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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1995
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____________ to ____________
Commission file number 1-7935
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INTERNATIONAL RECTIFIER CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-1528961
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
233 KANSAS STREET
EL SEGUNDO, CA 90245
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (310) 322-3331
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Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
---------------------------------------- --------------------------------------
Common Stock, par value $1 New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report (s)), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ____
The aggregate market value of the registrant's voting Common Stock held by
non-affiliates of the registrant was approximately $925,670,509 (computed using
the closing price of a share of Common Stock on August 24, 1995 reported by New
York Stock Exchange).
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
There were 25,222,645 shares of the registrant's Common Stock, par value $1.00
per share, outstanding on August 24, 1995.
Portions of the registrant's definitive Proxy Statement for the Annual Meeting
of Stockholders scheduled to be held on November 20, 1995, which Proxy Statement
will be filed no later than 120 days after the close of the registrant's fiscal
year ended June 30, 1995, are incorporated by reference in Part III of this
Annual Report on Form 10-K.
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TABLE OF CONTENTS
PART I
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ITEM PAGE
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1. Business............................................................. 1
2. Properties........................................................... 8
3. Legal Proceedings.................................................... 8
4. Submission of Matters to a Vote of the Security Holders.............. 9
Additional Item. Directors and Executive Officers of the
Registrant........................................................... 10
PART II
5. Market for the Registrants' Common Equity and Related Stockholders'
Matters.............................................................. 11
6. Selected Financial Data.............................................. 12
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 13
8. Financial Statements and Supplementary Data.......................... 16
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................. 34
PART III
10. Directors and Executive Officers of the Registrant................... 34
11. Executive Compensation............................................... 34
12. Security Ownership of Certain Beneficial Owners and Management....... 34
13. Certain Relationships and Related Transactions....................... 34
PART IV
14. Exhibits, Financial Statement Schedule, and Reports.................. 34
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PART I
ITEM 1. BUSINESS
INTRODUCTION
International Rectifier Corporation ("IR" or the "Company") is a major
worldwide supplier of power semiconductors. Power semiconductors switch or
condition electricity at relatively high voltage and current levels in products
such as computers/peripherals, automobiles, portable phones, and electronic
lights.
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, electrical power is converted 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 the switch. The switch chops the energy into small elements. Output
rectification re-configures the elements into a form usable by electrically
operated equipment.
IR supplies products that perform each of the four basic functions in power
conversion, and many circuits use more than one type of IR product. This allows
IR to develop products that work together to optimize overall circuit
performance, and enables the Company to capitalize more broadly on market-
leading 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. Computer/peripheral applications
include power supplies, disk drives, and printers. Office equipment applications
include copiers and facsimile machines. Consumer electronics and lighting
applications include home entertainment, household appliances and electronic
lighting ballasts. Communications applications include portable phones,
telephone networks and modems. Power semiconductors are also used widely in
industrial applications such as motor-driven production lines, machine tools,
fork lifts, and welders.
Based on statistics published by the Semiconductor Industry Association (the
"SIA"), the Company believes it is the leader in the power MOSFET (Metal Oxide
Semiconductor Field Effect Transistor) segment with its trademarked
HEXFET-Registered Trademark- power MOSFETs and IGBTs (Insulated Gate Bipolar
Transistors). SIA data indicates that industry-wide sales of power MOSFETs were
$1.5 billion in calendar 1994, an increase of 38% over 1993 levels, and that,
over the past five years, power MOSFET sales have grown at an average rate of
28% per year.
The Company's major customers include industry leaders such as AT&T
Technologies Inc., Conner Peripherals, Inc., General Motors Corp., Hewlett
Packard Co., International Business Machines Corp., Matsushita Electronics
Corporation, Sanken Electric Company, Ltd., Sony Corporation, Sporele and
Siemens AG. In fiscal year 1995 the Company's sales by region were approximately
46% from North America, 28% from Europe, and 26% from Asia. IR has manufacturing
facilities in North America, Europe, and Asia, and uses subcontract assembly in
Asia.
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.
POWER SEMICONDUCTOR INDUSTRY
Semiconductors are silicon-based chips that conduct and block electricity.
