to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefore and, in the event of
the liquidation, dissolution or winding up of the Company, is entitled to share
ratably in all assets of the Company remaining after payment of liabilities.
Holders of Common Stock have no conversion, preemptive or other rights to
subscribe for additional shares, and there are no redemption rights or sinking
fund provisions with respect to the Common Stock.
The Transfer Agent and Registrar for the Common Stock is Chemical Trust
Company of California, Los Angeles, California.
PREFERRED STOCK
The Board of Directors, without further action by the holders of Common
Stock, may issue shares of Preferred Stock in one or more series and may fix or
alter the rights, preferences, privileges and restrictions, including the voting
rights, redemption provisions (including sinking fund provisions), dividend
rights, dividend rates, liquidation preferences and conversion rights, and the
description of and number of shares constituting any wholly unissued series of
Preferred Stock. The Board of Directors, without further shareholder approval,
can issue Preferred Stock with voting and conversion rights which could
adversely affect the voting power of the holders of Common Stock. No shares of
Preferred Stock presently are outstanding, and the Company has no plans to issue
shares of Preferred Stock. The issuance of shares of Preferred Stock under
certain circumstances could have the effect of delaying or preventing a change
of control or other corporate action.
CHARTER AND BYLAW PROVISIONS
In addition to the authorized Preferred Stock, certain other provisions of
the Company's Certificate of Incorporation and Bylaws may make it more difficult
for a third party to acquire, or may discourage a third party from attempting to
acquire, control of the Company.
In accordance with provisions contained in the Company's Certificate of
Incorporation and its Bylaws, the Company's Board of Directors is divided into
three classes with staggered three year terms for each class. The Certificate of
Incorporation and Bylaws provide that the directors have the right to increase
(with certain restrictions) or decrease the number of directors. The Certificate
of Incorporation provides that vacancies for newly created directorships may be
filled by a majority vote of the remaining directors and removal for cause may
only be made by the vote of a majority of the outstanding shares.
Amendment of any of the foregoing provisions of the Company's Certificate of
Incorporation requires the approval of the holders of at least 66 2/3% of the
stock of the Company issued and outstanding having voting power, given at a duly
convened stockholders meeting upon a proposal adopted by the Board.
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<PAGE>
Under the Company's Bylaws, a special meeting of stockholders may be called
only by certain officers or a majority of the Board.
LIMITATION ON DIRECTOR LIABILITY
In accordance with Section 102(b)(7) of the Delaware General Corporation Law
(the "DGCL"), the Company's Certificate of Incorporation limits a director's
liability to the Company or its stockholders for monetary damages for breach of
fiduciary duty to the fullest extent permitted by the DGCL. Section 102(b)(7) of
the DGCL enables a corporation in its certificate of incorporation to eliminate
or limit the personal liability of a director to the corporation or its
stockholders for monetary damages for violations of the director's fiduciary
duty, except that a corporation may not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) pursuant to
Section 174 of the DGCL (providing for liability of directors for unlawful
payment of dividends or unlawful stock purchases or redemptions) or (iv) for any
transaction from which the director derived an improper personal benefit.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of the DGCL prevents a Delaware corporation from engaging in a
"Business Combination" (defined to include a variety of transactions, including
mergers, as set forth below) with an "Interested Stockholder" (generally defined
as a person with 15% or more of a corporation's outstanding voting stock) for
three years following the date such person became an Interested Stockholder
unless: (i) before such person became an Interested Stockholder, the board of
directors of the corporation approved either the Business Combination or the
transaction in which the Interested Stockholder became an Interested
Stockholder; (ii) upon consummation of the transaction the Interested
Stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers and employee stock ownership plans in which
employee participants do not have the right to determine confidentially whether
shares subject to the plan will be tendered in a tender or exchange offer); or
(iii) on or subsequent to the date on which such person became an Interested
Stockholder, the Business Combination is (x) approved by the board of directors
of the corporation and (y) authorized at a meeting of stockholders by the
affirmative vote of at least 66 2/3% of the outstanding voting stock of the
corporation not owned by the Interested Stockholder.
Under Section 203, the restrictions described above apply to the Company
unless, among other things, (i) by the affirmative vote of a majority of the
shares entitled to vote, it adopts an amendment to its certificate of
incorporation or bylaws expressly electing not to be governed by Section 203,
(such an amendment would not be effective until 12 months after its adoption and
would not apply to certain Business Combinations); or (ii) a class of its voting
stock is not (x) listed on a national securities exchange, (y) authorized for
quotation on an inter-dealer quotation system of a registered national
securities association or (z) held of record by more than 2,000 stockholders,
(unless any of the foregoing results from action taken, directly or indirectly,
by an Interested Stockholder or from a transaction in which a person becomes an
Interested Stockholder).
A Business Combination is defined in Section 203 as (i) a merger or
consolidation, (ii) any sale, lease, mortgage, transfer or other disposition of
assets having an aggregate market value of 10% or more of the aggregate market
value of either all assets of the corporation determined on a consolidated basis
or all outstanding stock of the corporation; (iii) any transaction which results
in the issuance or transfer by the corporation, or by certain of its
subsidiaries, of any of its stock to the Interested Stockholder, except pursuant
to (x) the exercise, exchange or conversion of securities exercisable for,
exchangeable for or convertible into stock of the corporation or any subsidiary
which were outstanding prior to the time the stockholder became an Interested
Stockholder or (y) a transaction which effects a pro rata distribution to all
stockholders of the corporation; (iv) any transaction involving the corporation
or certain subsidiaries thereof which has the effect of increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation or any
such subsidiary which is owned directly or indirectly by the Interested
Stockholder (except as a result of immaterial changes due to fractional share
adjustments or any purchase or redemption not caused by the Interested
Stockholder); or (v) any receipt by the Interested Stockholder of the benefit,
directly or indirectly, (except proportionately as a stockholder of the
corporation) of any loans, advances or other financial benefits provided by or
through the corporation.
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<PAGE>
UNDERWRITING
Under the terms of and subject to the conditions contained in the U.S.
Underwriting Agreement, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, the underwriters
of the offering of the Shares in the United States and Canada named below (the
"U.S. Underwriters") for whom Lehman Brothers Inc., Kidder, Peabody & Co.
Incorporated, Montgomery Securities, PaineWebber Incorporated and Smith Barney
Inc. are acting as representatives (the "Representatives"), have severally
agreed to purchase from the Company, and the Company has agreed to sell to each
U.S. Underwriter, the aggregate number of Shares set forth opposite the name of
each such U.S. Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Lehman Brothers Inc.........................................
Kidder, Peabody & Co. Incorporated..........................
Montgomery Securities.......................................
PaineWebber Incorporated....................................
Smith Barney Inc............................................
---------
Total................................................... 3,600,000
---------
---------
</TABLE>
Under the terms of and subject to the conditions contained in the
International Underwriting Agreement, the form of which is filed as an exhibit
to the Registration Statement of which this Prospectus is a part, the managers
of the concurrent offering of the Shares outside the United States and Canada
(the "International Managers" and together with the U.S. Underwriters, the
"Underwriters") for whom Lehman Brothers International (Europe), Kidder, Peabody
International PLC, Montgomery Securities, PaineWebber International (U.K.) Ltd.
and Smith Barney Inc. are acting as lead managers (the "Lead Managers"), have
severally agreed to purchase from the Company, and the Company has agreed to
sell to each International Manager, the aggregate number of Shares set forth
opposite the name of each such International Manager below:
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Lehman Brothers International (Europe)......................
Kidder, Peabody International PLC...........................
Montgomery Securities.......................................
PaineWebber International (U.K.) Ltd........................
Smith Barney Inc............................................
---------
Total................................................... 900,000
---------
---------
</TABLE>
The Company has been advised that the U.S. Underwriters and the
International Managers, respectively, propose to offer part of the Shares to the
public at the public offering price set forth on the cover page hereof and part
to certain dealers at a price that represents a concession not in excess of
$ per share under the public offering price. The U.S. Underwriters and the
International Managers may allow, and such dealers may reallow, a concession not
in excess of $ per share to certain other brokers or dealers. After the
initial offering to the public, the offering price and other selling terms may
be changed by the U.S. Underwriters and International Managers.
The U.S. Underwriting Agreement and the International Underwriting Agreement
(collectively, the "Underwriting Agreements") provide that the obligations of
the several U.S. Underwriters and the International Managers to pay for and
accept delivery of the shares of Common Stock offered pursuant to the Offerings
are subject to certain conditions contained therein, and that if any of the
foregoing shares of Common Stock are purchased by the U.S. Underwriters pursuant
to the U.S. Underwriting Agreement or by the International Managers pursuant to
the International Underwriting Agreement, all the shares of Common Stock agreed
to be purchased by either the U.S. Underwriters or the International Managers,
as the case may be, pursuant to their respective Underwriting Agreements, must
be so purchased. The closing
27
<PAGE>
under the International Underwriting Agreement is a condition to the closing
under the U.S. Underwriting Agreement, and the closing under the U.S.
Underwriting Agreement is a condition to the closing under the International
Underwriting Agreement.
The Company has granted to the U.S. Underwriters and the International
Managers an option to purchase up to an aggregate of 675,000 additional shares
of Common Stock at the price to public less the underwriting discount, solely to
cover over-allotments, if any. Such option may be exercised at any time up to 30
days after the date of this Prospectus. To the extent that the U.S. Underwriters
or International Managers exercise such option, each of the U.S. Underwriters or
the International Managers, as the case may be, will be committed, subject to
certain conditions, to purchase a number of Common Stock shares proportionate to
such U.S. Underwriter's or International Manager's initial commitment as
indicated in the preceding tables.
The U.S. Underwriters and the International Managers have entered into an
Agreement Between U.S. Underwriters and International Managers (the "Agreement
Between U.S. Underwriters and International Managers"), pursuant to which each
U.S. Underwriter has agreed that, as part of the distribution of the Shares
(plus any of the shares to cover over-allotments) offered in the U.S. Offering,
(i) it is not purchasing any such Shares for the account of anyone other than a
U.S. Person (as defined below) and (ii) it has not offered or sold, and will not
offer, sell, resell or deliver, directly or indirectly, any of such Shares
outside the United States or Canada or to anyone other than a U.S. Person. In
addition, pursuant to such agreement, each International Manager has agreed
that, as part of the distribution of the Shares (plus any of the shares to cover
over-allotments) offered in the International Offering, (i) it is not purchasing
any such Shares for the account of a U.S. Person and (ii) it has not offered or
sold, and will not offer, sell, resell or deliver, directly or indirectly, any
of such Shares in the United States or Canada or to any U.S. Person. Each
International Manager has also agreed that it will offer to sell shares only in
compliance with all relevant requirements of any applicable laws.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Underwriting Agreements and the
Agreement Between U.S. Underwriters and International Managers, including (i)
certain purchases and sales between the U.S. Underwriters and the International
Managers, (ii) certain offers, sales, resales, deliveries or distributions to or
through investment advisors or other persons exercising investment discretion,
(iii) purchases, offers or sales by a U.S. Underwriter who is also acting as an
International Manager or by an International Manager who is also acting as a
U.S. Underwriter and (iv) other transactions specifically approved by the U.S.
Underwriters and International Managers. As used herein, (a) the term "United
States" means the United States of America (including District of Columbia) and
its territories, its possessions and other areas subject to its jurisdiction,
and (b) the term "U.S. Person" means any resident or citizen of the United
States, any corporation, partnership or other entity created or organized in or
under the laws of the United States or any estate or trust the income of which
is subject to United States income taxation regardless of the source of its
income (other than the foreign branch of any U.S. Person), and includes any
United States branch of a person other than a U.S. Person.
Pursuant to the Agreement Between U.S. Underwriters and International
Managers, sales may be made between the U.S. Underwriters and the International
Managers of such number of shares of Common Stock as may be mutually agreed
upon. The price of any shares sold shall be the public offering price then in
effect for Shares being sold by the U.S. Underwriters and the International
Managers, less the selling concession unless otherwise determined by mutual
agreement. To the extent that there are sales between the U.S. Underwriters and
the International Managers pursuant to the Agreement Between U.S. Underwriters
and International Managers, the number of shares initially available for sale by
the U.S. Underwriters or by the International Managers may be more or less than
the amount appearing on the cover page of this Prospectus.
Each International Manager has represented and agreed that (i) it has not
offered or sold, and will not offer or sell, in the United Kingdom, by means of
any document, any Shares other than (a) to persons whose ordinary business it is
to buy or sell shares or debentures, whether as principal or agent, or (b) under
28
<PAGE>
circumstances which do not constitute an offer to the public within the meaning
of the Companies Act 1985; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 (the "1986 Act") with
respect to anything done by it in relation to the Shares in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on, and
will only issue or pass on to any person in the United Kingdom, any investment
advertisement (within the meaning of the 1986 Act) relating to the Shares if
that person falls within Article 9(3) of the Financial Services Act 1986
(Investment Advertisements) (exemptions) Order 1988.
No action has been taken or will be taken in any jurisdiction by the Company
or the International Managers that would permit a public offering of the shares
offered pursuant to the Offerings in any jurisdiction where action for that
purpose is required, other than the United States. Persons into whose possession
this Prospectus comes are required by the Company and the International Managers
to inform themselves about and to observe any restrictions as to the offering of
the shares offered pursuant to the Offerings and the distribution of this
Prospectus.
Purchasers of the shares of Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase in addition to the offering price set forth on the cover
page hereof.
The Company and each of Alexander, Derek and Eric Lidow have agreed not to
sell or dispose of any shares of Common Stock, with certain exceptions, prior to
the expiration of 90 days from the date of this Prospectus without the prior
written consent of the U.S. Underwriters and International Managers. The Company
has agreed to indemnify the U.S. Underwriters and International Managers against
certain liabilities, including liabilities under the Securities Act, and to
contribute to payments that the U.S. Underwriters and the International Managers
may be required to make in respect hereof.
LEGAL OPINIONS
The validity of the Common Stock to be issued pursuant to the Offerings and
general corporate legal matters will be passed upon for the Company by O'Melveny
& Myers and for the U.S. Underwriters and the International Managers by Latham &
Watkins.
EXPERTS
The audited consolidated financial statements of the Company included in
this prospectus, have been audited by Coopers & Lybrand L.L.P., independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon such report, which include an explanatory
paragraph regarding three outstanding class action lawsuits, given upon the
authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as at the following Regional Offices of the Commission: 7
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
material may also be inspected at the offices of the New York Stock Exchange and
the Pacific Stock Exchange.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended. This
Prospectus omits certain of the information contained in the Registration
Statement, and reference is hereby made to the Registration Statement and
29
<PAGE>
related exhibits for further information with respect to the Company and the
Common Stock. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference in
this Prospectus:
(i) the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1994; and
(ii) the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of these offerings shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the respective dates
of filing of such documents.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon oral or written request, a copy of any or all of
the foregoing documents incorporated herein by reference, except for the
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into information that this Prospectus incorporates). Written
requests should be directed to International Rectifier Corporation, 233 Kansas
Street, El Segundo, California 90245, Attention: Corporate Secretary. Telephone
requests should be directed to (310) 322-3331.
30
<PAGE>
GLOSSARY
The following are definitions of certain technical terms used in the
Prospectus:
ASSEMBLY -- The process of encasing a semiconductor chip in a package to
produce a finished product.
BIPOLAR TRANSISTOR -- A transistor that is controlled by electrical current.
CONTROL IC -- A semiconductor device having logic and control on the same
chip that is used in conjunction with power MOSFETs or IGBTs.
DIODE -- A discrete device which conducts current in one direction.
DISCRETE DEVICE -- An electrical or electronic component that performs a
single function.
FAST RECOVERY DIODE -- A diode suited to applications above 200 volts where
high switching speed is desirable.
FET (FIELD EFFECT TRANSISTOR) -- A transistor that is controlled by
electrical voltage.
IGBT (INSULATED GATE BIPOLAR TRANSISTOR) -- A variant of the power MOSFET
that incorporates bipolar transistor technology.
IC (INTEGRATED CIRCUIT) -- A device that contains multiple components on a
single silicon chip to form an electronic circuit.
PACKAGE -- The external structure that encases a semiconductor chip.
POWER MOSFET -- A power field effect transistor (FET) that is manufactured
using MOS (Metal Oxide Semiconductor) processing technology similar to that used
in manufacturing certain integrated circuits. The Company's power MOSFETs are
sold under the trademark HEXFET.
POWER SEMICONDUCTOR -- A silicon-based component that operates at a power
level above approximately one watt and has the ability both to conduct and to
block the flow of electricity. Power semiconductors are used to switch (turn on
and off) electricity or to condition electricity, for example by converting
alternating current to direct current.
RECTIFIER -- A diode used to convert alternating current to direct current.
SCHOTTKY DIODE -- An ultra-fast rectifier for use in high-frequency,
low-voltage circuits.
THYRISTOR (SCR) -- A four layer semiconductor device that has a gate
structure allowing current to flow in an electrical circuit.
TRANSISTOR -- A semiconductor device that switches (turns on and off) or
amplifies electricity in a circuit.
WAFER FABRICATION -- The sequence of semiconductor processing steps that
creates semiconductor devices on a silicon wafer.
31
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Consolidated Statement of Operations for the fiscal years ended June 30, 1994, 1993, and 1992 and the three
month periods ended September 30, 1994 and 1993 (unaudited)............................................... F-3
Consolidated Balance Sheet as of June 30, 1994 and 1993 and as of September 30, 1994 (unaudited)........... F-4
Consolidated Statement of Stockholders' Equity for the fiscal years ended June 30, 1994, 1993, and 1992 and
for the three month period ended September 30, 1994 (unaudited)........................................... F-5
Consolidated Statement of Cash Flows for the fiscal years ended June 30, 1994, 1993, and 1992 and for the
three month periods ended September 30, 1994 and 1993 (unaudited)......................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Shareholders and Board of Directors
International Rectifier Corporation
We have audited the accompanying consolidated financial statements of
International Rectifier Corporation and Subsidiaries as of June 30, 1994 and
1993, and for the fiscal years ended June 30, 1994, 1993 and 1992. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 International
Rectifier Corporation and Subsidiaries at June 30, 1994 and 1993, and the
consolidated results of their operations and their cash flows for the fiscal
years ended June 30, 1994, 1993 and 1992, in conformity with generally accepted
accounting principles.
As discussed in Note 10 to the accompanying consolidated financial
statements, three class action lawsuits have been filed against the Company and
its Board of Directors (two of whom are also officers). The ultimate outcome
thereof cannot presently be determined. Accordingly, no provisions for any
liability that may result upon adjudication of these matters has been made in
the accompanying consolidated financial statements.
COOPERS & LYBRAND
Los Angeles, California
July 26, 1994
F-2
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN 000'S EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED) FISCAL YEARS ENDED JUNE 30,
-------------------- ----------------------------------
1994 1993 1994 1993 1992
--------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues............................................... $ 92,253 $ 73,094 $ 328,882 $ 281,732 $ 265,495
Cost of sales.......................................... 60,739 49,674 219,944 202,684 186,437
--------- --------- ---------- ---------- ----------
Gross profit......................................... 31,514 23,420 108,938 79,048 79,058
Selling and administrative expense..................... 18,486 16,350 69,008 62,637 58,771
Research and development expense....................... 4,111 3,810 16,381 14,083 9,405
--------- --------- ---------- ---------- ----------
Operating profit..................................... 8,917 3,260 23,549 2,328 10,882
Other income (expense):
Interest expense, net................................ (912) (760) (3,625) (2,250) (1,436)
Other, net........................................... (179) (194) (1,050) (2,675) 1,066
--------- --------- ---------- ---------- ----------
Income (loss) before income taxes...................... 7,826 2,306 18,874 (2,597) 10,512
Provision for income taxes (Note 5).................... 1,328 330 3,160 436 1,275
--------- --------- ---------- ---------- ----------
Net income (loss)...................................... $ 6,498 $ 1,976 $ 15,714 $ (3,033) $ 9,237
--------- --------- ---------- ---------- ----------
--------- --------- ---------- ---------- ----------
Net income (loss) per share............................ $0.32 $0.10 $0.78 $(0.15) $0.46
------ ------ ------- ------- -------
------ ------ ------- ------- -------
Average common and common equivalent shares
outstanding........................................... 20,596 20,360 20,428 20,087 20,107
------ ------ ------- ------- -------
------ ------ ------- ------- -------
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN 000'S EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1994 JUNE 30, JUNE 30,
(UNAUDITED) 1994 1993
------------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................... $ 11,610 $ 13,051 $ 8,545
Trade accounts receivable, less allowance for doubtful accounts
($677 in 1994 and $607 in 1993)........................................ 76,071 67,595 55,004
Inventories............................................................. 75,288 73,429 62,609
Prepaid expenses........................................................ 2,542 2,779 1,731
------------- ---------- ----------
Total current assets.................................................. 165,511 156,854 127,889
Property, plant and equipment, at cost, less accumulated depreciation
($112,411 in 1994 and $98,250 in 1993)................................... 167,542 158,567 138,518
Investments and long-term notes receivable................................ 2,236 2,248 2,251
Other assets.............................................................. 13,200 12,905 9,790
------------- ---------- ----------
Total assets.......................................................... $ 348,489 $ 330,574 $ 278,448
------------- ---------- ----------
------------- ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans (Note 2)..................................................... $ 34,853 $ 27,205 $ 24,007
Long-term debt, due within one year (Note 2)............................ 6,614 6,105 3,532
Accounts payable........................................................ 38,549 36,965 27,846
Accrued salaries, wages and commissions................................. 8,959 10,264 9,376
Other accrued expenses.................................................. 9,648 9,150 5,012
------------- ---------- ----------
Total current liabilities............................................. 98,623 89,689 69,773
Long-term debt, less current maturities (Note 2).......................... 28,605 26,817 11,810
Deferred income........................................................... 1,103 1,199 1,402
Other long-term liabilities............................................... 9,238 9,320 9,073
Deferred income taxes (Note 5)............................................ 617 606 316
Commitments and contingencies (Notes 7, 8, 9, 10, and 11)
Stockholders' equity (Note 3):
Common shares, $1 par value, authorized: 30,000,000; issued and
outstanding: 20,352,277 shares in 1994 and 20,233,802 shares in 1993... 20,392 20,352 20,234
Preferred shares, $1 par value, authorized: 1,000,000; issued and
outstanding: none in 1994 and 1993..................................... -- -- --
Capital contributed in excess of par value of shares.................... 168,508 168,078 167,148
Retained earnings....................................................... 25,998 19,500 3,786
Cumulative translation adjustments...................................... (4,595) (4,987) (5,094)
------------- ---------- ----------
Total stockholders' equity............................................ 210,303 202,943 186,074
------------- ---------- ----------
Total liabilities and stockholders' equity............................ $ 348,489 $ 330,574 $ 278,448
------------- ---------- ----------
------------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN 000'S EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CAPITAL
CONTRIBUTED
IN EXCESS
OF RETAINED CUMULATIVE
COMMON PAR VALUE EARNINGS TRANSLATION
SHARES OF SHARES (DEFICIT) ADJUSTMENTS TOTAL
------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1991............................ $19,810 $164,938 $ (2,418) $(2,795) $179,535
Issuance of common shares:
30,916 -- exercise of stock options............. 31 159 -- -- 190
48,956 -- stock purchase plan................... 49 489 -- -- 538
40,000 -- profit sharing contribution........... 40 184 -- -- 224
Stock offering costs.............................. -- (203) -- -- (203)
Net income for the year ended June 30, 1992....... -- -- 9,237 -- 9,237
Cumulative translation adjustments................ -- -- -- 2,182 2,182
------- ----------- -------- ----------- --------
BALANCE, JUNE 30, 1992............................ 19,930 165,567 6,819 (613) 191,703
Issuance of common shares:
204,640 -- exercise of stock options............ 205 992 -- -- 1,197
99,027 -- stock purchase plan................... 99 589 -- -- 688
Net loss for the year ended June 30, 1993......... -- -- (3,033) -- (3,033)
Cumulative translation adjustments................ -- -- -- (4,481) (4,481)
------- ----------- -------- ----------- --------
BALANCE, JUNE 30, 1993............................ 20,234 167,148 3,786 (5,094) 186,074
Issuance of common shares:
49,410 -- exercise of stock options............. 49 276 -- -- 325
69,065 -- stock purchase plan................... 69 654 -- -- 723
Net income for the year ended June 30, 1994....... -- -- 15,714 -- 15,714
Cumulative translation adjustments................ -- -- -- 107 107
------- ----------- -------- ----------- --------
BALANCE, JUNE 30, 1994............................ 20,352 168,078 19,500 (4,987) 202,943
Issuance of common shares:
5,500 -- exercise of stock options.............. 5 54 -- -- 59
34,546 -- stock purchase plan................... 35 376 -- -- 411
Net income for the three months ended September
30, 1994......................................... -- -- 6,498 -- 6,498
Cumulative translation adjustments................ -- -- -- 392 392
------- ----------- -------- ----------- --------
BALANCE, SEPTEMBER 30, 1994 (UNAUDITED)........... $20,392 $168,508 $ 25,998 $(4,595) $210,303
------- ----------- -------- ----------- --------
------- ----------- -------- ----------- --------
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN 000'S)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED) FISCAL YEARS ENDED JUNE 30,
---------------------- ----------------------------------
1994 1993 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income (loss)................................... $ 6,498 $ 1,976 $ 15,714 $ (3,033) $ 9,237
Adjustment to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization..................... 5,365 4,214 18,018 16,524 16,597
Stock contribution to employee benefit plan....... -- -- -- -- 224
Deferred income................................... (95) (126) (203) (513) (496)
Deferred income taxes............................. -- (78) 272 (159) (248)
Deferred compensation............................. 165 470 1,473 1,529 978
---------- ---------- ---------- ---------- ----------
Cash flow from operating activities prior to working
capital requirements............................... 11,933 6,456 35,274 14,348 26,292
Change in working capital (Note 1).................. (8,749) (3,591) (9,109) 3,943 (19,760)
---------- ---------- ---------- ---------- ----------
Net cash provided by operating activities............. 3,184 2,865 26,165 18,291 6,532
---------- ---------- ---------- ---------- ----------
Cash flow from investing activities:
Additions to property, plant and equipment.......... (13,267) (5,825) (24,686) (16,994) (32,069)
Investment in other noncurrent assets............... (709) (256) (4,979) (4,158) (3,233)
---------- ---------- ---------- ---------- ----------
Net cash used in investing activities................. (13,976) (6,081) (29,665) (21,152) (35,302)
---------- ---------- ---------- ---------- ----------
Cash flow from financing activities:
Proceeds from issuance of short-term bank debt,
net................................................ 7,403 3,007 2,623 5,333 14,490
Proceeds from issuance of long-term debt............ 3,098 3,038 10,326 2,038 1,734
Payments on long-term debt and obligations under
capital leases..................................... (1,208) (992) (5,809) (5,268) (7,606)
Net proceeds from issuance of common stock.......... 470 509 1,048 1,885 525
Other............................................... (459) (150) (125) (1,201) 4,085
---------- ---------- ---------- ---------- ----------
Net cash provided by financing activities............. 9,304 5,412 8,063 2,787 13,228
---------- ---------- ---------- ---------- ----------
Effect of exchange rate changes on cash and cash
equivalents.......................................... 47 39 (57) 72 (192)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents.......................................... (1,441) 2,235 4,506 (2) (15,734)
Cash and cash equivalents beginning of year........... 13,051 8,545 8,545 8,547 24,281
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents end of year................. $ 11,610 $ 10,780 $ 13,051 $ 8,545 $ 8,547
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all its majority-owned subsidiaries which are located in Europe, Mexico,
Canada, the Far East and South East Asia. All material intercompany transactions
have been eliminated.
BASIS OF PRESENTATION FOR INTERIM FINANCIALS
The consolidated financial statements included herein are unaudited,
however, they contain all normal recurring accruals which, in the opinion of
management, are necessary to present fairly the consolidated financial position
of the Company at September 30, 1994 and the consolidated results of operations
and cash flows for the three month periods ended September 30, 1994 and 1993. It
should be understood that accounting measurements at interim dates inherently
involve greater reliance on estimates than at year end. The results of
operations for the three month period ended September 30, 1994 are not
necessarily indicative of the results to be expected for the full year.
FISCAL YEAR
Fiscal years 1994 and 1992 consist of 52 weeks ending July 3 and June 28,
respectively. Fiscal year 1993 consists of 53 weeks ending July 4. For
convenience, all references herein to fiscal years are to fiscal years ended
June 30.
REVENUE RECOGNITION
The Company recognizes revenues from product sales at the time of shipment
except on certain government contracts where revenues are recognized using the
percentage of completion method.
INVENTORIES
Inventories are stated at the lower of cost (principally first-in,
first-out) or market. Inventories at June 30, 1994 and 1993, and for the period
ended September 30, 1994 (unaudited), were comprised of the following (000's):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
JUNE 30,
THREE MONTHS ENDED --------------------
SEPTEMBER 30, 1994 1994 1993
------------------- --------- ---------
<S> <C> <C> <C>
Raw materials................................................ $ 15,579 $ 15,118 $ 12,613
Work-in-process.............................................. 29,734 26,965 24,943
Finished goods............................................... 29,975 31,346 25,053
------- --------- ---------
$ 75,288 $ 73,429 $ 62,609
------- --------- ---------
------- --------- ---------
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Upon retirement or other
disposal, the asset cost and related accumulated depreciation are removed from
the accounts and any gain or loss on disposition is included in income.
Depreciation is provided on the straight-line method, based on the estimated
useful lives of the assets, or the units of production method based upon the
estimated output of the equipment. In the fourth quarter of fiscal year 1993,
the Company extended the estimated useful lives of certain assets. This change
positively impacted 1994 and 1993 pre-tax results by $2,600,000 and $200,000,
respectively.
F-7
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Depreciation expense for the fiscal years ended June 30, 1994, 1993, and 1992
was $15,880,000, $14,160,000, and $15,358,000, respectively. Property, plant and
equipment at June 30, 1994 and 1993 was comprised of the following (000's):
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Buildings and improvements.................................................... $ 72,004 $ 71,859
Equipment..................................................................... 169,988 140,651
Construction in progress...................................................... 22,525 17,795
Less accumulated depreciation................................................. (112,411) (98,250)
----------- -----------
152,106 132,055
Land.......................................................................... 6,461 6,463
----------- -----------
$ 158,567 $ 138,518
----------- -----------
----------- -----------
</TABLE>
Depreciation of improvements to leased premises is provided on the
straight-line method over the shorter of the remaining term of the lease or
estimated useful lives of the improvements. Capital leases included in property,
plant and equipment at June 30, 1994 and 1993 are as follows (000's):
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Equipment....................................................................... $ 62,533 $ 51,305
Less accumulated depreciation................................................... (35,171) (31,800)
---------- ----------
$ 27,362 $ 19,505
---------- ----------
---------- ----------
</TABLE>
FOREIGN CURRENCY TRANSLATION
The financial position and results of operation of the Company's foreign
subsidiaries are measured using the local currency as the functional currency.
Foreign assets and liabilities in the consolidated balance sheet have been
translated at the rate of exchange on the balance sheet date. Revenues and
expenses are translated at the average exchange rate for the year. Unrealized
translation adjustments do not affect the results of operations and are reported
as a separate component of stockholders' equity. In fiscal 1994, 1993 and 1992,
the Company recognized foreign currency transaction gains of $376,000, $129,000,
and $376,000, respectively.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
INCOME TAXES
Deferred income taxes are determined based on the difference between the
financial reporting and tax bases of assets and liabilities using enacted rates
in effect during the year in which the differences are expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable for the period and the change during the period in deferred tax assets
and liabilities.
U.S. income taxes have not been provided on approximately $14,260,000 of
undistributed earnings of foreign subsidiaries since management considers these
earnings to be invested indefinitely or substantially offset by foreign tax
credits.
EARNINGS PER SHARE
Earnings per share is computed by dividing earnings by the weighted average
number of common and common stock equivalents outstanding. Stock options
outstanding under stock option plans are considered
F-8
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
common stock equivalents. Common stock equivalents for stock options of 112,700
and 244,200 were utilized in the computation of earnings per share in 1994 and
1992, respectively. No common stock equivalents for stock options were used in
1993 as the impact would have been anti-dilutive.
INTANGIBLE ASSETS
Patent costs are amortized using the straight-line method over the life of
the patent.
STATEMENT OF CASH FLOWS
The Company invests excess cash from operations in short term investment
grade money market funds. The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be
cash equivalents. Components in the changes in working capital are comprised of
the following (000's):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
JUNE 30,
THREE MONTHS ENDED ---------------------------------
SEPTEMBER 30, 1994 1994 1993 1992
------------------- ---------- --------- ----------
<S> <C> <C> <C> <C>
(UNAUDITED)
Trade accounts receivable, net.................. $ (8,070) $ (11,701) $ (2,871) $ (8,386)
Inventories..................................... (1,515) (10,427) 3,390 (19,333)
Prepaid expenses................................ 257 (1,031) (789) 796
Accounts payable................................ 1,431 9,123 4,316 4,710
Accrued salaries, wages and commissions......... (1,356) 918 243 1,686
Other accrued expenses.......................... 504 4,009 (346) 767
------- ---------- --------- ----------
$ (8,749) $ (9,109) $ 3,943 $ (19,760)
------- ---------- --------- ----------
------- ---------- --------- ----------
</TABLE>
Supplemental disclosures of cash flow information (000's):
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Cash paid during the year for:
Interest................................................................ $ 3,612 $ 3,246 $ 3,877
Income taxes............................................................ 802 1,376 1,416
Interest capitalized...................................................... 453 1,357 1,736
Non cash financing activity:
Assets acquired through capital leases.................................. 12,675 4,275 2,576
</TABLE>
Included in assets acquired through capital leases in 1994 is $7.2 million
in existing operating leases that were renegotiated to capital leases.
CONCENTRATION OF RISK
The Company places its temporary cash investments with high credit quality
financial institutions. At times, such investments may be in excess of insured
limits.
The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Receivables generally are
due in 60 days. Credit losses have consistently been within management's
expectations.
RECLASSIFICATION
Certain reclassifications have been made to previously reported amounts to
conform with the current year presentation.
F-9
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. LONG-TERM DEBT AND OTHER LOANS
In June 1994, the Company renewed and modified its existing $20 million
unsecured credit facility from Sanwa Bank California ("Sanwa Facility"). The
modified facility increases the revolving line of credit to $25 million. In June
1994 the Company also added an unsecured revolving credit facility of $10
million from Wells Fargo Bank. Interest rates on both facilities are at prime,
or the banks costs of funds plus 1.25%, or LIBOR plus 1.25% (at the Company's
option). Both facilities expire on October 31, 1996, contain the same financial
covenants and ratios, which impact the availability of funds, and prohibit the
Company from paying cash dividends. At June 30, 1994, $2.5 million was
outstanding under the Sanwa Facility. The Company also has a $3.0 million
uncommitted domestic credit facility of which $1.0 million was outstanding at
June 30, 1994.
The Company also has an additional $39.0 million of credit facilities at
foreign locations. The interest rate on these facilities range from 3.0% to
12.25% at June 30, 1994. Under the terms of the agreements, the availability of
funds is impacted by various financial covenants and collateral requirements. At
June 30, 1994, $23.7 million was outstanding under these foreign facilities.
Based on covenant and collateral limitations under the above credit
facilities, the Company had $26.5 million available for borrowing at June 30,
1994.
The following is a summary of the Company's long-term debt and other loans
at June 30, 1994 and 1993 (000's):
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Capitalized lease obligations payable in varying monthly installments primarily at rates
from 6.9% to 16.6%......................................................................... $ 16,115 $ 7,543
10.55% property mortgage due in equal monthly installments to 2011.......................... 4,300 4,392
Domestic bank loans collateralized by equipment, payable in varying monthly installments at
rates from 8.0% to 9.0%, due in 1995 through 1999.......................................... 3,097 134
Foreign bank loans collateralized by property and/or equipment, payable in varying monthly
installments at rates from 6.5% to 10.8%, due in 1997 through 2000......................... 4,803 2,873
Foreign unsecured bank loans payable in varying monthly installments at rates from 4.0% to
11.9%, due in 1998 through 2006............................................................ 4,607 400
--------- ---------
32,922 15,342
Less current portion of long-term debt...................................................... (6,105) (3,532)
--------- ---------
$ 26,817 $ 11,810
--------- ---------
--------- ---------
</TABLE>
The net book value of properties mortgaged at June 30, 1994 amounted to
$6,134,000. Principal payments on long-term debt are as follows: 1996
$6,458,000; 1997 $6,246,000; 1998 $6,087,000; 1999 $2,769,000; and $5,257,000
thereafter.
In accordance with Statement of Financial Accounting Standards No. 107
"Disclosures About Fair Value of Financial Instruments," the fair values of the
Company's long-term debt has been estimated based on current rates offered to
the Company for debt of the same remaining maturities. The carrying amounts of
the Company's loans approximate their fair values.
3. CAPITAL STOCK
The Company has an employee stock purchase plan. Under this plan employees
are allowed to designate between two and ten percent of their base compensation
to purchase shares of the Company's common stock at 85 percent of fair market
value. In November 1993, the stock purchase plan was amended
F-10
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. CAPITAL STOCK (CONTINUED)
to cover an additional 1,000,000 shares. During fiscal 1994 and 1993, 69,065 and
99,027 shares were purchased at an aggregate purchase price of $723,000 and
$688,000, respectively. Shares authorized under this plan that remained unissued
were 1,055,003 and 124,068 at June 30, 1994 and 1993, respectively.
The Company has three stock option plans, the 1979, 1984, and 1992 Plans, as
amended. Under these plans, options to purchase shares of the Company's common
stock are issued to key employees as well as members of the Company's Board of
Directors. Options are issued at 100% of the fair value of the Company's common
stock at the date of grant and become exercisable in annual installments of 20%,
beginning on the first anniversary date. The 1992 plan provides for the increase
in options available for grant under the plan by 1 1/2% of total common stock
outstanding on January 1 of each year. On January 1, 1994 and 1993, 304,503 and
300,061 options, respectively, were added to the plan.
A summary of the status of options under the 1992, 1984, and 1979 plans is
as follows:
<TABLE>
<CAPTION>
SHARES PRICE RANGE
-------- -------------------
<S> <C> <C> <C> <C>
Outstanding, June 30, 1991................. 616,290 $ 4.00 to $21.62
Options granted.......................... 92,900 8.00 to 19.62
Options exercised........................ (30,916) 4.00 to 11.50
Options expired or canceled.............. (15,874) 4.37 to 19.62
--------
Outstanding, June 30, 1992................. 662,400 4.00 to 21.62
Options granted.......................... 73,700 8.00 to 12.50
Options exercised........................ (204,640) 4.00 to 10.00
Options expired or canceled.............. (17,650) 4.00 to 12.75
--------
Outstanding, June 30, 1993................. 513,810 4.00 to 21.62
Options granted.......................... 240,000 11.00 to 17.00
Options exercised........................ (49,410) 4.00 to 15.38
Options expired or canceled.............. (23,200) 5.75 to 21.62
--------
Outstanding, June 30, 1994 at an average
price of $13.97........................... 681,200 $ 4.50 to $21.62
--------
--------
</TABLE>
The following table summarizes the options exercisable:
<TABLE>
<CAPTION>
SHARES PRICE RANGE
------- -------------------
<S> <C> <C> <C> <C>
June 30, 1994.............................. 264,120 $ 4.50 to $21.62
June 30, 1993.............................. 216,760 4.00 to 21.62
June 30, 1992.............................. 275,900 4.00 to 21.62
</TABLE>
Additional information relating to the 1992, 1984, and 1979 plans is as
follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
--------------------------------
1994 1993 1992
---------- --------- ---------
<S> <C> <C> <C>
Options available for grant at June 30............................... 350,214 262,511 20,350
Total reserved common stock shares................................... 1,031,414 776,321 682,750
</TABLE>
F-11
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. GEOGRAPHIC SEGMENTS AND FOREIGN OPERATIONS
The Company operates in one business segment. Transfers between geographic
areas are made at prices reflecting market conditions. Geographic segment
information including sales and transfers between geographic areas is presented
below:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED (000'S)
----------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Revenues from Unaffiliated Customers
United States.................................................... $ 169,263 $ 137,765 $ 123,854
Europe........................................................... 89,073 79,930 83,382
Other............................................................ 70,546 64,037 58,259
---------- ---------- ----------
Total.......................................................... $ 328,882 $ 281,732 $ 265,495
---------- ---------- ----------
---------- ---------- ----------
Transfers between Geographic Areas
United States.................................................... $ 97,896 $ 84,753 $ 87,145
Europe........................................................... 48,864 56,119 52,150
Other............................................................ 1,379 2,602 5,281
---------- ---------- ----------
Total.......................................................... $ 148,139 $ 143,474 $ 144,576
---------- ---------- ----------
---------- ---------- ----------
Total Revenues
United States.................................................... $ 267,159 $ 222,518 $ 210,999
Europe........................................................... 137,937 136,049 135,532
Other............................................................ 71,925 66,639 63,540
Intersegment eliminations........................................ (148,139) (143,474) (144,576)
---------- ---------- ----------
Total.......................................................... $ 328,882 $ 281,732 $ 265,495
---------- ---------- ----------
---------- ---------- ----------
Operating Profit
United States.................................................... $ 18,173 $ 1,108 $ 7,285
Europe........................................................... 4,710 409 2,692
Other............................................................ 666 811 905
---------- ---------- ----------
Total.......................................................... $ 23,549 $ 2,328 $ 10,882
---------- ---------- ----------
---------- ---------- ----------
Identifiable Assets
United States (1)................................................ $ 189,591 $ 164,485 $ 164,778
Europe........................................................... 74,533 61,364 71,230
Other............................................................ 28,696 22,506 23,297
---------- ---------- ----------
Total.......................................................... $ 292,820 $ 248,355 $ 259,305
---------- ---------- ----------
---------- ---------- ----------
U.S. Export Sales to Unaffiliated Customers by Destination of Sale
Europe........................................................... $ 4,362 $ 3,293 $ 3,630
Asia............................................................. 20,094 13,319 10,709
Other............................................................ 4,829 4,057 2,448
---------- ---------- ----------
Total.......................................................... $ 29,285 $ 20,669 $ 16,787
---------- ---------- ----------
---------- ---------- ----------
<FN>
- ------------------------
(1) Excluding general corporate assets.
</TABLE>
5. INCOME TAXES
Effective July 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes"
which requires recognition of deferred tax
F-12
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
assets and liabilities for temporary differences and net operating loss (NOL)
and tax credit carryforwards. Under SFAS No. 109, deferred income taxes are
established based on enacted tax rates expected to be in effect when temporary
differences are scheduled to reverse and NOL and tax credit carryforwards are
expected to be utilized. Adoption of SFAS No. 109 did not have a material impact
on the Company's financial position or results from operations. Prior year's
financial statements have not been restated.
The major components of the net deferred tax liability as of June 30, 1994
and July 1, 1993 were as follows (000's):
<TABLE>
<CAPTION>
JUNE 30, JULY 1,
1994 1993
------------ -----------
<S> <C> <C>
Deferred tax liability:
Depreciation..................................................... $ (9,215) $ (10,194)
Deferred tax assets:
Reserves for books, not deducted................................. 3,380 2,851
Net operating loss carryovers.................................... 9,815 16,765
Credit carryovers................................................ 5,417 5,269
Other............................................................ 593 539
------------ -----------
Total deferred tax assets........................................ 19,205 25,424
Valuation allowance.............................................. (10,596) (15,546)
------------ -----------
Net deferred tax liabilities..................................... $ (606) $ (316)
------------ -----------
------------ -----------
</TABLE>
Income (loss) before income taxes was as follows (000's):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Operations:
Domestic................................................... $ 15,626 $ (1,590) $ 8,733
Foreign.................................................... 3,248 (1,007) 1,779
--------- --------- ---------
$ 18,874 $ (2,597) $ 10,512
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision (benefit) for income taxes consisted of (000's):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Current income taxes:
Domestic........................................................ $ 1,539 $ (122) $ 614
Foreign......................................................... 1,331 788 908
--------- --------- ---------
$ 2,870 $ 666 $ 1,522
--------- --------- ---------
Deferred income taxes:
Domestic........................................................ -- (160) --
Foreign......................................................... 290 (70) (247)
--------- --------- ---------
290 (230) (247)
--------- --------- ---------
$ 3,160 $ 436 $ 1,275
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred taxes result primarily from temporary differences relating to
depreciation, inventory valuation and state taxes.
F-13
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
The Company's effective tax rate on pretax income (loss) differs from the
U.S. Federal Statutory tax rate as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Statutory tax rate (benefit)...................... 35.0% (34.0)% 34.0%
Utilization of domestic net operating loss
carryforward..................................... (36.6) -- (23.1)
Change in valuation allowance..................... 9.6 -- --
Foreign tax differential.......................... 2.6 40.9 0.5
Domestic loss producing no current tax benefit.... -- 16.6 --
State taxes, net of federal tax benefit........... 1.5 (7.5) --
Alternative minimum tax........................... 2.2 -- --
Other, net........................................ 2.4 0.8 0.7
------- ------- -------
16.7% 16.8% 12.1%
------- ------- -------
------- ------- -------
</TABLE>
At June 30, 1994, the Company had approximately $28.8 million of U.S.
federal income tax net operating loss carryovers which begin to expire in 2004.
During the year, the Company utilized approximately $20.4 million in U.S.
federal net operating loss carryovers. The estimated tax benefit from
utilization of the net operating loss carryover was $6.9 million.
The Company has approximately $3.1 million, $1.1 million, and $0.2 million,
respectively, of investment, research and development, and foreign tax credit
carryforwards which expire from 1995 to 2001. In addition, the Company has
approximately $0.9 million of alternative minimum tax credits which are
available to offset future regular tax.
In general, Section 382 of the United States Internal Revenue Code includes
provisions which limit the amount of net operating loss carryforwards and other
tax attributes that may be used annually in the event that a 50% ownership
change (as defined) takes place in any three year period. At June 30, 1994, the
Company had not experienced a change in ownership for purposes of Section 382.
6. PROFIT SHARING AND RETIREMENT PLANS
The Company has established defined contribution plans for all eligible
employees. The Profit Sharing and Retirement Plan provides for contributions by
the Company in such amounts as the Board of Directors may annually determine.
The Company has also established a voluntary Retirement Savings Plan (401K) to
which the Company makes an annual contribution of up to $600 for each
participating employee. Combined plan contributions totaled $841,000, $511,000,
and $1,250,000 for fiscal years 1994, 1993, and 1992, respectively. Fiscal year
1992 contributions included 40,000 shares of the Company's common stock to its
Profit Sharing and Retirement Plan.
7. ENVIRONMENTAL MATTERS
Federal, state and local laws and regulations impose various restrictions
and controls on the discharge of certain materials, chemicals and gases used in
semiconductor processing. The Company does not believe that compliance with such
laws and regulations will have a material adverse effect on its financial
position.
The Company and Rachelle Laboratories, Inc. ("Rachelle"), its pharmaceutical
subsidiary which discontinued operations in 1986, have been named among several
hundred entities as potentially responsible parties ("PRPs") under the
provisions of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), in connection with the United States
Environmental Protection Agency's ("EPA") investigation of the disposal of
allegedly hazardous substances at a major superfund site in Monterey Park,
California (the "OII site"). Certain PRPs who settled certain claims with the
EPA under two
F-14
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. ENVIRONMENTAL MATTERS (CONTINUED)
consent decrees, filed suit in Federal Court in May 1992 against a number of
other PRPs, including IR, for cost recovery and contribution under CERCLA. The
lawsuit against IR, relating to the first and second consent decrees, was
settled in August 1993 for the sum of $40,000 to avoid protracted and expensive
litigation. Claims have been made with the Company's insurers with respect to
the OII site matter; however, there can be no assurance that the insurance
coverage attaches to these claims. There remains the potential for litigation
against IR relating to future consent decrees. The Company does not believe that
either it or Rachelle is responsible for the disposal at the OII site of any
material constituting hazardous substances under CERCLA. Although the ultimate
resolution of this matter is unknown, the Company believes that it will not have
a material adverse impact on its financial position.
In May 1993 the Company purchased property from its Employee Profit Sharing
and Retirement Plan. At the time of the purchase it was determined that the
property required clean up of seepage from a storage tank, at an estimated
additional cost of $500,000. The Company commenced the clean up in fiscal year
1994, and the costs to be incurred will be capitalized as additional costs of
the property.
On July 18, 1994, the Company received a letter from the State of Washington
Department of Ecology (the "Department") notifying the Company of a proposed
finding that the Company is a potentially liable person ("PLP") for alleged PCE
contamination (also known as perchloroethylene, tetrachloroethylene, and other
names) ("PCE") of real property and groundwater in Yakima County, Washington.
The letter alleges that the Company arranged for disposal or treatment of the
PCE or arranged with a transporter for the disposal or treatment of the PCE in
Yakima County. The Company replied on August 11, 1994 to this letter and stated
that it has not contributed to PCE or other solvent contamination at the Yakima
County site and that it should not be designated a PLP. On October 11, 1994 the
Company received a letter from the Department notifying the Company of its
finding that the Company is a PLP in the above matter.
The Company received a letter dated September 9, 1994, from the State of
California Department of Toxic Substances Control stating that the Company may
be a PRP for the deposit of hazardous substances at a facility in Whittier,
California. The Company's investigation of this matter has just begun and
therefore an opinion cannot be expressed as to any ultimate responsibility.
8. COMMITMENTS
The future minimum lease commitments under non-cancelable capital and
operating leases of equipment and real property at June 30, 1994 were as follows
(000's):
<TABLE>
<CAPTION>
CAPITAL OPERATING TOTAL
FISCAL YEARS LEASES LEASES COMMITMENTS
- ------------------------------------------------------------------ --------- ----------- -------------
<S> <C> <C> <C>
1995.............................................................. $ 5,282 $ 6,050 $ 11,332
1996.............................................................. 4,949 5,272 10,221
1997.............................................................. 4,436 4,457 8,893
1998.............................................................. 3,880 1,826 5,706
1999.............................................................. 977 628 1,605
Later years....................................................... 3 1,208 1,211
Less imputed interest............................................. (3,412) -- (3,412)
--------- ----------- -------------
Total minimum lease payment....................................... $ 16,115 $ 19,441 $ 35,556
--------- ----------- -------------
--------- ----------- -------------
</TABLE>
Total rental expense on all operating leases charged to income was $6,723,000,
$5,591,000, and $3,193,000 in fiscal years 1994, 1993 and 1992, respectively.
9. INTELLECTUAL PROPERTY RIGHTS
A competitor, prior to settlement of patent litigation with the Company in
February 1992, obtained reexamination by the United States Patent and Trademark
Office ("PTO") of the Company's MOSFET
F-15
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INTELLECTUAL PROPERTY RIGHTS (CONTINUED)
patents 4,376,286, 4,959,699 and 5,008,725. The PTO confirmed the patentability
of the '725 patent in January 1993 and the '286 patent in July 1993 and the '699
patent in October 1993. In other reexamination proceedings the PTO in November
1992 agreed to reexamine the Company's 4,642,666 patent and in July 1993 agreed
to reexamine the Company's 4,705,759 patent. More recently, the PTO on September
12, 1994 agreed to reexamine the Company's 4,642,666 and 4,959,699 patents. The
patents subject to reexamination are fundamental to the Company's MOS
transistors.
10. LITIGATION
The Company and SGS-Thomson Microelectronics, Inc. ("SGS") are engaged in
various legal proceedings relating to their respective power MOSFET patents. SGS
filed suit against the Company in June 1991 in Federal District Court in Texas,
charging infringement of U.S. patent 4,553,314. On motion by the Company, the
suit was transferred to the Federal District Court in Los Angeles, California,
and thereafter SGS amended its complaint to charge infringement of U.S. patents
4,495,513 and 4,712,127. SGS alleges, in substance, that the Company's power
MOSFET and IGBT products infringe the '314 patent, that the Company's IGBT
products infringe the '513 patent and that certain packages for IR's products
(including certain power MOSFET packages) infringe the '127 patent. The
complaint, as amended, seeks unspecified actual damages (but no less than an
unspecified reasonable royalty) and an injunction restraining further sales of
such products. On February 1, 1993, the District Court dismissed SGS's claims
for infringement of the '127 and '513 patents for lack of standing and on March
15, 1993 ruled that the SGS '314 patent is unenforceable due to inequitable
conduct. SGS appealed these rulings, as well as the order transferring the case
to California, to the Court of Appeals for the Federal Circuit. IR
cross-appealed a separate ruling by the District Court denying IR's motion for
summary judgment that the '314 patent is invalid. In July 1994, the Federal
Circuit reversed the District Court's grants of summary judgment as to the '513,
'127 and '314 patents and affirmed the District Court's denial of IR's motion
for summary judgment of invalidity of the '314 patent. The Federal Circuit
ordered, however, that the case should proceed in California. Cross-petitions
for writs of certiorari are pending before the U.S. Supreme Court as to the
jurisdictional and venue rulings of the Federal Circuit. No trial date has yet
been set and the ultimate outcome of the case as to the three SGS patents is
unknown.
In separate proceedings before the same California District Court, IR sought
enforcement of a prior license agreement between IR and SGS. The Court in July
1994 granted the Company's motions to enforce the license agreement with SGS,
requiring SGS to pay additional past and prospective royalties under IR's U.S.
patents 4,959,699 and 4,642,666 on SGS's sales of power MOSFET, IGBT and power
IC products. SGS has filed a separate appeal of this ruling with the Federal
Circuit.
The Company has also filed a separate action in the same District Court
against SGS and its Italian affiliate, SGS-Thomson Microelectronics, S.r.l.,
seeking an injunction against infringement of the Company's U.S. patents
5,008,725 and 5,130,767. Trial of the Company's action has been set for January
25, 1995.
The Company, its directors and certain officers have been named as
defendants in three class action lawsuits filed in federal court in California.
These suits seek unspecified compensatory and punitive damages for alleged
intentional and negligent misrepresentations and violations of the federal
securities laws. They generally allege that the Company and the other defendants
made materially false statements and/or omitted to state material facts in
connection with the public offering of the Company's common stock completed on
April 24, 1991 and/or the redemption and conversion in June 1991 of the
Company's 9% Convertible Subordinated Debentures Due 2010. They also allege that
the Company's projections for growth in fiscal 1992 were materially misleading.
Although the Company believes that the claims alleged in the suits are without
merit, the ultimate outcome cannot be presently determined. A substantial
judgment or
F-16
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. LITIGATION (CONTINUED)
settlement, if any, could have a material adverse effect on the Company's
financial condition and results of operations. Two of these suits also name
Kidder, Peabody & Co. Incorporated and Montgomery Securities as defendants.
The Company is currently involved in litigation arising in the normal course
of business. Management does not believe that the ultimate resolution of this
litigation will have a material adverse impact on the financial position of the
Company (also see Notes 7 and 9).
11. EXECUTIVE AGREEMENT
The Company entered into an executive agreement with Eric Lidow dated May
15, 1991 providing for his continued employment with the Company for a six year
period as Chief Executive Officer and President or in such other position as the
Board of Directors may determine. Mr. Lidow's salary at fiscal year end under
this agreement was $550,000. Upon Mr. Lidow's retirement from the Company (or a
change in control) he will receive annual payments (Founder's Pension) of 90% of
his then current salary. Upon Mr. Lidow's death, payments will be continued to
his wife, if she survives him, in an amount equal to two-thirds of his
retirement benefits for the remainder of her life. Under the terms of the
Founder's Pension, $572,000, $572,000, and $611,000 have been expensed in fiscal
years 1994, 1993, and 1992, respectively.
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data is as follows (000's, except per share
amounts):
<TABLE>
<CAPTION>
NET
GROSS NET INCOME (LOSS)
REVENUES PROFIT INCOME (LOSS) PER SHARE
--------- --------- ------------- -------------
<S> <C> <C> <C> <C>
1994
- ---------------------------------------------------
1st Quarter........................................ $ 73,094 $ 23,420 $ 1,976 $ 0.10
2nd Quarter........................................ 79,104 25,613 3,070 0.15
3rd Quarter........................................ 84,252 28,110 4,206 0.21
4th Quarter........................................ 92,432 31,795 6,462 0.32
1993
- ---------------------------------------------------
1st Quarter........................................ $ 64,980 $ 16,937 $ (1,878) $ (0.09)
2nd Quarter........................................ 70,452 19,417 (1,993) (0.10)
3rd Quarter........................................ 70,572 20,513 125 0.01
4th Quarter........................................ 75,728 22,181 713 0.04
</TABLE>
F-17
<PAGE>
[INSIDE BACK COVER PHOTO]
[PHOTO2]
Daytime aerial photo of International Rectifier's HEXFET America site.
[CAPTION]
HEXFET America, International Rectifier's principal power MOS transistor
fabrication and assembly facility in Temecula, California, processes wafers
using linear flow manufacturing similar to a production line for automobiles.
In-line production sharply reduces manufacturing cycle time and inventory
requirements.
To meet rising demand for power MOSFETs and IGBTs, International Rectifier is
planning to increase the plant's wafer fabrication capacity by approximately
75%. The expansion is now in progress, and additional capacity is scheduled to
be in production by the end of calendar 1995.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE U.S.
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---
<S> <C>
Prospectus Summary................................. 3
The Company........................................ 5
Risk Factors....................................... 5
Use of Proceeds.................................... 8
Capitalization..................................... 8
Price Range of Common Stock........................ 9
Dividend Policy.................................... 9
Selected Consolidated Financial Data............... 10
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 12
Business........................................... 15
Management......................................... 24
Description of Capital Stock....................... 25
Underwriting....................................... 27
Legal Opinions..................................... 29
Experts............................................ 29
Available Information.............................. 29
Incorporation of Certain Documents by Reference.... 30
Glossary........................................... 31
Index to Consolidated Financial Statements......... F-1
</TABLE>
4,500,000 SHARES
[LOGO]
INTERNATIONAL
RECTIFIER
CORPORATION
COMMON STOCK
-------------------
PROSPECTUS
, 1994
---------------------
LEHMAN BROTHERS
KIDDER, PEABODY & CO.
INCORPORATED
MONTGOMERY SECURITIES
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[ALTERNATE SECTION FOR INTERNATIONAL PROSPECTUS]
Subject to Completion, dated November 16, 1994
PROSPECTUS
4,500,000 SHARES
[LOGO]
INTERNATIONAL RECTIFIER CORPORATION
COMMON STOCK
----------------
All of the 4,500,000 shares of Common Stock, par value $1.00 per share (the
"Shares"), offered hereby are being sold by International Rectifier Corporation
("IR" or the "Company"). Of the 4,500,000 shares of Common Stock offered,
900,000 shares will be offered initially outside the United States and Canada by
the International Managers (the "International Offering") and 3,600,000 shares
will be offered concurrently in the United States and Canada by the U.S.
Underwriters (the "U.S. Offering" and, together with the International Offering,
the "Offerings"). The offering price and underwriting discounts and commissions
for the U.S. Offering and the International Offering will be identical. See
"Underwriting."
The Company's Common Stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange under the symbol "IRF." On October 27, 1994, the closing
price for the Company's Common Stock on the New York Stock Exchange Composite
Tape was $23.625 per share. See "Price Range of Common Stock and Dividend
Policy."
---------------------
SEE "RISK FACTORS" FOR CERTAIN MATTERS RELEVANT TO AN INVESTMENT IN THE
COMPANY'S COMMON STOCK.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Discounts
Price and Proceeds to
to Public Commissions (1) Company (2)
<S> <C> <C> <C>
Per Share.............................. $ $ $
Total (3).............................. $ $ $
<FN>
(1) The Company has agreed to indemnify the International Managers and the U.S.
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses of the Offerings of $475,000 payable to
the Company.
(3) The Company has granted the International Managers and the U.S.
Underwriters a 30-day option to purchase up to 675,000 additional shares of
Common Stock on the same terms and conditions as set forth above solely to
cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ and $ , respectively.
See "Underwriting."
</TABLE>
---------------------
The shares of Common Stock offered by this Prospectus are offered by the
International Managers subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
International Managers and to certain further conditions. It is expected that
delivery of the Shares will be made at the offices of Lehman Brothers Inc., New
York, New York, on or about , 1994.
---------------------
LEHMAN BROTHERS
KIDDER, PEABODY INTERNATIONAL PLC
MONTGOMERY SECURITIES
PAINEWEBBER INTERNATIONAL
SMITH BARNEY INC.
, 1994
<PAGE>
[ALTERNATE SECTION FOR INTERNATIONAL PROSPECTUS]
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES TO
NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income tax consequences of the ownership and disposition of the shares of Common
Stock by a holder who, for United States federal income tax purposes, is not a
United States person (a "Non-United States Holder") who holds such stock as a
capital asset. For these purposes, "United States person" means a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, or an estate or trust whose income is subject to United
States federal income tax regardless of its source. This discussion is based on
current provisions of the Internal Revenue Code of 1986, as amended, existing
and proposed regulations promulgated thereunder and administrative and judicial
interpretations thereof, all of which are subject to change possibly with
retroactive effect. This discussion is for general information only and does not
consider all specific facts and circumstances that may be relevant to a
particular holder's tax position. Each Non-United States Holder is urged to
consult its own tax adviser with respect to the United States federal income tax
consequences of owning and disposing of shares of Common Stock, as well as any
tax consequences that may arise under the laws of any state, municipality or
other taxing jurisdiction.
DIVIDENDS. Dividends paid on shares of Common Stock to Non-United States
Holders generally will be subject to withholding of United States federal income
tax at the rate of 30 percent, subject to a reduction for Non-United States
Holders eligible for the benefits of an applicable tax treaty. In the event that
the dividend is effectively connected with the conduct of a trade or business
within the United States by the Non-United States Holder, the dividend (as
adjusted by any applicable deductions) will generally be subject to United
States federal income tax at regular graduated rates (if certain certification
and disclosure requirements are met) instead of the 30 percent withholding tax
described above. Any such effectively connected dividends received by a foreign
corporation may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. Holders that are partnerships and trusts may be
subject to certain additional withholding requirements and are urged to consult
their tax advisers as to the applicability of such requirements. Non-United
States Holders may be required to comply with certain certification requirements
in order to claim treaty benefits or to be exempt from withholding.
The Company must report annually to the Internal Revenue Service and to each
Non-United States Holder the amount of dividends paid and tax withheld with
respect to shares of Common Stock held by such holder. These information
reporting requirements apply regardless of whether withholding was reduced or
eliminated by an applicable tax treaty. This information may also be made
available by the Internal Revenue Service to tax authorities of the country in
which the Non-United States Holder resides.
Under current U.S. Treasury regulations, dividends paid to an address
outside the United States are presumed to be paid to a resident of such country
for purposes of the withholding discussed above (unless the payor has knowledge
to the contrary), and, under the current interpretation of U.S. Treasury
regulations, for purposes of determining the applicability of a tax treaty rate.
These rules are currently being studied by the Internal Revenue Service and
Treasury Department and may be changed in the future to require certain
additional certifications by a non-U.S. Holder of Common Stock.
GAIN ON DISPOSITION. Any gain recognized upon a disposition of Common Stock
by a Non-United States Holder will generally not be subject to United States
federal income tax unless (i) the gain is effectively connected with the conduct
of a trade or business within the United States of the Non-United States Holder
or, if a tax treaty applies, attributable to a permanent establishment
maintained by the Non-United States Holder or (ii) the Non-United States Holder
is an individual who holds the Common Stock as a capital asset and is present in
the United States for 183 days or more in the taxable year of the disposition
and either (a) such individual has a "tax home" (as defined for U.S. federal
income tax purposes) in the United States or (b) the gain is attributable to an
office or other fixed place of business maintained in the United States by such
individual. If an individual Non-United States Holder falls under clause (i)
above, he or she will be taxed on his or her net gain derived from the sale
under regular graduated U.S. federal income tax rates. If the individual
Non-United States Holder falls under clause (ii) above, he or she will be
subject to
27
<PAGE>
[ALTERNATE SECTION FOR INTERNATIONAL PROSPECTUS]
a flat 30% tax on the gain derived from the sale which may be offset by U.S.
capital losses (notwithstanding the fact that he or she is not considered a
resident of the United States). Thus, individual Non-United States Holders who
have spent 183 days or more in the United States in the taxable year in which
they contemplate a sale of the Common Stock are urged to consult their tax
advisers as to the tax consequences of such sale. If a Non-United States Holder
that is a foreign corporation falls under clause (i) above, it will be taxed on
its gain under regular graduated U.S. federal income tax rates and, in addition,
may be subject to the branch profits tax equal to 30% of its "effectively
connected earnings and profits" within the meaning of the Code for the taxable
year, as adjusted for certain items, unless it qualifies for a lower rate under
an applicable income tax treaty. The foregoing treatment is based on the
Company's belief that it does not constitute a "United States real property
holding corporation" for United States income tax purposes. However, there can
be no assurance that the Company will not be so characterized in the future.
ESTATE TAX. Shares of Common Stock held by an individual Non-United States
Holder at the time of his death will be subject to the United States federal
estate tax imposed on the estates of nonresident aliens in the absence of a
contrary provision in an applicable estate tax treaty.
BACKUP WITHHOLDING AND INFORMATION REPORTING
DIVIDENDS. Dividends that are subject to U.S. withholding tax at the 30%
statutory rate or at a reduced tax treaty rate and dividends that are
effectively connected with the conduct of a trade or business in the United
States (if certain certification and disclosure requirements are met) are exempt
from backup withholding of U.S. federal income tax. In general, backup
withholding at a rate of 31% and information reporting will apply to other
dividends paid on shares of Common Stock to holders that are not "exempt
recipients" and fail to provide in the manner required certain identifying
information (such as the holder's name, address and taxpayer identification
number). Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients.
DISPOSITION OF COMMON STOCK. Information reporting and backup withholding
imposed at a rate of 31% will apply to the proceeds of a disposition of Common
Stock paid to or through a U.S. office of a broker unless the disposing holder
certifies its non-U.S. status or otherwise establishes an exemption. Generally,
U.S. information reporting and backup withholding will not apply to a payment of
disposition proceeds if the payment is made outside the United States through a
non-U.S. office of a non-U.S. broker. However, U.S. information reporting
requirements (but not backup withholding) will apply to a payment of disposition
proceeds outside the United States if (A) the payment is made through an office
outside the United States of a broker that is either (i) a U.S. person, (ii) a
foreign person which derives 50% or more of its gross income for certain periods
from the conduct of a trade or business in the United States or (iii) a
"controlled foreign corporation" for U.S. federal income tax purposes and (B)
the broker fails to maintain documentary evidence that the holder is a non-U.S.
holder and that certain conditions are met, or that the holder otherwise is
entitled to an exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the U.S.
Internal Revenue Service.
These information and backup withholding rules are under review by the
United States Treasury. Their application to the ownership and disposition of
shares of Common Stock could be changed prospectively by future regulations.
28
<PAGE>
UNDERWRITING
Under the terms of and subject to the conditions contained in the U.S.
Underwriting Agreement, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, the underwriters
of the offering of the Shares in the United States and Canada named below (the
"U.S. Underwriters") for whom Lehman Brothers Inc., Kidder, Peabody & Co.
Incorporated, Montgomery Securities, PaineWebber Incorporated and Smith Barney
Inc. are acting as representatives (the "Representatives"), have severally
agreed to purchase from the Company, and the Company has agreed to sell to each
U.S. Underwriter, the aggregate number of Shares set forth opposite the name of
each such U.S. Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Lehman Brothers Inc.........................................
Kidder, Peabody & Co. Incorporated..........................
Montgomery Securities.......................................
PaineWebber Incorporated....................................
Smith Barney Inc............................................
---------
Total................................................... 3,600,000
---------
---------
</TABLE>
Under the terms of and subject to the conditions contained in the
International Underwriting Agreement, the form of which is filed as an exhibit
to the Registration Statement of which this Prospectus is a part, the managers
of the concurrent offering of the Shares outside the United States and Canada
(the "International Managers" and together with the U.S. Underwriters, the
"Underwriters") for whom Lehman Brothers International (Europe), Kidder, Peabody
International PLC, Montgomery Securities, PaineWebber International (U.K.) Ltd.
and Smith Barney Inc. are acting as lead managers (the "Lead Managers"), have
severally agreed to purchase from the Company, and the Company has agreed to
sell to each International Manager, the aggregate number of Shares set forth
opposite the name of each such International Manager below:
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Lehman Brothers International (Europe)......................
Kidder, Peabody International PLC...........................
Montgomery Securities.......................................
PaineWebber International (U.K.) Ltd........................
Smith Barney Inc............................................
---------
Total................................................... 900,000
---------
---------
</TABLE>
The Company has been advised that the U.S. Underwriters and the
International Managers, respectively, propose to offer part of the Shares to the
public at the public offering price set forth on the cover page hereof and part
to certain dealers at a price that represents a concession not in excess of
$ per share under the public offering price. The U.S. Underwriters and the
International Managers may allow, and such dealers may reallow, a concession not
in excess of $ per share to certain other brokers or dealers. After the
initial offering to the public, the offering price and other selling terms may
be changed by the U.S. Underwriters and International Managers.
The U.S. Underwriting Agreement and the International Underwriting Agreement
(collectively, the "Underwriting Agreements") provide that the obligations of
the several U.S. Underwriters and the International Managers to pay for and
accept delivery of the shares of Common Stock offered pursuant to the Offerings
are subject to certain conditions contained therein, and that if any of the
foregoing shares of Common Stock are purchased by the U.S. Underwriters pursuant
to the U.S. Underwriting Agreement or by the International Managers pursuant to
the International Underwriting Agreement, all the shares of Common Stock agreed
to be purchased by either the U.S. Underwriters or the International Managers,
as the case may be, pursuant to their respective Underwriting Agreements, must
be so purchased. The closing
29
<PAGE>
under the International Underwriting Agreement is a condition to the closing
under the U.S. Underwriting Agreement, and the closing under the U.S.
Underwriting Agreement is a condition to the closing under the International
Underwriting Agreement.
The Company has granted to the U.S. Underwriters and the International
Managers an option to purchase up to an aggregate of 675,000 additional shares
of Common Stock at the price to public less the underwriting discount, solely to
cover over-allotments, if any. Such option may be exercised at any time up to 30
days after the date of this Prospectus. To the extent that the U.S. Underwriters
or International Managers exercise such option, each of the U.S. Underwriters or
the International Managers, as the case may be, will be committed, subject to
certain conditions, to purchase a number of Common Stock shares proportionate to
such U.S. Underwriter's or International Manager's initial commitment as
indicated in the preceding tables.
The U.S. Underwriters and the International Managers have entered into an
Agreement Between U.S. Underwriters and International Managers (the "Agreement
Between U.S. Underwriters and International Managers"), pursuant to which each
U.S. Underwriter has agreed that, as part of the distribution of the Shares
(plus any of the shares to cover over-allotments) offered in the U.S. Offering,
(i) it is not purchasing any such Shares for the account of anyone other than a
U.S. Person (as defined below) and (ii) it has not offered or sold, and will not
offer, sell, resell or deliver, directly or indirectly, any of such Shares
outside the United States or Canada or to anyone other than a U.S. Person. In
addition, pursuant to such agreement, each International Manager has agreed
that, as part of the distribution of the Shares (plus any of the shares to cover
over-allotments) offered in the International Offering, (i) it is not purchasing
any such Shares for the account of a U.S. Person and (ii) it has not offered or
sold, and will not offer, sell, resell or deliver, directly or indirectly, any
of such Shares in the United States or Canada or to any U.S. Person. Each
International Manager has also agreed that it will offer to sell shares only in
compliance with all relevant requirements of any applicable laws.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Underwriting Agreements and the
Agreement Between U.S. Underwriters and International Managers, including (i)
certain purchases and sales between the U.S. Underwriters and the International
Managers, (ii) certain offers, sales, resales, deliveries or distributions to or
through investment advisors or other persons exercising investment discretion,
(iii) purchases, offers or sales by a U.S. Underwriter who is also acting as an
International Manager or by an International Manager who is also acting as a
U.S. Underwriter and (iv) other transactions specifically approved by the U.S.
Underwriters and International Managers. As used herein, (a) the term "United
States" means the United States of America (including District of Columbia) and
its territories, its possessions and other areas subject to its jurisdiction,
and (b) the term "U.S. Person" means any resident or citizen of the United
States, any corporation, partnership or other entity created or organized in or
under the laws of the United States or any estate or trust the income of which
is subject to United States income taxation regardless of the source of its
income (other than the foreign branch of any U.S. Person), and includes any
United States branch of a person other than a U.S. Person.
Pursuant to the Agreement Between U.S. Underwriters and International
Managers, sales may be made between the U.S. Underwriters and the International
Managers of such number of shares of Common Stock as may be mutually agreed
upon. The price of any shares sold shall be the public offering price then in
effect for Shares being sold by the U.S. Underwriters and the International
Managers, less the selling concession unless otherwise determined by mutual
agreement. To the extent that there are sales between the U.S. Underwriters and
the International Managers pursuant to the Agreement Between U.S. Underwriters
and International Managers, the number of shares initially available for sale by
the U.S. Underwriters or by the International Managers may be more or less than
the amount appearing on the cover page of this Prospectus.
Each International Manager has represented and agreed that (i) it has not
offered or sold, and will not offer or sell, in the United Kingdom, by means of
any document, any Shares other than (a) to persons whose ordinary business it is
to buy or sell shares or debentures, whether as principal or agent, or (b) under
30
<PAGE>
circumstances which do not constitute an offer to the public within the meaning
of the Companies Act 1985; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 (the "1986 Act") with
respect to anything done by it in relation to the Shares in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on, and
will only issue or pass on to any person in the United Kingdom, any investment
advertisement (within the meaning of the 1986 Act) relating to the Shares if
that person falls within Article 9(3) of the Financial Services Act 1986
(Investment Advertisements) (exemptions) Order 1988.
No action has been taken or will be taken in any jurisdiction by the Company
or the International Managers that would permit a public offering of the shares
offered pursuant to the Offerings in any jurisdiction where action for that
purpose is required, other than the United States. Persons into whose possession
this Prospectus comes are required by the Company and the International Managers
to inform themselves about and to observe any restrictions as to the offering of
the shares offered pursuant to the Offerings and the distribution of this
Prospectus.
Purchasers of the shares of Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase in addition to the offering price set forth on the cover
page hereof.
The Company and each of Alexander, Derek and Eric Lidow have agreed not to
sell or dispose of any shares of Common Stock, with certain exceptions, prior to
the expiration of 90 days from the date of this Prospectus without the prior
written consent of the U.S. Underwriters and International Managers. The Company
has agreed to indemnify the U.S. Underwriters and International Managers against
certain liabilities, including liabilities under the Securities Act, and to
contribute to payments that the U.S. Underwriters and the International Managers
may be required to make in respect hereof.
LEGAL OPINIONS
The validity of the Common Stock to be issued pursuant to the Offerings and
general corporate legal matters will be passed upon for the Company by O'Melveny
& Myers and for the U.S. Underwriters and the International Managers by Latham &
Watkins.
EXPERTS
The audited consolidated financial statements of the Company included in
this prospectus, have been audited by Coopers & Lybrand L.L.P., independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon such report, which include an explanatory
paragraph regarding three outstanding class action lawsuits, given upon the
authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as at the following Regional Offices of the Commission: 7
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
material may also be inspected at the offices of the New York Stock Exchange and
the Pacific Stock Exchange.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended. This
Prospectus omits certain of the information contained in the Registration
Statement, and reference is hereby made to the Registration Statement and
31
<PAGE>
related exhibits for further information with respect to the Company and the
Common Stock. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference in
this Prospectus:
(i) the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1994; and
(ii) the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of these offerings shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the respective dates
of filing of such documents.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon oral or written request, a copy of any or all of
the foregoing documents incorporated herein by reference, except for the
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into information that this Prospectus incorporates). Written
requests should be directed to International Rectifier Corporation, 233 Kansas
Street, El Segundo, California 90245, Attention: Corporate Secretary. Telephone
requests should be directed to (310) 322-3331.
32
<PAGE>
GLOSSARY
The following are definitions of certain technical terms used in the
Prospectus:
ASSEMBLY -- The process of encasing a semiconductor chip in a package to
produce a finished product.
BIPOLAR TRANSISTOR -- A transistor that is controlled by electrical current.
CONTROL IC -- A semiconductor device having logic and control on the same
chip that is used in conjunction with power MOSFETs or IGBTs.
DIODE -- A discrete device which conducts current in one direction.
DISCRETE DEVICE -- An electrical or electronic component that performs a
single function.
FAST RECOVERY DIODE -- A diode suited to applications above 200 volts where
high switching speed is desirable.
FET (FIELD EFFECT TRANSISTOR) -- A transistor that is controlled by
electrical voltage.
IGBT (INSULATED GATE BIPOLAR TRANSISTOR) -- A variant of the power MOSFET
that incorporates bipolar transistor technology.
IC (INTEGRATED CIRCUIT) -- A device that contains multiple components on a
single silicon chip to form an electronic circuit.
PACKAGE -- The external structure that encases a semiconductor chip.
POWER MOSFET -- A power field effect transistor (FET) that is manufactured
using MOS (Metal Oxide Semiconductor) processing technology similar to that used
in manufacturing certain integrated circuits. The Company's power MOSFETs are
sold under the trademark HEXFET.
POWER SEMICONDUCTOR -- A silicon-based component that operates at a power
level above approximately one watt and has the ability both to conduct and to
block the flow of electricity. Power semiconductors are used to switch (turn on
and off) electricity or to condition electricity, for example by converting
alternating current to direct current.
RECTIFIER -- A diode used to convert alternating current to direct current.
SCHOTTKY DIODE -- An ultra-fast rectifier for use in high-frequency,
low-voltage circuits.
THYRISTOR (SCR) -- A four layer semiconductor device that has a gate
structure allowing current to flow in an electrical circuit.
TRANSISTOR -- A semiconductor device that switches (turns on and off) or
amplifies electricity in a circuit.
WAFER FABRICATION -- The sequence of semiconductor processing steps that
creates semiconductor devices on a silicon wafer.
33
<PAGE>
[ALTERNATE SECTION FOR INTERNATIONAL PROSPECTUS]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE INTERNATIONAL
MANAGERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
THERE ARE RESTRICTIONS ON THE OFFER AND SALE OF THE SHARES OF COMMON STOCK
OFFERED HEREBY IN THE UNITED KINGDOM. ALL APPLICABLE PROVISIONS OF THE FINANCIAL
SERVICES ACT 1986 AND THE COMPANIES ACT 1985 WITH RESPECT TO ANYTHING DONE BY
ANY PERSON IN RELATION TO THE COMMON STOCK IN, FROM OR OTHERWISE INVOLVING THE
UNITED KINGDOM MUST BE COMPLIED WITH. SEE "UNDERWRITING."
IN THIS PROSPECTUS, REFERENCES TO "DOLLARS" AND "$" ARE TO UNITED STATES
DOLLARS UNLESS STATED OTHERWISE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---
<S> <C>
Prospectus Summary................................. 3
The Company........................................ 5
Risk Factors....................................... 5
Use of Proceeds.................................... 8
Capitalization..................................... 8
Price Range of Common Stock........................ 9
Dividend Policy.................................... 9
Selected Consolidated Financial Data............... 10
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 12
Business........................................... 15
Management......................................... 24
Description of Capital Stock....................... 25
Certain United States Federal Tax
Consequences To Non-United States
Holders.......................................... 27
Underwriting....................................... 29
Legal Opinions..................................... 31
Experts............................................ 31
Available Information.............................. 31
Incorporation of Certain Documents by Reference.... 32
Glossary........................................... 33
Index to Consolidated Financial Statements......... F-1
</TABLE>
4,500,000 SHARES
[LOGO]
INTERNATIONAL
RECTIFIER
CORPORATION
COMMON STOCK
-------------------
PROSPECTUS
, 1994
---------------------
LEHMAN BROTHERS
KIDDER, PEABODY INTERNATIONAL PLC
MONTGOMERY SECURITIES
PAINEWEBBER INTERNATIONAL
SMITH BARNEY INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized statement of the estimated expenses, other than
underwriting discounts and commissions, all of which were or will be borne by
the Company:
<TABLE>
<CAPTION>
ITEM AMOUNT
- ------------------------------------------------------------ ---------
<S> <C>
Registration fee............................................ $ 41,155
New York Stock Exchange and Pacific Stock Exchange filing
fees....................................................... 33,150
NASD fee.................................................... 12,435
Blue Sky fees and expenses.................................. 10,000
Accounting fees and expenses................................ 100,000
Printing and engraving fee.................................. 150,000
Legal fees and expenses..................................... 120,000
Transfer agent fees......................................... 2,500
Miscellaneous............................................... 5,760
---------
Total................................................... $ 475,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's bylaws provide for indemnification of directors and officers
of the Company to the fullest extent authorized by law. Section 145 of the
Delaware General Corporation Law provides that a corporation may indemnify any
persons, including officers and directors, who are, or are threatened to be
made, parties to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, if such person acted in good
faith and in a manner reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to any criminal proceeding, had
no reasonable cause to believe that his conduct was unlawful. A Delaware
corporation may indemnify for expenses its officers, directors, employees and
agents in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer, director, employee or agent is adjudged to be liable to
the corporation. Where an officer, director, employee or agent is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify such person against the expenses which such officer,
director, employee or agent actually and reasonably incurred in connection
therewith.
The U.S. Underwriting Agreement and the International Underwriting Agreement
provide that the U.S. Underwriters or the International Managers, as applicable,
shall indemnify each director of the Company, each officer of the Company who
signed this Registration Statement and each person who controls the Company for
certain liabilities, including certain liabilities under the Securities Act of
1933.
The Company maintains an officers' and directors' liability insurance policy
insuring the Company's officers and directors against certain liabilities and
expenses incurred by them in their capacities as such, and insuring the Company,
under certain circumstances, in the event that indemnification payments are made
by the Company to such officers and directors.
II-1
<PAGE>
ITEM 16. EXHIBITS.
Exhibit Table
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------
<C> <S> <C>
1(a) Form of U.S. Underwriting Agreement.........................
1(b) Form of International Underwriting Agreement................
5 Opinion of O'Melveny & Myers, legal counsel of the
Company....................................................
*23(a) Consent of Coopers & Lybrand, independent accountants of the
Company....................................................
23(b) Consent of O'Melveny & Myers, legal counsel of the Company
(included in Exhibit 5)....................................
*24 Power of Attorney (contained in Part II of the Registration
Statement).................................................
<FN>
- ------------------------
*Previously filed.
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provision of Item 15 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of El Segundo, State of California on
November 16, 1994.
INTERNATIONAL RECTIFIER
CORPORATION
By: ERIC LIDOW*
-----------------------------------
Eric Lidow
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------ --------------------------------------- ----------------------
<C> <S> <C>
DONALD S. BURNS*
-------------------------------------- Director November 16, 1994
Donald S. Burns
GEORGE KRSEK*
-------------------------------------- Director November 16, 1994
George Krsek
ALEXANDER LIDOW*
-------------------------------------- Director, Executive Vice President of November 16, 1994
Alexander Lidow Operations
DEREK B. LIDOW*
-------------------------------------- Director, Executive Vice President November 16, 1994
Derek B. Lidow
ERIC LIDOW*
-------------------------------------- President, Chief Executive Officer, November 16, 1994
Eric Lidow Chairman of the Board
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------ --------------------------------------- ----------------------
<C> <S> <C>
/s/ MICHAEL P. MCGEE
-------------------------------------- Vice-President, Chief Financial Officer November 16, 1994
Michael P. McGee and Principal Accounting Officer
/s/ROBERT J. MUELLER
-------------------------------------- Director, Executive Vice President November 16, 1994
Robert J. Mueller
/s/JAMES D. PLUMMER
-------------------------------------- Director November 16, 1994
James D. Plummer
JACK O. VANCE*
-------------------------------------- Director November 16, 1994
Jack O. Vance
ROCHUS E. VOGT*
-------------------------------------- Director November 16, 1994
Rochus E. Vogt
*By: /s/MICHAEL P. MCGEE
----------------------------------
Michael P. McGee November 16, 1994
Attorney-in-Fact
</TABLE>
II-5
<PAGE>
EXHIBIT 1(a)
4,140,000 SHARES
INTERNATIONAL RECTIFIER CORPORATION
COMMON STOCK
($1.00 PAR VALUE)
U.S. UNDERWRITING AGREEMENT
November __, 1994
LEHMAN BROTHERS INC.
KIDDER, PEABODY & CO. INCORPORATED
MONTGOMERY SECURITIES
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
As Representatives of the several
Underwriters named in Schedule 1,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
International Rectifier Corporation, a Delaware corporation (the
"Company"), proposes to sell 3,600,000 shares (the "Firm Stock") of the
Company's Common Stock, par value $1.00 per share (the "Common Stock") through
arrangements with certain U.S. Underwriters named in Schedule 1 hereto (the
"U.S. Underwriters"). In addition, the Company proposes to grant to the U.S.
Underwriters an option to purchase up to an additional 540,000 shares of the
Common Stock on the terms and for the purposes set forth in Section 2 (the
"Option Stock"). The Firm Stock and the Option Stock, if purchased, are
hereinafter collectively called the "Stock" by the U.S. Underwriters.
It is understood by all parties that the Company is concurrently
entering into an agreement dated the date hereof (the "International
Underwriting Agreement") providing for the sale by the Company of 900,000 shares
of Common Stock (the "International Stock") through arrangements with certain
underwriters outside the United States (the "International Managers"), for whom
Lehman Brothers International (Europe), Kidder, Peabody International PLC,
Montgomery Securities, PaineWebber International (U.K.) Ltd. and Smith Barney
Inc. are acting
<PAGE>
as lead managers. In addition, the Company proposes to grant to the
International Managers an option to purchase up to an additional 135,000 shares
of the Common Stock on the terms and for the purposes set forth in Section 2.
The U.S. Underwriters and the International Managers simultaneously are
entering into an agreement between the U.S. and international underwriting
syndicates (the "Agreement Between U.S. Underwriters and International
Managers") which provides for, among other things, the transfer of shares of
Common Stock between the two syndicates. Two forms of prospectus are to be used
in connection with the offering and sale of shares of Common Stock contemplated
by the foregoing, one relating to the Firm Stock and the other relating to the
International Stock. The latter form of prospectus will be identical to the
former except for certain substitute pages as included in the registration
statement and amendments thereto referred to below. Except as used in Sections
2, 3, 4, 9, and 10 herein, and except as the context may otherwise require,
references herein to the Stock shall include all the shares of which may be sold
pursuant to either this Agreement or the International Underwriting Agreement,
and references herein to any prospectus whether in preliminary or final form,
and whether as amended or supplemented, shall include both the U.S. and the
international versions thereof.
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-3 with respect to the
Stock has (i) been prepared by the Company in conformity with the
requirements of the United States Securities Act of 1933 (the
"Securities Act") and the rules and regulations (the "Rule and
Regulations") of the United States Securities and Exchange Commission
(the "Commission") thereunder, (ii) been filed with the Commission
under the Securities Act and (iii) become effective under the
Securities Act. Copies of such registration statement and all
amendments thereto have been delivered by the Company to you as the
representatives (the "Representatives") of the U.S. Underwriters. As
used in this Agreement, "Effective Time" means the date and the time
as of which such registration statement, or the most recent post-
effective amendment thereto, if any, was declared effective by the
Commission; "Effective Date" means the date of the Effective Time;
"Preliminary Prospectus" means each prospectus included in such
registration statement, or amendments thereof, before it became
effective under the Securities Act and any prospectus filed with the
Commission by the Company with the consent of the Representatives
pursuant to Rule 424(a) of the Rules and Regulations; "Registration
Statement" means such registration statement, as amended at the
Effective Time, including any documents incorporated by reference
therein at such time and all information contained in the final
prospectus filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations in accordance with Section 5(a) hereof and
deemed to be a part of the registration statement as of the Effective
Time pursuant to paragraph (b) of Rule 430A of the Rules and
Regulations; and "Prospectus" means such final prospectus, as first
2
<PAGE>
filed with the Commission pursuant to paragraph (1) or (4) of Rule
424(b) of the Rules and Regulations. Reference made herein to any
Preliminary Prospectus or to the Prospectus shall be deemed to refer
to and include any documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Securities Act, as of the
date of such Preliminary Prospectus or the Prospectus, as the case may
be, and any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to
and include any document filed under the United States Securities
Exchange Act of 1934 (the "Exchange Act") after the date of such
Preliminary Prospectus or the Prospectus, as the case may be, and
incorporated by reference in such Preliminary Prospectus or the
Prospectus, as the case may be; and any reference to any amendment to
the Registration Statement shall be deemed to include any annual
report of the Company filed with the Commission pursuant to Section
13(a) or 15(d) of the Exchange Act after the Effective Time that is
incorporated by reference in the Registration Statement. The
Commission has not issued any order preventing or suspending the use
of any Preliminary Prospectus.
(b) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all material respects to
the requirements of the Securities Act and the Rules and Regulations
and will not, as of the applicable effective date (as to the
Registration Statement and any amendment thereto) and as of the
applicable filing date (as to the Prospectus and any amendment or
supplement thereto) contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; PROVIDED that
no representation or warranty is made as to information contained in
or omitted from the Registration Statement or the Prospectus in
reliance upon and in conformity with written information furnished to
the Company through the Representatives by or on behalf of any U.S.
Underwriter specifically for inclusion therein.
(c) The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements of
the Exchange Act and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(d) The Company and each of its Significant Subsidiaries (as
defined in Section 1(s)) have been duly incorporated and are validly
existing as corporations in good standing under the laws of their
respective jurisdictions of incorporation, are duly qualified to do
business and are in good standing as
3
<PAGE>
foreign corporations in each jurisdiction in which their respective
ownership or lease of property or the conduct of their respective
businesses requires such qualification (except where the failure to be
so qualified, considering all such cases in the aggregate, does not
involve a material risk to the business, properties, financial
position or results of operations of the Company and its subsidiaries
taken as a whole), and have all power and authority necessary to own
or hold their respective properties and to conduct the businesses in
which they are engaged; and none of the subsidiaries of the Company is
a "significant subsidiary," as such term is defined in Rule 405 of the
Rules and Regulations, except as set forth in Section 1(s) below.
(e) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description thereof
contained in the Prospectus; and all of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable and
(except for directors' qualifying shares) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
equities or claims.
(f) The unissued shares of the Stock to be issued and sold by
the Company to the U.S. Underwriters hereunder and to the
International Managers under the International Underwriting Agreement
have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein and in the International
Underwriting Agreement, will be duly and validly issued, fully paid
and non-assessable; and the Stock will conform to the description
thereof contained in the Prospectus.
(g) This Agreement has been duly authorized, executed and
delivered by the Company.
(h) The Company and each of its subsidiaries have complied in
all respects with all laws, regulations and orders applicable to them
or their respective businesses, the violation of which would have a
material adverse effect upon the business, properties, financial
condition or earnings of the Company and its subsidiaries taken as a
whole, and neither the Company nor any of its subsidiaries is in
default under any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement or other
evidence of indebtedness, lease, contract or other agreement or
instrument to which any of them is a party or by which any of them or
any of their respective properties are bound, which default would
individually or in the aggregate have a material adverse effect on the
Company and its subsidiaries taken as a whole, and no other party
under any such agreement or instrument to which the Company or any of
its subsidiaries is a party is, to the knowledge of the
4
<PAGE>
Company, in default in any material respect thereunder, and
neither the Company nor any of its subsidiaries is in violation of its
respective charter or bylaws, as the case may be.
(i) The execution, delivery and performance of this Agreement
and the International Underwriting Agreement by the Company and the
consummation of the transactions contemplated hereby will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject, nor will such actions result in any violation of the
provisions of the charter or by-laws of the Company or any of its
subsidiaries or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties or
assets; and except for the registration of the Stock under the
Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Exchange
Act and applicable state or foreign securities laws in connection with
the purchase and distribution of the Stock by the U.S. Underwriters
and the International Managers, no consent, approval, authorization or
order of, or filing or registration with, any such court or
governmental agency or body is required for the execution, delivery
and performance of this Agreement, or the International Underwriting
Agreement by the Company and the consummation of the transactions
contemplated hereby.
(j) There are no contracts, agreements or understandings between
the Company and any person granting such person the right to require
the Company to file a registration statement under the Securities Act
with respect to any securities of the Company owned or to be owned by
such person or to require the Company to include such securities in
the securities registered pursuant to the Registration Statement.
(k) Except as described in the Prospectus, the Company has not
sold or issued any shares of Common Stock during the six-month period
preceding the date of the Prospectus, including any sales pursuant to
Rule 144A under, or Regulations D or S of, the Securities Act other
than shares issued pursuant to employee benefit plans, qualified stock
options plans or other employee compensation plans or pursuant to
outstanding options, rights or warrants.
(l) Neither the Company nor any of its subsidiaries has
sustained, since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus, any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by
5
<PAGE>
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Prospectus; and, since such date, there has not been any change in the
capital stock or long-term debt of the Company or any of its
subsidiaries, other than in the ordinary course of business that is
material to the Company and its subsidiaries taken as a whole, or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set
forth or contemplated in the Prospectus.
(m) The financial statements including the related notes and
supporting schedules filed as part of the Registration Statement or
included or incorporated by reference in the Prospectus present fairly
the financial condition and results of operations of the entities
purported to be shown thereby, at the dates and for the periods
indicated, and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis
throughout the periods involved.
(n) The Company and each of its subsidiaries have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them, in each case
free and clear of all liens, encumbrances and defects except such as
are described in the Prospectus or such as do not materially affect
the value of such property and do not materially interfere with the
use made and proposed to be made of such property by the Company and
its subsidiaries; and all real property and buildings held under lease
by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases, with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its
subsidiaries.
(o) Except to the extent that legal proceedings between the
Company and SGS-Thomson Microelectronics, Inc., as disclosed in the
Prospectus, are resolved on a materially adverse basis to the Company,
each of the Company and its subsidiaries have sufficient trademarks,
trade names, registered service marks, patent rights, licenses,
permits, copyright protection and similar governmental authorizations
currently required for the conduct of the Company's business, and the
Company and each of its subsidiaries, as the case may be, is in all
material respects complying therewith; other than as disclosed in the
Prospectus, the expiration of any such trademarks, trade names,
registered service marks, patent rights, licenses, permits, copyrights
and similar governmental authorization would not materially adversely
affect the condition (financial or otherwise), business, results of
operations or prospects of the Company and its subsidiaries taken as a
whole; and, except as disclosed in the Prospectus, or in writing by
the Company to the Representatives of the several U.S. Underwriters,
neither the Company nor
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any subsidiary has received any notice of violation or infringement of
or conflict with asserted rights of others with respect to any
trademarks, trade names, registered service marks, patent rights,
licenses or copyrights.
(p) Except as described in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property or assets of the
Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, might have a
material adverse effect on the consolidated financial position,
stockholders' equity, results of operations, business or prospects of
the Company and its subsidiaries; and to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
(q) There are no contracts or other documents which are required
to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and
Regulations which have not been described in the Prospectus or filed
as exhibits to the Registration Statement or incorporated therein by
reference as permitted by the Rules and Regulations.
(r) Neither the Company nor any subsidiary is an "investment
company" within the meaning of such term under the United States
Investment Company Act of 1940 and the rules and regulations of the
Commission thereunder.
(s) The only significant subsidiaries of the Company, as such
term is defined in Rule 405 of the Rules and Regulations, are
International Rectifier Company (Great Britain) Limited and
International Rectifier Corporation Italiana S.p.A., (the "Significant
Subsidiaries").
2. PURCHASE OF THE STOCK BY THE U.S. UNDERWRITERS. On the basis of
the representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell the Firm Stock to the
several U.S. Underwriters and each of the U.S. Underwriters, severally and not
jointly, agrees to purchase the number of shares of the Firm Stock set forth
opposite that U.S. Underwriter's name in Schedule 1 hereto. The respective
purchase obligations of the U.S. Underwriters with respect to the Firm Stock
shall be rounded among the U.S. Underwriters to avoid fractional shares, as the
Representatives may determine.
In addition, the Company grants to the U.S. Underwriters an option to
purchase up to 540,000 shares of Option Stock. Such option is granted solely
for the purpose of covering over-allotments in the sale of Firm Stock and is
exercisable as provided in Section 4 hereof. Shares of Option Stock shall be
purchased severally for the account of the U.S. Underwriters in proportion to
the number of shares of Firm Stock set forth opposite the name of such U.S.
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Underwriters in Schedule 1 hereto. The respective purchase obligations of each
U.S. Underwriter with respect to the Option Stock shall be adjusted by the
Representatives so that no U.S. Underwriter shall be obligated to purchase
Option Stock other than in 100 share amounts. The price of both the Firm Stock
and any Option Stock shall be $____ per share.
The Company shall not be obligated to deliver any of the Stock to be
delivered on the First Delivery Date or the Second Delivery Date (as hereinafter
defined), as the case may be, except upon payment for all the Stock to be
purchased on such Delivery Date as provided herein and in the International
Underwriting Agreement.
3. OFFERING OF STOCK BY THE U.S. UNDERWRITERS. Upon authorization by
the Representatives of the release of the Firm Stock, the several U.S.
Underwriters propose to offer the Firm Stock for sale upon the terms and
conditions set forth in the Prospectus.
Each U.S. Underwriter agrees that, except to the extent permitted by
the Agreement Between U.S. Underwriters and International Managers, it will not
offer or sell any of the Stock outside of the United States or Canada.
4. DELIVERY OF AND PAYMENT FOR THE STOCK. Delivery of the Firm Stock
shall made at the office of Lehman Brothers Inc., New York, New York and payment
for the Firm Stock shall be made at the office of [Latham & Watkins], Los
Angeles, California at 10:00 A.M., New York City time, on the fifth full
business day following the date of this Agreement or at such other date or place
as shall be determined by agreement between the Representatives and the Company.
This date and time are sometimes referred to as the "First Delivery Date." On
the First Delivery Date, the Company shall deliver or cause to be delivered
certificates representing the Firm Stock to the Representatives for the account
of each U.S. Underwriter against payment to or upon the order of the Company of
the purchase price by certified or official bank check or checks payable in
Clearing House (next-day) funds. Time shall be of the essence, and delivery at
the time and place specified pursuant to this Agreement is a further condition
of the obligation of each U.S. Underwriter hereunder. Upon delivery, the Firm
Stock shall be registered in such names and in such denominations as the
Representatives shall request in writing not less than two full business days
prior to the First Delivery Date. For the purpose of expediting the checking
and packaging of the certificates for the Firm Stock, the Company shall make the
certificates representing the Firm Stock available for inspection by the
Representatives in New York, New York, not later than 2:00 P.M., New York City
time, on the business day prior to the First Delivery Date.
At any time on or before the thirtieth day after the date of this
Agreement the option granted in Section 2 may be exercised by written notice
being given to the Company by the Representatives. Such notice shall set forth
the aggregate number of shares of Option Stock as to which the option is being
exercised, the names in which the shares of Option Stock are to be registered,
the denominations in which the shares of Option Stock are to be issued and the
date and time, as determined by the Representatives, when the shares of Option
Stock are to be delivered; PROVIDED, HOWEVER, that this date and time shall not
be earlier than the First Delivery
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Date nor earlier than the second business day after the date on which the option
shall have been exercised nor later than the fifth business day after the date
on which the option shall have been exercised. The date and time the shares of
Option Stock are delivered are sometimes referred to as the "Second Delivery
Date" and the First Delivery Date and the Second Delivery Date are sometimes
each referred to as a "Delivery Date."
Delivery of and payment for the Option Stock shall be made at the
place specified in the first sentence of the first paragraph of this Section 4
(or at such other place as shall be determined by agreement between the
Representatives and the Company) at 10:00 A.M., New York City time, on the
Second Delivery Date. On the Second Delivery Date, the Company shall deliver or
cause to be delivered the certificates representing the Option Stock to the
Representatives for the account of each U.S. Underwriter against payment to or
upon the order of the Company of the purchase price by certified or official
bank check or checks payable in New York Clearing House (next-day) funds. Time
shall be of the essence, and delivery at the time and place specified pursuant
to this Agreement is a further condition of the obligation of each U.S.
Underwriter hereunder. Upon delivery, the Option Stock shall be registered in
such names and in such denominations as the Representatives shall request in the
aforesaid written notice. For the purpose of expediting the checking and
packaging of the certificates for the Option Stock, the Company shall make the
certificates representing the Option Stock available for inspection by the
Representatives in New York, New York, not later than 2:00 P.M., New York City
time, on the business day prior to the Second Delivery Date.
5. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees:
(a) To prepare the Prospectus in a form approved by
the Representatives and to file such Prospectus pursuant to Rule
424(b) under the Securities Act not later than the Commission's close
of business on the second business day following the execution and
delivery of this Agreement or, if applicable, such earlier time as may
be required by Rule 430A(a)(3) under the Securities Act; to make no
further amendment or any supplement to the Registration Statement or
to the Prospectus prior to the last Delivery Date except as permitted
herein; to advise the Representatives, promptly after it receives
notice thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed and to furnish the
Representatives with copies thereof; to file promptly all reports and
any definitive proxy or information statements required to be filed by
the Company with the Commission pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of the Prospectus
and for so long as the delivery of a prospectus is required in
connection with the offering or sale of the Stock; to advise the
Representatives, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, of the suspension of the qualification of the Stock for
offering or sale in any jurisdiction, of the initiation or threatening
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<PAGE>
of any proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the Registration
Statement or the Prospectus or for additional information; and, in the
event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or
suspending any such qualification, to use promptly its best efforts to
obtain its withdrawal;
(b) To furnish promptly to each of the Representatives
and to counsel for the U.S. Underwriters a signed copy of the
Registration Statement as originally filed with the Commission, and
each amendment thereto filed with the Commission, including all
consents and exhibits filed therewith;
(c) To deliver promptly to the Representatives such
number of the following documents as the Representatives shall
reasonably request: (i) conformed copies of the Registration
Statement as originally filed with the Commission and each amendment
thereto (in each case excluding exhibits other than this Agreement and
the computation of per share earnings), (ii) each Preliminary
Prospectus, the Prospectus and any amended or supplemented Prospectus
and (iii) any document incorporated by reference in the Prospectus
(excluding exhibits thereto; and, if the delivery of a prospectus is
required at any time after the Effective Time in connection with the
offering or sale of the Stock or any other securities relating thereto
and if at such time any events shall have occurred as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall be
necessary to amend or supplement the Prospectus or to file under the
Exchange Act any document incorporated by reference in the Prospectus
in order to comply with the Securities Act or the Exchange Act, to
notify the Representatives and, upon their request, to file such
document and to prepare and furnish without charge to each U.S.
Underwriter and to any dealer in securities as many copies as the
Representatives may from time to time reasonably request of an amended
or supplemented Prospectus which will correct such statement or
omission or effect such compliance.
(d) To file promptly with the Commission any amendment
to the Registration Statement or the Prospectus or any supplement to
the Prospectus that may, in the judgment of the Company or the
Representatives, be required by the Securities Act or requested by the
Commission;
(e) Prior to filing with the Commission any amendment
to the Registration Statement or supplement to the Prospectus, any
document incorporated by reference in the Prospectus or any Prospectus
pursuant to Rule
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424 of the Rules and Regulations, to furnish a copy thereof to the
Representatives and counsel for the U.S. Underwriters and obtain the
consent of the Representatives to the filing;
(f) As soon as practicable after the Effective Date,
but in any event not later than fifteen months after the end of the
Company's current fiscal quarter, to make generally available to the
Company's security holders and to deliver to the Representatives an
earnings statement of the Company and its subsidiaries (which need not
be audited) complying with Section 11(a) of the Securities Act and the
Rules and Regulations (including, at the option of the Company, Rule
158);
(g) For a period of five years following the Effective
Date, to furnish to the Representatives copies of all materials
furnished by the Company to its shareholders and all public reports
and all reports and financial statements furnished by the Company to
the principal national securities exchange upon which the Common Stock
may be listed pursuant to requirements of or agreements with such
exchange or to the Commission pursuant to the Exchange Act or any rule
or regulation of the Commission thereunder;
(h) Promptly from time to time to take such action as
the Representatives may reasonably request to qualify the Stock for
offering and sale under the securities laws of such jurisdictions as
the Representatives may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of the Stock PROVIDED that in connection therewith the
Company shall not be required to qualify as a foreign corporation or
to file a general consent to service of process in any jurisdiction;
(i) For a period of 90 days from the date of the Prospectus, not
to offer for sale, sell or otherwise dispose of (or enter into any
transaction which is designed to, or could be expected to, result in
the disposition by any person of), directly or indirectly, any shares
of Common Stock (other than the Stock and shares issued pursuant to
employee benefit plans, qualified stock option plans or other employee
compensation plans existing on the date hereof or pursuant to
currently outstanding options, warrants or rights), or sell or grant
options, rights or warrants with respect to any shares of Common Stock
(other than the grant of options pursuant to option plans existing on
the date hereof), without the prior written consent of Lehman Brothers
Inc.;
(j) Prior to the Effective Date, to apply for the inclusion of
the Stock on the New York and Pacific Stock Exchanges, Inc. and to use
its best efforts to complete that listing, subject only to official
notice of issuance and evidence of satisfactory distribution, prior to
the First Delivery Date;
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(k) To apply the net proceeds from the sale of the Stock being
sold by the Company as set forth in the Prospectus; and
(l) To take such steps as shall be necessary to ensure that
neither the Company nor any subsidiary shall become an "investment
company" within the meaning of such term under the United States
Investment Company Act of 1940 and the rules and regulations of the
Commission thereunder.
6. EXPENSES. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Stock and any taxes payable in
that connection; (b) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statement and any amendments and
exhibits thereto; (c) the costs of distributing the Registration Statement as
originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any Preliminary Prospectus, the
Prospectus and any amendment or supplement to the Prospectus or any document
incorporated by reference therein, all as provided in this Agreement; (d) the
costs of printing and distributing this Agreement, the Agreement Between U.S.
Underwriters and International Managers, any Supplemental Agreement Among U.S.
Underwriters and any other related documents in connection with the offering,
purchase, sale and delivery of the stock; (e) the filing fees incident to
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of sale of the Stock; (f) any applicable listing or other
fees; (g) the fees and expenses (not in excess, in the aggregate, of $10,000.00)
of qualifying the Stock under the securities laws of the several jurisdictions
as provided in Section 5(h) and of preparing, printing and distributing a Blue
Sky Memorandum (including related fees and expenses of counsel to the
Underwriters); and (h) all other costs and expenses incident to the performance
of the obligations of the Company under this Agreement; PROVIDED that, except as
provided in this Section 6 and in Section 11 the U.S. Underwriters shall pay
their own costs and expenses, including the costs and expenses of their counsel,
any transfer taxes on the Stock which they may sell and the expenses of
advertising any offering of the Stock made by the U.S. Underwriters.
7. CONDITIONS OF U.S. UNDERWRITERS' OBLIGATIONS. The respective
obligations of the U.S. Underwriters hereunder are subject to the accuracy, when
made and on each Delivery Date, of the representations and warranties of the
Company contained herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Prospectus shall have been timely filed with
the Commission in accordance with Section 5(a); no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and any
request of the Commission for inclusion of additional information in
the Registration Statement or the Prospectus or otherwise shall have
been complied with.
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(b) No U.S. Underwriter or International Manager shall
have discovered and disclosed to the Company on or prior to such
Delivery Date that the Registration Statement or the Prospectus or any
amendment or supplement thereto contains an untrue statement of a fact
which, in the opinion of Latham & Watkins, counsel for the U.S.
Underwriters and International Managers, is material or omits to state
a fact which, in the opinion of such counsel, is material and is
required to be stated therein or is necessary to make the statements
therein not misleading.
(c) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this Agreement,
the International Underwriting Agreement, the Stock, the Registration
Statement and the Prospectus, and all other legal matters relating to
this Agreement and the transactions contemplated hereby shall be
reasonably satisfactory in all material respects to counsel for the
U.S. Underwriters, and the Company shall have furnished to such
counsel all documents and information that they may reasonably request
to enable them to pass upon such matters.
(d) O'Melveny & Myers shall have furnished to the
Representatives their written opinion, as counsel to the Company,
addressed to the U.S. Underwriters and dated such Delivery Date, in
form and substance reasonably satisfactory to the Representatives, to
the effect that:
(i) The Company has been duly incorporated and is
an existing corporation in good standing under the laws of its
jurisdiction of incorporation and has full corporate power and
authority to conduct its business as described in the
Registration Statement and the Prospectus;
(ii) The shares of Stock have been duly
authorized and validly issued, are fully paid and non-assessable
and conform to the description thereof in the Prospectus; and the
shareholders of the Company have no preemptive rights with
respect to the shares of Stock being issued and sold by the
Company hereunder;
(iii) The Registration Statement has become
effective under the Act, the Prospectus has been filed as
required by Section 1(a) hereof, and to the knowledge of such
counsel no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that
purpose has been instituted or threatened by the Commission;
(iv) Each part of the registration statement, when
such part became effective, and the Prospectus and any amendment
or
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supplement thereto, on the date of filing thereof with the
Commission and at the Delivery Date, appeared on their face to
comply as to form in all material respects with the requirements
of the Securities Act and the Rules and Regulations, and the
documents incorporated by reference in the Registration Statement
or the Prospectus or any amendment or supplement thereto, when
they became effective under the Securities Act or were filed with
the Commission under the Exchange Act, as the case may be, in
either case to the extent amended, appeared on their face to
comply as to form in all material respects with the requirements
of the Securities Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, it being
understood that such counsel need express no opinion as to the
financial statements or other financial data included or required
to be included in any of the documents mentioned in this clause;
(v) The descriptions in the Registration
Statement and the Prospectus of statutes, legal and governmental
proceedings, contracts and other documents are accurate and
fairly present the information required to be shown; and such
counsel do not know of any statutes or legal or governmental
proceedings required to be described in the Prospectus that are
not described as required, or of any contracts or documents of a
character required to be described in the Registration Statement
or the Prospectus (or required to be filed under the Exchange Act
if upon such filing they would be incorporated by reference
therein) or to be filed as exhibits to the Registration Statement
that are not described or filed as required; and
(vi) This Agreement and the International
Underwriting Agreement have been duly authorized, executed and
delivered by the Company, the performance of this Agreement and
the International Underwriting Agreement and the consummation of
the transactions herein and therein contemplated (except for the
provisions of Section 8 herein and therein as to which no opinion
need be expressed) will not result in a breach or violation of
any of the terms and provisions of, or constitute a default
under, any statute, any agreement or instrument known to such
counsel to which the Company is a party or by which it is bound
or to which any of the property of the Company is subject, the
Company's charter or by-laws, or any order, rule or regulation
known to such counsel of any court or governmental agency or body
having jurisdiction over the Company or any of its properties;
and no consent, approval, authorization or order of, or filing
with, any court or governmental agency or body is required for
the consummation of the transactions contemplated by this
Agreement and the International Underwriting Agreement in
connection with the issuance or sale of the
14
<PAGE>
shares of Stock to be sold by the Company, except such as have
been obtained under the Securities Act and such as may be
required under state or foreign securities laws in connection
with the purchase and distribution of such shares of Stock by the
U.S. Underwriters or the International Managers.
In addition, such counsel shall state that in connection
with its participation in the preparation of the Registration
Statement and the Prospectus and any amendment or supplement thereto
it has not independently verified the accuracy, completeness or
fairness of the statements contained therein, and the limitations
inherent in the examination made by such counsel and the knowledge
available to it are such that they are unable to assume, and do not
assume, any responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statement or the
Prospectus and any amendment or supplement thereto; however, on the
basis of their examination and participation in conferences at which
the contents of the Registration Statement and the Prospectus and any
amendment or supplement thereto and related matters were discussed,
such counsel has no reason to believe that either any part of the
registration statement, when such part became effective, or the
Prospectus and any amendment or supplement thereto, on the date of
filing thereof with the Commission or at the Delivery Date, included
an untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, it being
understood that such counsel need express no opinion as to the
financial statements or other financial data included or required to
be included in any of the documents mentioned in this paragraph.
Such counsel need not express any opinion as to the
availability of equitable remedies or as to laws other than California
and federal law and the corporate law of the State of Delaware. In
giving such opinion, such counsel may rely on certificates of public
officials and officers of the Company as to matters of fact, in which
case the opinion shall state that such counsel has no reason to
believe that they and the U.S. Underwriters are not entitled to so
rely on such certificates.
(e) Counsel for each Significant Subsidiary shall
have furnished to the Representatives their written opinion addressed
to the U.S. Underwriters and dated such Delivery Date, in form and
substance reasonably satisfactory to the Representatives, to the
effect that:
(i) Such Significant Subsidiary is a corporation
duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Such Significant
Subsidiary has the corporate power and authority to conduct all
of the activities conducted by
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it, to own or lease all of the assets owned or leased by it and
to conduct its business as described in the Registration
Statement and the Prospectus; and is duly licensed or qualified
to do business and in good standing as a foreign corporation in
all jurisdictions in which the nature of the activities conducted
by it and/or the character of the assets owned and leased by it
makes such license or qualification necessary, except for those
failures to be so qualified or licensed or in good standing which
will not have a material adverse effect on such Significant
Subsidiary.
(ii) The execution and delivery of this Agreement
and the International Underwriting Agreement by the Company, the
consummation by the Company of the transactions herein and
therein contemplated and the compliance with the terms of this
Agreement and the International Underwriting Agreement do not and
will not conflict with or result in a breach of any of the terms
or provisions of, or constitute a default under, the charter or
bylaws of such Significant Subsidiary or any indenture, mortgage
or other agreement or instrument known to such counsel to which
such Significant Subsidiary is a party or by which such
Significant Subsidiary or any of its properties are bound, or any
existing law, rule, regulation, judgment, order or decree of any
government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over such Significant Subsidiary or
any of its properties.
(iii) All of the issued and outstanding shares
of the capital stock of such Significant Subsidiary, other than
director's qualifying shares, are owned of record by the Company,
and, to the knowledge of such counsel, such shares are
beneficially owned by the Company free and clear of all
mortgages, pledges, liens, security interests, conditional sale
agreements, charges, encumbrances and restrictions of every
nature; and all of such shares are validly issued, fully paid and
non-assessable.
Such opinion shall be to such further effect with respect to other legal
matters relating to this Agreement and the International Underwriting
Agreement and the sale of the Shares hereunder and thereunder as counsel
for the U.S. Underwriters may reasonably request. In giving such opinion,
such counsel may rely on certificates of public officials and officers of
the applicable Significant Subsidiary as to matters of fact, in which case
the opinion shall state that such counsel has no reason to believe that
they and the U.S. Underwriters are not entitled to so rely on such
certificates.
(f) The Representatives shall have received from
Latham & Watkins, counsel for the U.S. Underwriters, such opinion or
opinions, dated such Delivery Date, with respect to the issuance and
sale of the Stock, the Registration Statement, the Prospectus and
other related matters as the
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Representatives may reasonably require, and the Company shall have
furnished to such counsel such documents as they reasonably request
for the purpose of enabling them to pass upon such matters.
(g) At the time of execution of this Agreement, the
Representatives shall have received from Coopers & Lybrand a letter,
in form and substance satisfactory to the Representatives, addressed
to the U.S. Underwriters and dated the date hereof stating, as of the
date hereof (or, with respect to matters involving changes or
developments since the respective dates as of which specified
financial information is given in the Prospectus, as of a date not
more than five days prior to the date hereof), the conclusions and
findings of such firm with respect to the financial information and
other matters ordinarily covered by accountants' "comfort letters" to
underwriters in connection with registered public offerings.
(h) With respect to the letter of Coopers & Lybrand
referred to in the preceding paragraph and delivered to the
Representatives concurrently with the execution of this Agreement (the
"initial letter"), the Company shall have furnished to the
Representatives a letter (the "bring-down letter") of such
accountants, addressed to the U.S. Underwriters and dated such
Delivery Date (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are in
compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, (ii) stating, as of the date of the bring-down letter (or,
with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given
in the Prospectus, as of a date not more than five days prior to the
date of the bring-down letter), the conclusions and findings of such
firm with respect to the financial information and other matters
covered by the initial letter and (iii) confirming in all material
respects the conclusions and findings set forth in the initial letter.
(i) The Company shall have furnished to the
Representatives a certificate, dated such Delivery Date, executed by
its Chairman of the Board, its President or a Vice President and its
Chief Financial Officer stating that:
(i) The representations, warranties and
agreements of the Company in Section 1 are true and correct as of
such Delivery Date; the Company has complied with all its
agreements contained herein; and the conditions set forth in
Sections 7(a) and 7(j) have been fulfilled; and
(ii) They have carefully examined the
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Registration Statement and the Prospectus and, in their opinion
since the Effective Date no event has occurred which should have
been set forth in a supplement or amendment to the Registration
Statement or the Prospectus.
(j) Neither the Company nor any of its subsidiaries
shall have sustained since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus any
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus, and, other than
in the ordinary course of business, that is material to the Company
and its subsidiaries taken as a whole, since such date there shall not
have been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any change, or any development
involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set
forth or contemplated in the Prospectus, the effect of which, in any
such case described in clause (i) or (ii), is, in the judgment of the
Representatives, so material and adverse as to make it impracticable
or inadvisable to proceed with the public offering or the delivery of
the Stock being delivered on such Delivery Date on the terms and in
the manner contemplated in the Prospectus.
(k) Subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the following: (i)
trading in securities generally on the New York Stock Exchange or the
American Stock Exchange or in the over-the-counter market, or trading
in any securities of the Company on any exchange or in the over-the-
counter market, shall have been wholly suspended or minimum prices
shall have been established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium
shall have been declared by Federal or state authorities, (iii) the
United States shall have become engaged in hostilities, there shall
have been an escalation in hostilities involving the United States or
there shall have been a declaration of a national emergency or war by
the United States or (iv) there shall have occurred such a substantial
national or international calamity or other event or occurrence of a
similar nature as to make it, in the judgment of a majority in
interest of the several Underwriters, impracticable or inadvisable to
proceed with the public offering or delivery of the Stock being
delivered on such Delivery Date on the terms and in the manner
contemplated in the Prospectus.
18
<PAGE>
(l) The New York and Pacific Stock Exchanges shall
have approved the Stock for inclusion, subject only to official notice
of issuance.
(m) The closing under the International Underwriting
Agreement shall have occurred concurrently with the closing hereunder
on the First Delivery Date.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the U.S. Underwriters.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall indemnify and hold harmless each U.S.
Underwriter and each person, if any, who controls any U.S. Underwriter within
the meaning of the Securities Act, from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including, but
not limited to, any loss, claim, damage, liability or action relating to
purchases and sales of Stock), to which that U.S. Underwriter or controlling
person may become subject, under the Securities Act or otherwise, insofar as
such loss, claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus or in any amendment or supplement thereto or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and shall reimburse
each U.S. Underwriter and each such controlling person promptly upon demand for
any legal or other expenses reasonably incurred by that U.S. Underwriter or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred; PROVIDED, HOWEVER, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement or the Prospectus or in any such amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company through the Representatives by or on behalf of any U.S.
Underwriter specifically for inclusion therein; and provided further that the
Company shall not be liable to any U.S. Underwriter under the indemnity
agreement in this subsection (a) with respect to any Preliminary Prospectus to
the extent that any such loss, claim, damage or liability of such U.S.
Underwriter results solely from an untrue statement of a material fact contained
in, or the omission of a material fact from, such Preliminary Prospectus which
untrue statement or omission was corrected in the U.S. Prospectus or the
International Prospectus or both, as the case may be, if the Company shall
sustain the burden of proving that such U.S. Underwriter sold Securities to the
person alleging such loss, claim, damage or liability without sending or giving,
at or prior to the written confirmation of such sale, a copy of the U.S.
Prospectus or the International Prospectus or both, as the case may be
(exclusive of the documents from which information is incorporated by reference)
(or of the Prospectus as then amended or supplemented), if the
19
<PAGE>
Company had previously furnished copies thereof to such Underwriter. The
foregoing indemnity agreement is in addition to any liability which the Company
may otherwise have to any U.S. Underwriter or to any controlling person of that
U.S. Underwriter.
(b) Each U.S. Underwriter, severally and not jointly, shall indemnify
and hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Securities Act, from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Company or any such director, officer or controlling person may
become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company through the Representatives by or on behalf of that U.S.
Underwriter specifically for inclusion therein, and shall reimburse the Company
and any such director, officer or controlling person for any legal or other
expenses reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition to any
liability which any U.S. Underwriter may otherwise have to the Company or any
such director, officer or controlling person.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; PROVIDED, HOWEVER, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure and, PROVIDED FURTHER, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; PROVIDED, HOWEVER, that
the Representatives shall have the right to employ counsel to represent jointly
the Representatives and those other U.S. Underwriters and their respective
controlling persons who may be subject to liability arising out of any claim in
respect of which
20
<PAGE>
indemnity may be sought by the U.S. Underwriters against the Company under this
Section 8 if, in the reasonable judgment of counsel to the Representatives, it
is advisable for the Representatives and those U.S. Underwriters and controlling
persons to be jointly represented by separate counsel, and in that event the
fees and expenses of such separate counsel shall be paid by the Company. An
indemnifying party will not, without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld), settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding. An indemnified party will not, without the prior written
consent of the indemnifying party (which consent shall not be unreasonably
withheld), settle or compromise any such action, but if settled with the consent
of the indemnifying party or if there be a final judgment for the plaintiff in
any such action, the indemnifying party agrees to indemnify and hold harmless
any indemnified party from and against any loss or liability by reason of such
settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 8(a) or 8(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the U.S. Underwriters on the other
from the offering of the Stock or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and the U.S. Underwriters
on the other with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the U.S. Underwriters on the other with respect to
such offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Stock purchased under this Agreement (before
deducting expenses) received by the Company on the one hand, and the total
underwriting discounts and commissions received by the U.S. Underwriters with
respect to the shares of the Stock purchased under this Agreement, on the other
hand, bear to the total gross proceeds from the offering of the shares of the
Stock under this Agreement, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company or the U.S. Underwriters, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The U.S. Underwriters agree that it would not be just
and equitable if contributions pursuant to this Section were to be determined
by pro rata allocation (even if the U.S. Underwriters were treated as one entity
for such purpose) or by any other method of
21
<PAGE>
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 8(d) shall be deemed to include, for purposes
of this Section 8(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 8(d), no U.S.
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Stock underwritten by it and distributed
to the public was offered to the public exceeds the amount of any damages which
such U.S. Underwriter has otherwise paid or become liable to pay by reason of
any untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The U.S. Underwriters'
obligations to contribute as provided in this Section 8(d) are several in
proportion to their respective underwriting obligations and not joint.
(e) The U.S. Underwriters severally confirm that the statements with
respect to the public offering of the Stock set forth on the cover page of, and
under the caption "Underwriting" in, the Prospectus are correct and constitute
the only information furnished in writing to the Company by or on behalf of the
U.S. Underwriters specifically for inclusion in the Registration Statement and
the Prospectus.
9. DEFAULTING UNDERWRITERS.
If, on either Delivery Date, any U.S. Underwriter defaults in the
performance of its obligations under this Agreement, the remaining non-
defaulting U.S. Underwriters shall be obligated to purchase the Stock which the
defaulting U.S. Underwriter agreed but failed to purchase on such Delivery Date
in the respective proportions which the number of shares of the Firm Stock set
forth opposite the name of each remaining non-defaulting U.S. Underwriter in
Schedule 1 hereto bears to the total number of shares of the Firm Stock set
forth opposite the names of all the remaining non-defaulting U.S. Underwriters
in Schedule 1 hereto; PROVIDED, HOWEVER, that the remaining non-defaulting U.S.
Underwriters shall not be obligated to purchase any of the Stock on such
Delivery Date if the total number of shares of the Stock which the defaulting
U.S. Underwriter or U.S. Underwriters agreed but failed to purchase on such date
exceeds 9.09% of the total number of shares of the Stock to be purchased on such
Delivery Date, and any remaining non-defaulting U.S. Underwriter shall not be
obligated to purchase more than 110% of the number of shares of the Stock which
it agreed to purchase on such Delivery Date pursuant to the terms of Section 2.
If the foregoing maximums are exceeded, the remaining non-defaulting U.S.
Underwriters, or those other underwriters satisfactory to the Representatives
who so agree, shall have the right, but shall not be obligated, to purchase, in
such proportion as may be agreed upon among them, all the Stock to be purchased
on such Delivery Date. If the remaining U.S. Underwriters or other underwriters
satisfactory to the Representatives do not elect to purchase the shares which
the defaulting U.S. Underwriter or U.S. Underwriters agreed but failed to
purchase on such Delivery Date, this Agreement (or, with respect to the Second
Delivery Date, the obligation of the U.S. Underwriters to purchase,
22
<PAGE>
and of the Company to sell, the Option Stock) shall terminate without liability
on the part of any non-defaulting Underwriter or the Company, except that the
Company will continue to be liable for the payment of expenses to the extent set
forth in Sections 6 and 11. As used in this Agreement, the term "U.S.
Underwriter" includes, for all purposes of this Agreement unless the context
requires otherwise, any party not listed in Schedule 1 hereto who, pursuant to
this Section 9, purchases Firm Stock which a defaulting U.S. Underwriter agreed
but failed to purchase.
Nothing contained herein shall relieve a defaulting U.S. Underwriter
of any liability it may have to the Company for damages caused by its default.
If other underwriters are obligated or agree to purchase the Stock of a
defaulting or withdrawing U.S. Underwriter, either the Representatives or the
Company may postpone the Delivery Date for up to seven full business days in
order to effect any changes that in the opinion of counsel for the Company or
counsel for the U.S. Underwriters may be necessary in the Registration
Statement, the Prospectus or in any other document or arrangement.
10. TERMINATION. The obligations of the U.S. Underwriters hereunder
may be terminated by the Representatives by notice given to and received by the
Company prior to delivery of and payment for the Firm Stock if, prior to that
time, any of the events described in Section 7(j), shall have occurred or if the
U.S. Underwriters shall decline to purchase the Stock for any reason permitted
under this Agreement.
11. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the sale of the U.S.
Shares provided for herein is not consummated by reason of any failure, refusal
or inability on the part of the Company to perform any agreement on its part to
be performed, or because any other condition of the U.S. Underwriters'
obligations hereunder required to be fulfilled by the Company is not fulfilled,
the Company will reimburse the U.S. Underwriters for all reasonable out-of-
pocket expenses (including fees and disbursements of counsel) incurred by the
Underwriters in connection with this Agreement and the proposed purchase of the
Stock, and upon demand the Company shall pay the full amount thereof to the
Representatives.
12. NOTICES, ETC. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the U.S. Underwriters, shall be delivered or
sent by mail, telex or facsimile transmission to Lehman Brothers Inc.,
Three World Financial Center, New York, New York 10285, Attention:
Syndicate Department (Fax: 212-528-8822), with a copy, in the case of
any notice pursuant to Section 11(d), to the Director of Litigation,
Office of the General Counsel, Lehman Brothers Inc., 2 World Trade
Center, 15th Floor, New York, NY 10048;
(b) if to the Company shall be delivered or sent by
mail, telex or facsimile transmission to the address of the Company
set forth in the Registration Statement, Attention: Lesley Kleveter
(Fax: 310-607-8844);
23
<PAGE>
PROVIDED, HOWEVER, that any notice to an U.S. Underwriter pursuant to Section
8(c) shall be delivered or sent by mail, telex or facsimile transmission to such
U.S. Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the U.S. Underwriters by Lehman Brothers Inc. on behalf of
the Representatives.
13. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the U.S. Underwriters, the Company,
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that (A) the
representations, warranties, indemnities and agreements of the Company contained
in this Agreement shall also be deemed to be for the benefit of the person or
persons, if any, who control any U.S. Underwriter within the meaning of
Section 15 of the Securities Act and for the benefit of each International
Manager (and controlling persons thereof) who offers or sells any shares of
Common Stock in accordance with the terms of the Agreement between U.S.
Underwriters and International Managers and (B) the indemnity agreement of the
U.S. Underwriters contained in Section 8(b) of this Agreement shall be deemed to
be for the benefit of directors of the Company, officers of the Company who have
signed the Registration Statement and any person controlling the Company within
the meaning of Section 15 of the Securities Act. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 13, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
14. SURVIVAL. The respective indemnities, representations,
warranties and agreements of the Company and the U.S. Underwriters contained in
this Agreement or made by or on behalf on them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Stock and shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any of them or any person controlling any of them.
15. DEFINITION OF THE TERM "BUSINESS DAY". For purposes of this
Agreement, "business day" means any day on which the New York Stock Exchange,
Inc. is open for trading.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF NEW YORK.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
24
<PAGE>
If the foregoing correctly sets forth the agreement between the
Company and the U.S. Underwriters, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
INTERNATIONAL RECTIFIER CORPORATION
By
----------------------------------------
Eric Lidow
President and Chief Executive Officer
LEHMAN BROTHERS INC.
KIDDER, PEABODY & CO. INCORPORATED
MONTGOMERY SECURITIES
PAINEWEBBER INCORPORATED
SMITH BARNEY INC.
For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto
By LEHMAN BROTHERS INC.
By
-------------------------------------
H. Brooks Dexter
25
<PAGE>
SCHEDULE 1
Number of
Underwriters Shares
------------ ---------
Lehman Brothers Inc.. . . . . . . . . . . .
Kidder Peabody & Co. Incorporated . . . . .
Montgomery Securities . . . . . . . . . . .
PaineWebber Incorporated. . . . . . . . . .
Smith Barney Inc. . . . . . . . . . . . . .
---------
Total. . . . . . . . . . . . . . . . . 3,600,000
---------
---------
1
<PAGE>
EXHIBIT 1(b)
1,035,000 SHARES
INTERNATIONAL RECTIFIER CORPORATION
COMMON STOCK
($1.00 PAR VALUE)
INTERNATIONAL UNDERWRITING AGREEMENT
November __, 1994
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
KIDDER, PEABODY INTERNATIONAL PLC
MONTGOMERY SECURITIES
PAINEWEBBER INTERNATIONAL (U.K.) LTD.
SMITH BARNEY INC.
As Representatives of the several
Underwriters named in Schedule 1,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
International Rectifier Corporation, a Delaware corporation (the
"Company"), proposes to sell 900,000 shares (the "International Stock") of the
Company's Common Stock, par value $1.00 per share (the "Common Stock") through
arrangements with certain underwriters outside the United States named in
Schedule 1 hereto (the "International Managers"), for whom Lehman Brothers
International (Europe), Kidder, Peabody International PLC, Montgomery
Securities, PaineWebber International (U.K.) Ltd. and Smith Barney Inc. are
acting as lead managers. In addition, the Company proposes to grant to the
International Managers an option to purchase up to an additional 135,000 shares
of the Common Stock on the terms and for the purposes set forth in Section 2
(the "Option Stock"). The International Stock and the Option Stock, if
purchased, are hereinafter collectively called the "Stock."
It is understood by all parties that the Company is concurrently
entering into an agreement dated the date hereof (the "U.S. Underwriting
Agreement") providing for the sale by
<PAGE>
the Company of 3,600,000 shares of Common Stock (the "Firm Stock") through the
U.S. Underwriters named in Schedule 2 hereof (the "U.S. Underwriters"). In
addition, the Company proposes to grant to the U.S. Underwriters an option to
purchase up to an additional 540,000 shares of the Common Stock on the terms and
for the purposes set forth in Section 2.
The U.S. Underwriters and the International Managers simultaneously
are entering into an agreement between the U.S. and international underwriting
syndicates (the "Agreement Between U.S. Underwriters and International
Managers") which provides for, among other things, the transfer of shares of
Common Stock between the two syndicates. Two forms of prospectus are to be used
in connection with the offering and sale of shares of Common Stock contemplated
by the foregoing, one relating to the Firm Stock and the other relating to the
U.S. Stock. The latter form of prospectus will be identical to the former
except for certain substitute pages as included in the registration statement
and amendments thereto referred to below. Except as used in Sections 2, 3, 4,
9, and 10 herein, and except as the context may otherwise require, references
herein to the Stock shall include all the shares of which may be sold pursuant
to either this Agreement or the U.S. Underwriting Agreement, and references
herein to any prospectus whether in preliminary or final form, and whether as
amended or supplemented, shall include both the U.S. and the international
versions thereof.
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-3 with respect to the
Stock has (i) been prepared by the Company in conformity with the
requirements of the United States Securities Act of 1933 (the "Securities
Act") and the rules and regulations (the "Rule and Regulations") of the
United States Securities and Exchange Commission (the "Commission")
thereunder, (ii) been filed with the Commission under the Securities Act
and (iii) become effective under the Securities Act. Copies of such
registration statement and all amendments thereto have been delivered by
the Company to you as the representatives (the "Representatives") of the
International Managers. As used in this Agreement, "Effective Time" means
the date and the time as of which such registration statement, or the most
recent post-effective amendment thereto, if any, was declared effective by
the Commission; "Effective Date" means the date of the Effective Time;
"Preliminary Prospectus" means each prospectus included in such
registration statement, or amendments thereof, before it became effective
under the Securities Act and any prospectus filed with the Commission by
the Company with the consent of the Representatives pursuant to Rule 424(a)
of the Rules and Regulations; "Registration Statement" means such
registration statement, as amended at the Effective Time, including any
documents incorporated by reference therein at such time and all
information contained in the final prospectus filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations in accordance with
Section 5(a) hereof and deemed to be a part of the registration statement
as of the Effective Time pursuant to paragraph (b) of Rule 430A of the
Rules and Regulations; and "Prospectus" means such final prospectus, as
first filed with the Commission pursuant to paragraph (1) or (4) of Rule
424(b) of the Rules and Regulations. Reference made herein to any
Preliminary Prospectus or to the Prospectus shall be deemed to refer to and
include any documents
2
<PAGE>
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Securities Act, as of the date of such Preliminary Prospectus or the
Prospectus, as the case may be, and any reference to any amendment or
supplement to any Preliminary Prospectus or the Prospectus shall be deemed
to refer to and include any document filed under the United States
Securities Exchange Act of 1934 (the "Exchange Act") after the date of such
Preliminary Prospectus or the Prospectus, as the case may be, and
incorporated by reference in such Preliminary Prospectus or the Prospectus,
as the case may be; and any reference to any amendment to the Registration
Statement shall be deemed to include any annual report of the Company filed
with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act
after the Effective Time that is incorporated by reference in the
Registration Statement. The Commission has not issued any order preventing
or suspending the use of any Preliminary Prospectus.
(b) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all material respects to the
requirements of the Securities Act and the Rules and Regulations and will
not, as of the applicable effective date (as to the Registration Statement
and any amendment thereto) and as of the applicable filing date (as to the
Prospectus and any amendment or supplement thereto) contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; PROVIDED that no representation or warranty is made as to
information contained in or omitted from the Registration Statement or the
Prospectus in reliance upon and in conformity with written information
furnished to the Company through the Representatives by or on behalf of any
International Manager specifically for inclusion therein.
(c) The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the case
may be, conformed in all material respects to the requirements of the
Exchange Act and the rules and regulations of the Commission thereunder,
and none of such documents contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(d) The Company and each of its Significant Subsidiaries (as
defined in Section 1(s)) have been duly incorporated and are validly
existing as corporations in good standing under the laws of their
respective jurisdictions of incorporation, are duly qualified to do
business and are in good standing as foreign corporations in each
jurisdiction in which their respective ownership or lease of property or
the conduct of their respective businesses requires such qualification
(except where the failure to be so qualified, considering all such cases in
the aggregate, does not involve a material risk to the business,
properties, financial position or results of operations of the Company and
its subsidiaries taken as a whole) and have all corporate power and
authority necessary to own or hold their respective properties and to
conduct the businesses in which they are engaged and none of the
subsidiaries of the Company is a "significant subsidiary,"
3
<PAGE>
as such term is defined in Rule 405 of the Rules and Regulations, except as
set forth in Section 1(s) below.
(e) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid
and non-assessable and conform to the description thereof contained in the
Prospectus; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued
and are fully paid and non-assessable and (except for directors' qualifying
shares) are owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims.
(f) The unissued shares of the Stock to be issued and sold by
the Company to the International Managers hereunder and to the U.S.
Underwriters under the U.S. Underwriting Agreement have been duly and
validly authorized and, when issued and delivered against payment therefor
as provided herein and in the U.S. Underwriting Agreement, will be duly and
validly issued, fully paid and non-assessable; and the Stock will conform
to the description thereof contained in the Prospectus.
(g) This Agreement has been duly authorized, executed and
delivered by the Company.
(h) The Company and each of its subsidiaries have complied in
all respects with all laws, regulations and orders applicable to them or
their respective businesses, the violation of which would have a material
adverse effect upon the business, properties, financial condition or
earnings of the Company and its subsidiaries taken as a whole, and neither
the Company nor any of its subsidiaries is in default under any indenture,
mortgage, deed of trust, voting trust agreement, loan agreement, bond,
debenture, note agreement or other evidence of indebtedness, lease,
contract or other agreement or instrument to which any of them is a party
or by which any of them or any of their respective properties are bound,
which default would individually or in the aggregate have a material
adverse effect on the Company and its subsidiaries taken as a whole, and no
other party under any such agreement or instrument to which the Company or
any of its subsidiaries is a party is, to the knowledge of the Company, in
default in any material respect thereunder, and neither the Company nor any
of its subsidiaries is in violation of its respective charter or bylaws, as
the case may be.
(i) The execution, delivery and performance of this Agreement
and the U.S. Underwriting Agreement by the Company and the consummation of
the transactions contemplated hereby will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the property or assets of the Company or any of
its subsidiaries is subject, nor will such actions result in any violation
of the provisions of the charter or by-laws of the Company or any of its
subsidiaries or any statute or any order, rule or
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regulation of any court or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their properties or
assets; and except for the registration of the Stock under the Securities
Act and such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and applicable
state or foreign securities laws in connection with the purchase and
distribution of the Stock by the International Managers and the U.S.
Underwriters no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is
required for the execution, delivery and performance of this Agreement, or
the U.S. Underwriting Agreement by the Company and the consummation of the
transactions contemplated hereby.
(j) There are no contracts, agreements or understandings between
the Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement.
(k) Except as described in the Prospectus, the Company has not
sold or issued any shares of Common Stock during the six-month period
preceding the date of the Prospectus, including any sales pursuant to Rule
144A under, or Regulations D or S of, the Securities Act other than shares
issued pursuant to employee benefit plans, qualified stock options plans or
other employee compensation plans or pursuant to outstanding options,
rights or warrants.
(l) Neither the Company nor any of its subsidiaries has
sustained, since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus, any material loss
or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus; and, since such date, there has not been
any change in the capital stock or long-term debt of the Company or any of
its subsidiaries, other than in the ordinary course of business that is
material to the Company and its Subsidiaries taken as a whole, or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, otherwise than as set forth or contemplated
in the Prospectus.
(m) The financial statements including the related notes and
supporting schedules filed as part of the Registration Statement or
included or incorporated by reference in the Prospectus present fairly the
financial condition and results of operations of the entities purported to
be shown thereby, at the dates and for the periods indicated, and have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved.
(n) The Company and each of its subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all
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personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; and all real property and
buildings held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases, with such exceptions
as are not material and do not interfere with the use made and proposed to
be made of such property and buildings by the Company and its subsidiaries.
(o) Except to the extent that legal proceedings between the
Company and SGS-Thomson Microelectronics, Inc., as disclosed in the
Prospectus, are resolved on a materially adverse basis to the Company, each
of the Company and its subsidiaries have sufficient trademarks, trade
names, registered service marks, patent rights, licenses, permits,
copyright protection and similar governmental authorizations currently
required for the conduct of the Company's business, and the Company and
each of its subsidiaries, as the case may be, is in all material respects
complying therewith; other than as disclosed in the Prospectus, the
expiration of any such trademarks, trade names, registered service marks,
patent rights, licenses, permits, copyrights and similar governmental
authorization would not materially adversely affect the condition
(financial or otherwise), business, results of operations or prospects of
the Company and its subsidiaries taken as a whole; and, except as disclosed
in the Prospectus, or in writing by the Company to the Representatives of
the several U.S. Underwriters, neither the Company nor any subsidiary has
received any notice of violation or infringement of or conflict with
asserted rights of others with respect to any trademarks, trade names,
registered service marks, patent rights, licenses or copyrights.
(p) Except as described in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property or assets of the Company
or any of its subsidiaries is the subject which, if determined adversely to
the Company or any of its subsidiaries, might have a material adverse
effect on the consolidated financial position, stockholders' equity,
results of operations, business or prospects of the Company and its
subsidiaries; and to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(q) There are no contracts or other documents which are required
to be described in the Prospectus or filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which have
not been described in the Prospectus or filed as exhibits to the
Registration Statement or incorporated therein by reference as permitted by
the Rules and Regulations.
(r) Neither the Company nor any subsidiary is an "investment
company" within the meaning of such term under the United States Investment
Company Act of 1940 and the rules and regulations of the Commission
thereunder.
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(s) The only significant subsidiaries of the Company, as such
term is defined in Rule 405 of the Rules and Regulations, are International
Rectifier Company (Great Britain) Limited and International Rectifier
Corporation Italiana S.p.A. (the "Significant Foreign Subsidiaries").
2. PURCHASE OF THE STOCK BY THE INTERNATIONAL MANAGERS. On the
basis of the representations and warranties contained in, and subject to the
terms and conditions of, this Agreement, the Company agrees to sell the
International Stock to the several International Managers and each of the
International Managers, severally and not jointly, agrees to purchase the number
of shares of the International Stock set forth opposite that International
Manager's name in Schedule 1 hereto. The respective purchase obligations of the
International Managers with respect to the International Stock shall be rounded
among the International Managers to avoid fractional shares, as the
Representatives may determine.
In addition, the Company grants to the International Managers an
option to purchase up to 135,000 shares of Option Stock. Such option is granted
solely for the purpose of covering over-allotments in the sale of International
Stock and is exercisable as provided in Section 4 hereof. Shares of Option
Stock shall be purchased severally for the account of the International Managers
in proportion to the number of shares of International Stock set forth opposite
the name of such International Managers in Schedule 1 hereto. The respective
purchase obligations of each International Manager with respect to the Option
Stock shall be adjusted by the Representatives so that no International Manager
shall be obligated to purchase Option Stock other than in 100 share amounts.
The price of both the International Stock and any Option Stock shall be $_____
per share.
The Company shall not be obligated to deliver any of the Stock to be
delivered on the First Delivery Date or the Second Delivery Date (as hereinafter
defined), as the case may be, except upon payment for all the Stock to be
purchased on such Delivery Date as provided herein and in the U.S. Underwriting
Agreement.
3. OFFERING OF STOCK BY THE INTERNATIONAL MANAGERS. Upon
authorization by the Representatives of the release of the Firm Stock, the
several International Managers propose to offer the International Stock for sale
upon the terms and conditions set forth in the Prospectus.
Each International Manager agrees that, except to the extent permitted
by the Agreement Between U.S. Underwriters and International Managers, it will
not offer or sell any of the Stock in the United States or Canada.
4. DELIVERY OF AND PAYMENT FOR THE STOCK. Delivery of the
International Stock shall be made at the office of Lehman Brothers Inc., New
York, New York and payment for the International Stock shall be made at the
office of [Latham & Watkins], Los Angeles, California at 10:00 A.M., New York
City time, on the fifth full business day following the date of this Agreement
or at such other date or place as shall be determined by agreement between the
Representatives and the Company. This date and time are sometimes referred to
as the "First Delivery Date." On the First Delivery Date, the Company shall
deliver or cause to be delivered certificates representing the International
Stock to the Representatives for the account of each
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International Manager against payment to or upon the order of the Company of the
purchase price by certified or official bank check or checks payable in Clearing
House (next-day) funds. Time shall be of the essence, and delivery at the time
and place specified pursuant to this Agreement is a further condition of the
obligation of each International Manager hereunder. Upon delivery, the
International Stock shall be registered in such names and in such denominations
as the Representatives shall request in writing not less than two full business
days prior to the First Delivery Date. For the purpose of expediting the
checking and packaging of the certificates for the International Stock, the
Company shall make the certificates representing the International Stock
available for inspection by the Representatives in New York, New York, not later
than 2:00 P.M., New York City time, on the business day prior to the First
Delivery Date.
At any time on or before the thirtieth day after the date of this
Agreement the option granted in Section 2 may be exercised by written notice
being given to the Company by the Representatives. Such notice shall set forth
the aggregate number of shares of Option Stock as to which the option is being
exercised, the names in which the shares of Option Stock are to be registered,
the denominations in which the shares of Option Stock are to be issued and the
date and time, as determined by the Representatives, when the shares of Option
Stock are to be delivered; PROVIDED, HOWEVER, that this date and time shall not
be earlier than the First Delivery Date nor earlier than the second business day
after the date on which the option shall have been exercised nor later than the
fifth business day after the date on which the option shall have been exercised.
The date and time the shares of Option Stock are delivered are sometimes
referred to as the "Second Delivery Date" and the First Delivery Date and the
Second Delivery Date are sometimes each referred to as a "Delivery Date."
Delivery of and payment for the Option Stock shall be made at the
place specified in the first sentence of the first paragraph of this Section 4
(or at such other place as shall be determined by agreement between the
Representatives and the Company) at 10:00 A.M., New York City time, on the
Second Delivery Date. On the Second Delivery Date, the Company shall deliver or
cause to be delivered the certificates representing the Option Stock to the
Representatives for the account of each International Manager against payment to
or upon the order of the Company of the purchase price by certified or official
bank check or checks payable in New York Clearing House (next-day) funds. Time
shall be of the essence, and delivery at the time and place specified pursuant
to this Agreement is a further condition of the obligation of each International
Manager hereunder. Upon delivery, the Option Stock shall be registered in such
names and in such denominations as the Representatives shall request in the
aforesaid written notice. For the purpose of expediting the checking and
packaging of the certificates for the Option Stock, the Company shall make the
certificates representing the Option Stock available for inspection by the
Representatives in New York, New York, not later than 2:00 P.M., New York City
time, on the business day prior to the Second Delivery Date.
5. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees:
(a) To prepare the Prospectus in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b) under
the Securities Act not later than the Commission's close of business on the
second business day
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following the execution and delivery of this Agreement or, if applicable,
such earlier time as may be required by Rule 430A(a)(3) under the
Securities Act; to make no further amendment or any supplement to the
Registration Statement or to the Prospectus prior to the last Delivery Date
except as permitted herein; to advise the Representatives, promptly after
it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish the Representatives with copies thereof; to file promptly all
reports and any definitive proxy or information statements required to be
filed by the Company with the Commission pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus
and for so long as the delivery of a prospectus is required in connection
with the offering or sale of the Stock; to advise the Representatives,
promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus, of the suspension of
the qualification of the Stock for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional information;
and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus or suspending any such qualification, to use promptly its best
efforts to obtain its withdrawal;
(b) To furnish promptly to each of the Representatives and to
counsel for the International Managers a signed copy of the Registration
Statement as originally filed with the Commission, and each amendment
thereto filed with the Commission, including all consents and exhibits
filed therewith;
(c) To deliver promptly to the Representatives such number of
the following documents as the Representatives shall reasonably request:
(i) conformed copies of the Registration Statement as originally filed with
the Commission and each amendment thereto (in each case excluding exhibits
other than this Agreement and the computation of per share earnings), (ii)
each Preliminary Prospectus, the Prospectus and any amended or supplemented
Prospectus and (iii) any document incorporated by reference in the
Prospectus (excluding exhibits thereto; and, if the delivery of a
prospectus is required at any time after the Effective Time in connection
with the offering or sale of the Stock or any other securities relating
thereto and if at such time any events shall have occurred as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is delivered,
not misleading, or, if for any other reason it shall be necessary to amend
or supplement the Prospectus or to file under the Exchange Act any document
incorporated by reference in the Prospectus in order to comply with the
Securities Act or the Exchange Act, to notify the Representatives and, upon
their request, to file such document and to prepare and furnish without
charge to each International Manager and to any dealer in securities as
many copies as the Representatives may from time to time reasonably request
of an
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<PAGE>
amended or supplemented Prospectus which will correct such statement or
omission or effect such compliance.
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or the Representatives,
be required by the Securities Act or requested by the Commission;
(e) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus, any document
incorporated by reference in the Prospectus or any Prospectus pursuant to
Rule 424 of the Rules and Regulations, to furnish a copy thereof to the
Representatives and counsel for the International Managers and obtain the
consent of the Representatives to the filing;
(f) As soon as practicable after the Effective Date, but in any
event not later than fifteen months after the end of the Company's current
fiscal quarter, to make generally available to the Company's security
holders and to deliver to the Representatives an earnings statement of the
Company and its subsidiaries (which need not be audited) complying with
Section 11(a) of the Securities Act and the Rules and Regulations
(including, at the option of the Company, Rule 158);
(g) For a period of five years following the Effective Date, to
furnish to the Representatives copies of all materials furnished by the
Company to its shareholders and all public reports and all reports and
financial statements furnished by the Company to the principal national
securities exchange upon which the Common Stock may be listed pursuant to
requirements of or agreements with such exchange or to the Commission
pursuant to the Exchange Act or any rule or regulation of the Commission
thereunder;
(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Stock for offering
and sale under the securities laws of such jurisdictions as the
Representatives may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for as
long as may be necessary to complete the distribution of the Stock PROVIDED
that in connection therewith the Company shall not be required to qualify
as a foreign corporation or to file a general consent to service of process
in any jurisdiction;
(i) For a period of 90 days from the date of the Prospectus, not
to offer for sale, sell or otherwise dispose of (or enter into any
transaction which is designed to, or could be expected to, result in the
disposition by any person of), directly or indirectly, any shares of Common
Stock (other than the Stock and shares issued pursuant to employee benefit
plans, qualified stock option plans or other employee compensation plans
existing on the date hereof or pursuant to currently outstanding options,
warrants or rights), or sell or grant options, rights or warrants with
respect to any shares of Common Stock (other than the grant of options
pursuant to option plans
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<PAGE>
existing on the date hereof), without the prior written consent of Lehman
Brothers International (Europe);
(j) Prior to the Effective Date, to apply for the inclusion of
the Stock on the New York and Pacific Stock Exchanges, Inc. and to use its
best efforts to complete that listing, subject only to official notice of
issuance and evidence of satisfactory distribution, prior to the First
Delivery Date;
(k) To apply the net proceeds from the sale of the Stock being
sold by the Company as set forth in the Prospectus; and
(l) To take such steps as shall be necessary to ensure that
neither the Company nor any subsidiary shall become an "investment company"
within the meaning of such term under the United States Investment Company
Act of 1940 and the rules and regulations of the Commission thereunder.
6. EXPENSES. The Company agrees to pay (a) the costs incident to
the authorization, issuance, sale and delivery of the Stock and any taxes
payable in that connection; (b) the costs incident to the preparation, printing
and filing under the Securities Act of the Registration Statement and any
amendments and exhibits thereto; (c) the costs of distributing the Registration
Statement as originally filed and each amendment thereto and any post-effective
amendments thereof (including, in each case, exhibits), any Preliminary
Prospectus, the Prospectus and any amendment or supplement to the Prospectus or
any document incorporated by reference therein, all as provided in this
Agreement; (d) the costs of printing and distributing this Agreement, the
Agreement Between U.S. Underwriters and International Managers, any Supplemental
Agreement Among U.S. Underwriters and any other related documents in connection
with the offering, purchase, sale and delivery of the stock; (e) the filing fees
incident to securing any required review by the National Association of
Securities Dealers, Inc. of the terms of sale of the Stock; (f) any applicable
listing or other fees; (g) the fees and expenses (not in excess, in the
aggregate, of $10,000.00 of qualifying the Stock under the securities laws of
the several jurisdictions as provided in Section 5(h) and of preparing, printing
and distributing a Blue Sky Memorandum (including related fees and expenses of
counsel to the Underwriters); and (h) all other costs and expenses incident to
the performance of the obligations of the Company under this Agreement; PROVIDED
that, except as provided in this Section 6 and in Section 11 the U.S.
Underwriters shall pay their own costs and expenses, including the costs and
expenses of their counsel, any transfer taxes on the Stock which they may sell
and the expenses of advertising any offering of the Stock made by the
International Managers.
7. CONDITIONS OF INTERNATIONAL MANAGERS' OBLIGATIONS. The
respective obligations of the International Managers hereunder are subject to
the accuracy, when made and on each Delivery Date, of the representations and
warranties of the Company contained herein, to the performance by the Company of
its obligations hereunder, and to each of the following additional terms and
conditions:
(a) The Prospectus shall have been timely filed with the
Commission in accordance with Section 5(a); no stop order suspending the
effectiveness of the
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Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and any request of the Commission for inclusion of additional
information in the Registration Statement or the Prospectus or otherwise
shall have been complied with.
(b) No U.S. Underwriter or International Manager shall have
discovered and disclosed to the Company on or prior to such Delivery Date
that the Registration Statement or the Prospectus or any amendment or
supplement thereto contains an untrue statement of a fact which, in the
opinion of Latham & Watkins, counsel for the U.S. Underwriters and the
International Managers, is material or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein
or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the U.S.
Underwriting Agreement, the Stock, the Registration Statement and the
Prospectus, and all other legal matters relating to this Agreement and the
transactions contemplated hereby shall be reasonably satisfactory in all
material respects to counsel for the International Managers, and the
Company shall have furnished to such counsel all documents and information
that they may reasonably request to enable them to pass upon such matters.
(d) O'Melveny & Myers shall have furnished to the
Representatives their written opinion, as counsel to the Company, addressed
to the International Managers and dated such Delivery Date, in form and
substance reasonably satisfactory to the Representatives, to the effect
that:
(i) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of its
jurisdiction of incorporation and has full corporate power and
authority to conduct its business as described in the Registration
Statement and the Prospectus;
(ii) The shares of Stock have been duly authorized and
validly issued, are fully paid and non-assessable and conform to the
description thereof in the Prospectus; and the shareholders of the
Company have no preemptive rights with respect to the shares of Stock
being issued and sold by the Company hereunder;
(iii) The Registration Statement has become effective under
the Act, the Prospectus has been filed as required by Section 1(a)
hereof, and to the knowledge of such counsel no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or threatened by the
Commission;
(iv) Each part of the registration statement, when such part
became effective, and the Prospectus and any amendment or supplement
thereto, on the date of filing thereof with the Commission and at the
Delivery Date,
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appeared on their face to comply as to form in all material respects
with the requirements of the Securities Act and the Rules and
Regulations, and the documents incorporated by reference in the
Registration Statement or the Prospectuses or any amendment or
supplement thereto, when they became effective under the Securities
Act or were filed with the Commission under the Exchange Act, as the
case may be, in either case to the extent amended, appeared on their
face to comply as to form in all material respects with the
requirements of the Securities Act or the Exchange Act, as applicable,
and the rules and regulations of the Commission thereunder, it being
understood that such counsel need express no opinion as to the
financial statements or other financial data included or required to
be included in any of the documents mentioned in this clause;
(v) The descriptions in the Registration Statement and the
Prospectus of statutes, legal and governmental proceedings, contracts
and other documents are accurate and fairly present the information
required to be shown; and such counsel do not know of any statutes or
legal or governmental proceedings required to be described in the
Prospectus that are not described as required, or of any contracts or
documents of a character required to be described in the Registration
Statement or the Prospectus (or required to be filed under the
Exchange Act if upon such filing they would be incorporated by
reference therein) or to be filed as exhibits to the Registration
Statement that are not described or filed as required; and
(vi) This Agreement and the U.S. Underwriting Agreement have
been duly authorized, executed and delivered by the Company, the
performance of this Agreement and the U.S. Underwriting Agreement and
the consummation of the transactions herein and therein contemplated
(except for the provisions of Section 8 herein and therein as to which
no opinion need be expressed) will not result in a breach or violation
of any of the terms and provisions of, or constitute a default under,
any statute, any agreement or instrument known to such counsel to
which the Company is a party or by which it is bound or to which any
of the property of the Company is subject, the Company's charter or
by-laws, or any order, rule or regulation known to such counsel of any
court or governmental agency or body having jurisdiction over the
Company or any of its properties; and no consent, approval,
authorization or order of, or filing with, any court or governmental
agency or body is required for the consummation of the transactions
contemplated by this Agreement and the U.S. Underwriting Agreement in
connection with the issuance or sale of the shares of Stock to be sold
by the Company, except such as have been obtained under the Securities
Act and such as may be required under state or foreign securities laws
in connection with the purchase and distribution of such shares of
Stock by the U.S. Underwriters or the International Managers.
In addition, such counsel shall state that in connection with its
participation in the preparation of the Registration Statement and the
Prospectus and any amendment
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or supplement thereto it has not independently verified the accuracy,
completeness or fairness of the statements contained therein, and the
limitations inherent in the examination made by such counsel and the
knowledge available to it are such that they are unable to assume, and do
not assume, any responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statement or the
Prospectuses and any amendment or supplement thereto; however, on the basis
of their examination and participation in conferences at which the contents
of the Registration Statement and the Prospectus and any amendment or
supplement thereto and related matters were discussed, such counsel has no
reason to believe that either any part of the registration statement, when
such part became effective, or the Prospectus and any amendment or
supplement thereto, on the date of filing thereof with the Commission or at
the Delivery Date, included an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, it being understood that such counsel need express no opinion
as to the financial statements or other financial data included or required
to be included in any of the documents mentioned in this paragraph.
Such counsel need not express any opinion as to the availability
of equitable remedies or as to laws other than California and federal law
and the corporate law of the State of Delaware. In giving such opinion,
such counsel may rely on certificates of public officials and officers of
the Company as to matters of fact, in which case the opinion shall state
that such counsel has no reason to believe that they and the International
Managers are not entitled to so rely on such certificates.
(e) Counsel for each Significant Subsidiary shall have furnished
to the Representatives their written opinion addressed to the International
Managers and dated such Delivery Date, in form and substance reasonably
satisfactory to the Representatives, to the effect that:
(i) Such Significant Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Such Significant Subsidiary has
the corporate power and authority to conduct all of the activities
conducted by it, to own or lease all of the assets owned or leased by
it and to conduct its business as described in the Registration
Statement and the Prospectus; and is duly licensed or qualified to do
business and in good standing as a foreign corporation in all
jurisdictions in which the nature of the activities conducted by it
and/or the character of the assets owned and leased by it makes such
license or qualification necessary, except for those failures to be so
qualified or licensed or in good standing which will not have a
material adverse effect on such Significant Subsidiary.
(ii) The execution and delivery of this Agreement and the
U.S. Underwriting Agreement by the Company, the consummation by the
Company of the transactions herein and therein contemplated and the
compliance with the terms of this Agreement and the U.S. Underwriting
Agreement do not and will not conflict with or result in a breach of
any of the terms or provisions of, or
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constitute a default under, the charter or bylaws of such Significant
Subsidiary or any indenture, mortgage or other agreement or instrument
known to such counsel to which such Significant Subsidiary is a party
or by which such Significant Subsidiary or any of its properties are
bound, or any existing law, rule, regulation, judgment, order or
decree of any government, governmental instrumentality or court,
domestic or foreign, having jurisdiction over such Significant
Subsidiary or any of its properties.
(iii) All of the issued and outstanding shares of the
capital stock of such Significant Subsidiary, other than director's
qualifying shares, are owned of record by the Company, and, to the
knowledge of such counsel, such shares are beneficially owned by the
Company free and clear of all mortgages, pledges, liens, security
interests, conditional sale agreements, charges, encumbrances and
restrictions of every nature; and all of such shares are validly
issued, fully paid and non-assessable.
Such opinion shall be to such further effect with respect to other legal
matters relating to this Agreement and the U.S. Underwriting Agreement and
the sale of the Shares hereunder and thereunder as counsel for the
International Managers may reasonably request. In giving such opinion,
such counsel may rely on certificates of public officials and officers of
the applicable Significant Subsidiary as to matters of fact, in which case
the opinion shall state that such counsel has no reason to believe that
they and the International Managers are not entitled to so rely on such
certificates.
(f) The Representatives shall have received from Latham &
Watkins, counsel for the International Managers, such opinion or opinions,
dated such Delivery Date, with respect to the issuance and sale of the
Stock, the Registration Statement, the Prospectus and other related matters
as the Representatives may reasonably require, and the Company shall have
furnished to such counsel such documents as they reasonably request for the
purpose of enabling them to pass upon such matters.
(g) At the time of execution of this Agreement, the
Representatives shall have received from Coopers & Lybrand a letter, in
form and substance satisfactory to the Representatives, addressed to the
International Managers and dated the date hereof stating, as of the date
hereof (or, with respect to matters involving changes or developments since
the respective dates as of which specified financial information is given
in the Prospectus, as of a date not more than five days prior to the date
hereof), the conclusions and findings of such firm with respect to the
financial information and other matters ordinarily covered by accountants'
"comfort letters" to underwriters in connection with registered public
offerings.
(h) With respect to the letter of Coopers & Lybrand referred to
in the preceding paragraph and delivered to the Representatives
concurrently with the execution of this Agreement (the "initial letter"),
the Company shall have furnished to the Representatives a letter (the
"bring-down letter") of such accountants, addressed to the International
Managers and dated such Delivery Date (i) confirming that they are
15
<PAGE>
independent public accountants within the meaning of the Securities Act and
are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, (ii) stating, as of the date of the bring-down letter (or, with
respect to matters involving changes or developments since the respective
dates as of which specified financial information is given in the
Prospectus, as of a date not more than five days prior to the date of the
bring-down letter), the conclusions and findings of such firm with respect
to the financial information and other matters covered by the initial
letter and (iii) confirming in all material respects the conclusions and
findings set forth in the initial letter.
(i) The Company shall have furnished to the Representatives a
certificate, dated such Delivery Date, executed by its Chairman of the
Board, its President or a Vice President and its Chief Financial Officer
stating that:
(i) The representations, warranties and agreements of the
Company in Section 1 are true and correct as of such Delivery Date;
the Company has complied with all its agreements contained herein; and
the conditions set forth in Sections 7(a) and 7(j) have been
fulfilled; and
(ii) They have carefully examined the Registration Statement
and the Prospectus and, in their opinion since the Effective Date no
event has occurred which should have been set forth in a supplement or
amendment to the Registration Statement or the Prospectus.
(j) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus, and since such date there shall not have
been any change in the capital stock or long-term debt of the Company or
any of its subsidiaries, other than in the ordinary course of business,
that is material to the Company and its subsidiaries taken as a whole or
any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in this Section
(j), is, in the judgment of the Representatives, so material and adverse as
to make it impracticable or inadvisable to proceed with the public offering
or the delivery of the Stock being delivered on such Delivery Date on the
terms and in the manner contemplated in the Prospectus.
(k) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange or the American Stock
Exchange or in the over-the-counter market, or trading in any securities of
the Company on any exchange or in the over-the-counter market, shall have
been wholly suspended or minimum prices shall have been
16
<PAGE>
established on any such exchange or such market by the Commission, by such
exchange or by any other regulatory body or governmental authority having
jurisdiction, (ii) a banking moratorium shall have been declared by Federal
or state authorities, (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities involving
the United States or there shall have been a declaration of a national
emergency or war by the United States or (iv) there shall have occurred
such a substantial national or international calamity or other event or
occurrence of a similar nature as to make it, in the judgment of a majority
in interest of the several Underwriters, impracticable or inadvisable to
proceed with the public offering or delivery of the Stock being delivered
on such Delivery Date on the terms and in the manner contemplated in the
Prospectus.
(l) The New York and Pacific Stock Exchanges shall have approved
the Stock for inclusion, subject only to official notice of issuance.
(m) The closing under the U.S. Underwriting Agreement shall have
occurred concurrently with the closing hereunder on the First Delivery
Date.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the International Managers.
8. INDEMNIFICATION AND CONTRIBUTION
(a) The Company shall indemnify and hold harmless each
International Manager and each person, if any, who controls any
International Manager within the meaning of the Securities Act, from and
against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, but not limited to, any loss, claim,
damage, liability or action relating to purchases and sales of Stock), to
which that International Manager or controlling person may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus or in
any amendment or supplement thereto or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall
reimburse each International Manager and each such controlling person
promptly upon demand for any legal or other expenses reasonably incurred by
that International Manager or controlling person in connection with
investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action as such expenses are incurred; PROVIDED,
HOWEVER, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out
of, or is based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or in any such amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company through the Representatives by or on behalf of any
International Manager specifically for
17
<PAGE>
inclusion therein; and provided further that the Company shall not be
liable to any International Manager under the indemnity agreement in this
subsection (a) with respect to any Preliminary Prospectus to the extent
that any such loss, claim, damage or liability of such International
Manager results solely from an untrue statement of a material fact
contained in, or the omission of a material fact from, such Preliminary
Prospectus which untrue statement or omission was corrected in the U.S.
Prospectus or the International Prospectus or both, as the case may be, if
the Company shall sustain the burden of proving that such International
Manager sold Securities to the person alleging such loss, claim, damage or
liability without sending or giving, at or prior to the written
confirmation of such sale, a copy of the U.S. Prospectus or the
International Prospectus or both, as the case may be (exclusive of the
documents from which information is incorporated by reference) (or of the
Prospectus as then amended or supplemented), if the Company had previously
furnished copies thereof to such International Manager. The foregoing
indemnity agreement is in addition to any liability which the Company may
otherwise have to any International Manager or to any controlling person of
that International Manager.
(b) Each International Manager, severally and not jointly, shall
indemnify and hold harmless the Company, each of its directors, each of its
officers who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of the Securities Act, from and
against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company or any such director,
officer or controlling person may become subject, under the Securities Act
or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus or in any amendment or supplement
thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written
information furnished to the Company through the Representatives by or on
behalf of that International Manager specifically for inclusion therein,
and shall reimburse the Company and any such director, officer or
controlling person for any legal or other expenses reasonably incurred by
the Company or any such director, officer or controlling person in
connection with investigating or defending or preparing to defend against
any such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any
liability which any International Manager may otherwise have to the Company
or any such director, officer or controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the claim or the commencement of that
action; PROVIDED, HOWEVER, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under this
Section 8 except to the
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<PAGE>
extent it has been materially prejudiced by such failure and, PROVIDED
FURTHER, that the failure to notify the indemnifying party shall not
relieve it from any liability which it may have to an indemnified party
otherwise than under this Section 8. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying
party thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it wishes, jointly with any other similarly
notified indemnifying party, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 8 for any legal or other
expenses subsequently incurred by the indemnified party in connection with
the defense thereof other than reasonable costs of investigation; PROVIDED,
HOWEVER, that the Representatives shall have the right to employ counsel to
represent jointly the Representatives and those other International
Managers and their respective controlling persons who may be subject to
liability arising out of any claim in respect of which indemnity may be
sought by the International Managers against the Company under this Section
8 if, in the reasonable judgment of counsel to the Representatives, it is
advisable for the Representatives and those International Managers and
controlling persons to be jointly represented by separate counsel, and in
that event the fees and expenses of such separate counsel shall be paid by
the Company. An indemnifying party will not, without the prior written
consent of the indemnified parties (which consent shall not be unreasonably
withheld), settle or compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, suit or proceeding
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to
such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding. An
indemnified party will not, without the prior written consent of the
indemnifying party (which consent shall not be unreasonably withheld),
settle or compromise any such action, but if settled with the consent of
the indemnifying party or if there be a final judgment for the plaintiff in
any such action, the indemnifying party agrees to indemnify and hold
harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall
for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein,
then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate
to reflect the relative benefits received by the Company on the one hand
and the International Managers on the other from the offering of the Stock
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the International Managers on the
other with respect to the
19
<PAGE>
statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company on
the one hand and the International Managers on the other with respect to
such offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Stock purchased under this Agreement
(before deducting expenses) received by the Company on the one hand, and
the total underwriting discounts and commissions received by the
International Managers with respect to the shares of the Stock purchased
under this Agreement, on the other hand, bear to the total gross proceeds
from the offering of the shares of the Stock under this Agreement, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by the Company or
the International Managers, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The International Managers agree that it would not
be just and equitable if contributions pursuant to this Section were to be
determined by pro rata allocation (even if the International Managers were
treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as
a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 8(d) shall be deemed to include,
for purposes of this Section 8(d), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 8(d), no International Manager shall be required to contribute any
amount in excess of the amount by which the total price at which the Stock
underwritten by it and distributed to the public was offered to the public
exceeds the amount of any damages which such International Manager has
otherwise paid or become liable to pay by reason of any untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The International
Managers' obligations to contribute as provided in this Section 8(d) are
several in proportion to their respective underwriting obligations and not
joint.
(e) The International Managers severally confirm that the
statements with respect to the public offering of the Stock set forth on
the cover page of, and under the caption "Underwriting" in, the Prospectus
are correct and constitute the only information furnished in writing to the
Company by or on behalf of the International Managers specifically for
inclusion in the Registration Statement and the Prospectus.
9. DEFAULTING UNDERWRITERS. If, on either Delivery Date, any
International Manager defaults in the performance of its obligations under this
Agreement, the remaining non-defaulting International Managers shall be
obligated to purchase the Stock which the defaulting International Manager
agreed but failed to purchase on such Delivery Date in the respective
proportions which the number of shares of the Firm Stock set forth opposite the
name of each remaining non-defaulting International Manager in Schedule 1 hereto
bears to the total number
20
<PAGE>
of shares of the Firm Stock set forth opposite the names of all the remaining
non-defaulting International Managers in Schedule 1 hereto; PROVIDED, HOWEVER,
that the remaining non-defaulting International Managers shall not be obligated
to purchase any of the Stock on such Delivery Date if the total number of shares
of the Stock which the defaulting International Manager or International
Managers agreed but failed to purchase on such date exceeds 9.09% of the total
number of shares of the Stock to be purchased on such Delivery Date, and any
remaining non-defaulting International Manager shall not be obligated to
purchase more than 110% of the number of shares of the Stock which it agreed to
purchase on such Delivery Date pursuant to the terms of Section 2. If the
foregoing maximums are exceeded, the remaining non-defaulting International
Managers, or those other underwriters satisfactory to the Representatives who so
agree, shall have the right, but shall not be obligated, to purchase, in such
proportion as may be agreed upon among them, all the Stock to be purchased on
such Delivery Date. If the remaining International Managers or other
underwriters satisfactory to the Representatives do not elect to purchase the
shares which the defaulting International Manager or International Managers
agreed but failed to purchase on such Delivery Date, this Agreement (or, with
respect to the Second Delivery Date, the obligation of the International
Managers to purchase, and of the Company to sell, the Option Stock) shall
terminate without liability on the part of any non-defaulting Underwriter or the
Company, except that the Company will continue to be liable for the payment of
expenses to the extent set forth in Sections 6 and 11. As used in this
Agreement, the term "International Manager" includes, for all purposes of this
Agreement unless the context requires otherwise, any party not listed in
Schedule 1 hereto who, pursuant to this Section 9, purchases Firm Stock which a
defaulting International Manager agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting International
Manager of any liability it may have to the Company for damages caused by its
default. If other underwriters are obligated or agree to purchase the Stock of
a defaulting or withdrawing International Manager, either the Representatives or
the Company may postpone the Delivery Date for up to seven full business days in
order to effect any changes that in the opinion of counsel for the Company or
counsel for the International Managers may be necessary in the Registration
Statement, the Prospectus or in any other document or arrangement.
10. TERMINATION. The obligations of the International Managers
hereunder may be terminated by the Representatives by notice given to and
received by the Company prior to delivery of and payment for the International
Stock if, prior to that time, any of the events described in Section 7(i), shall
have occurred or if the International Managers shall decline to purchase the
Stock for any reason permitted under this Agreement.
11. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the sale of the
International Stock provided for herein is not consummated by reason of any
failure, refusal or inability on the part of the Company to perform any
agreement on its part to be performed, or because any other condition of the
International Managers' obligations hereunder required to be fulfilled by the
Company is not fulfilled, the Company will reimburse the International Managers
for all reasonable out-of-pocket expenses (including fees and disbursements of
counsel) incurred by the International Managers in connection with this
Agreement and the proposed purchase of the Stock, and upon demand the Company
shall pay the full amount thereof to the Representatives.
21
<PAGE>
12. NOTICES, ETC. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the International Managers, shall be delivered or sent
by mail, telex or facsimile transmission to Lehman Brothers Inc., Three
World Financial Center, New York, New York 10285, Attention: Syndicate
Department (Fax: 212-528-8822), with a copy, in the case of any notice
pursuant to Section 11(d), to the Director of Litigation, Office of the
General Counsel, Lehman Brothers Inc., 2 World Trade Center, 15th Floor,
New York, NY 10048;
(b) if to the Company shall be delivered or sent by mail, telex
or facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Lesley Kleveter (Fax: 310-607-8844);
PROVIDED, HOWEVER, that any notice to an International Manager pursuant to
Section 8(c) shall be delivered or sent by mail, telex or facsimile transmission
to such International Manager at its address set forth in its acceptance telex
to the Representatives, which address will be supplied to any other party hereto
by the Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the International Managers by Lehman Brothers Inc. on
behalf of the Representatives.
13. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the International Managers, the
Company, and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
(A) the representations, warranties, indemnities and agreements of the Company
contained in this Agreement shall also be deemed to be for the benefit of the
person or persons, if any, who control any International Manager within the
meaning of Section 15 of the Securities Act and for the benefit of each
International Manager (and controlling persons thereof) who offers or sells any
shares of Common Stock in accordance with the terms of the Agreement between
U.S. Underwriter and International Managers and (B) the indemnity agreement of
the International Managers contained in Section 8(b) of this Agreement shall be
deemed to be for the benefit of directors of the Company, officers of the
Company who have signed the Registration Statement and any person controlling
the Company within the meaning of Section 15 of the Securities Act. Nothing in
this Agreement is intended or shall be construed to give any person, other than
the persons referred to in this Section 13, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision contained
herein.
14. SURVIVAL. The respective indemnities, representations,
warranties and agreements of the Company and the International Managers
contained in this Agreement or made by or on behalf on them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Stock and shall remain in full force and effect, regardless of any investigation
made by or on behalf of any of them or any person controlling any of them.
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<PAGE>
15. DEFINITION OF THE TERM "BUSINESS DAY." For purposes of this
Agreement, "business day" means any day on which the New York Stock Exchange,
Inc. is open for trading.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF NEW YORK.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
19. MISCELLANEOUS. Each International Manager hereby agrees with the
Company and the Selling Stockholders that:
(a) It has not offered or sold and will not offer or sell any
Shares in the United Kingdom by means of any documents, other than to
persons whose ordinary business it is to buy or sell shares or debentures,
whether as principal or agent (except in circumstances which do not
constitute an offer to the public within the meaning of the Companies Act
1985);
(b) It will comply with all applicable provisions of the
Financial Services Act 1986 and with the rules and regulations of any
relevant regulatory body or authority with respect to anything done by it
in relation to the Shares in, from or otherwise involving the United
Kingdom; and
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<PAGE>
(c) It will only issue or distribute to any person in the United
Kingdom any document relating to the issue of the Shares if that person is
of a kind described in Article 9(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1988.
If the foregoing correctly sets forth the agreement between the
Company and the International Managers, please indicate your acceptance in the
space provided for that purpose below.
Very truly yours,
INTERNATIONAL RECTIFIER CORPORATION
By
---------------------------------------
Eric Lidow
President and Chief Executive Officer
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
KIDDER, PEABODY INTERNATIONAL PLC
MONTGOMERY SECURITIES
PAINEWEBBER INTERNATIONAL (U.K.) LTD.
SMITH BARNEY INC.
For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto
By LEHMAN BROTHERS INC.
By
----------------------------------
H. Brooks Dexter
24
<PAGE>
SCHEDULE 1
Number of
Underwriters Shares
------------ ---------
Lehman Brothers International (Europe). . .
Kidder Peabody International PLC. . . . . .
Montgomery Securities . . . . . . . . . . .
PaineWebber International (U.K.) Ltd. . . .
Smith Barney Inc. . . . . . . . . . . . . .
-------
Total. . . . . . . . . . . . . . . . . 900,000
-------
-------
1 - 1
<PAGE>
SCHEDULE 2
Number of
Underwriters Shares
------------ ---------
Lehman Brothers Inc.. . . . . . . . . . . .
Kidder Peabody & Co. Incorporated . . . . .
Montgomery Securities . . . . . . . . . . .
PaineWebber Incorporated. . . . . . . . . .
Smith Barney Inc. . . . . . . . . . . . . .
---------
Total. . . . . . . . . . . . . . . . . 3,600,000
---------
---------
2 - 1
<PAGE>
[O'MELVENY & MYERS LETTERHEAD]
November
14th
1994
International Rectifier Corporation
233 Kansas Street
El Segundo, California 90245
Ladies and Gentlemen:
At your request we have examined the Registration Statement on Form S-3
(Registration No. 33-56245) filed by you on October 28, 1994 (the "Registration
Statement") with the Securities and Exchange Commission. The Registration
Statement was filed in connection with the registration under the Securities Act
of 1933, as amended, of 4,500,000 shares of your Common Stock, $1.00 par value
per share ("Common Stock"), of which 3,600,000 shares will initially be sold by
you to Lehman Brothers Inc., Kidder, Peabody & Co. Incorporated, Montgomery
Securities, PaineWebber Incorporated, Smith Barney Inc. and certain other
underwriters named therein for offering in the United States and Canada (the
"U.S. Underwriters"), and 900,000 shares will initially be sold by you to Lehman
Brothers International (Europe), Kidder, Peabody International PLC, Montgomery
Securities, PaineWebber International (U.K.) Ltd., Smith Barney Inc. and certain
other underwriters named therein (with the U.S. Underwriters, the
"Underwriters") for offering outside the United States and Canada; an additional
675,000 shares may be sold to the Underwriters upon exercise of an
over-allotment option (all of such shares of Common Stock to be sold by you
referred to as the "Securities").
We are familiar with the proceedings heretofore taken, and with the
additional proceedings proposed to be taken, by you in connection with the
authorization and proposed issuance and sale of the Securities.
It is our opinion that, subject to the Registration Statement becoming
effective and to said proceedings being duly taken and completed by you as now
contemplated by us as your counsel prior to the issuance of the Securities, upon
the issuance and sale by you of the Securities in the manner contemplated by the
Registration Statement, the Securities will be legally and validly issued, fully
paid and nonassessable securities of International Rectifier Corporation.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to our firm in the Prospectuses which are a part
of the Registration Statement under the caption "Legal Opinions."
Respectfully submitted,
O'MELVENY & MYERS
Exhibit 5