The semiconductor industry consists of integrated circuits ("ICs") and power
semiconductors. ICs operate at low power levels and perform multiple functions
to process and convey information in electronic signal form. IC capability is
largely defined by circuit density, which increases as its features are
miniaturized. The
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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 condition and control 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 raw electric current into a more useful form. The amount of electric
current handled and the heat it generates limit the rate at which power
semiconductors can be miniaturized.
Advances in power semiconductor performance and cost-per-function have been
achieved through the use of MOS technology. MOS power transistors (power MOSFETs
and IGBTs) have gained an increasing share of the power transistor market at the
expense of bipolar transistors that also serve the switch function.
MOS power transistors offer significant benefits over bipolar power
transistors. They provide much greater switching speed, which allows the design
of higher frequency, more compact circuits. They are activated by voltage rather
than current, so they require less external circuitry. MOS transistors are more
compatible with microprocessor controls. They offer more reliable long-term
performance and are more rugged, so they can better withstand adverse operating
conditions. Power MOSFETs and IGBTs compare favorably to bipolar power
transistors on a price/performance basis.
APPLICATIONS
Power semiconductors are used in a broad spectrum of commercial and
industrial applications, including many products with long life cycles. Because
of their more gradual rate of technological change and the diversity of
applications, the demand for power semiconductors is less cyclical than for ICs.
Power semiconductor demand is driven by conversion to new technologies, the
proliferation of new end-product applications, and growth in the end markets.
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
battery-operated products such as lap-top and notebook computers,
personal digital organizers, cellular telephones, household appliances
and hand tools.
AUTOMOTIVE ELECTRONIC SYSTEMS. The concentration of solid state
electronics in recent model year automobiles has increased rapidly, as
safety and comfort features increase demands on the battery.
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 MOS transistors.
ELECTRONIC LIGHTING BALLASTS. Electronic lighting ballasts, which
incorporate power MOSFETs and Power Integrated Circuits, significantly
reduce the amount of energy consumed in lighting. Conversion to
electronic ballasts has been driven by lower end-user operating costs
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 ("CFCs") to less toxic
refrigerants which are also less efficient. Manufacturers of
refrigerators and air conditioners can compensate for these less
efficient chemicals by using more efficient variable-speed motors.
PRODUCTS
The Company's products convert electrical power to make it more useable and
efficient in performing work such as operating power supplies, controlling
motors, and lighting lamps. The products' ability to minimize energy lost at
each point in the power conversion process is central to
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their value. Important growth applications include such energy-sensitive
products as electronic fluorescent lights, more energy efficient refrigeration
and air conditioning equipment, and electric vehicles.
The Company's HEXFET power MOSFET products comprised about 66% of fiscal
1995 sales. IR also supplies IGBT transistors, High Voltage Control Integrated
Circuits, high-performance diodes, and high power rectifiers and thyristors. The
Company believes that this complete line of power conversion products represents
a competitive advantage, enabling IR to provide customers with integrated
solutions to their power conversion needs.
SWITCHING PRODUCTS
MOS TRANSISTORS. MOS transistors (power MOSFETs and IGBTs) serve the switch
function in power conversion to provide an even, usable flow of power for
electronic equipment.
POWER MOSFETS. Through its HEXFET product line, the Company is the world
leader in power MOSFETs. The breadth and diversity of the market for these
products help to stabilize demand.
Applications for MOSFETs in automobiles include anti-lock braking and 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 lighting ballasts and
compact fluorescent bulbs. Industrial applications include instrumentation and
test equipment. 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.
The Company fabricates the large majority of its power MOSFET wafers at
HEXFET America. Die from these wafers are assembled into packaged devices at
HEXFET America, IR's facilities in England and Mexico, and subcontract
facilities in Asia. See "-- Manufacturing."
IGBTS. IGBTs typically serve the switch function in power conversion
applications that require higher current and voltage than power MOSFETs handle
efficiently. 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. The Company believes that
its patents on fundamental MOSFET technology also apply to IGBTs, and it is
seeking further patent protection on its IGBT technology.
CONTROL PRODUCTS
HIGH VOLTAGE CONTROL ICS. These devices serve the control function of power
conversion. They perform the functions of several discrete components. This
integration allows IR's customers to simplify circuit design and assembly,
improve reliability and reduce overall system size and cost. In sensing and
responding to adverse operating conditions, High Voltage Control IC performance
is superior to that of discrete components in a safety or diagnostic circuit.
IR's High Voltage Control ICs draw on the Company's MOSFET technology and are
designed to optimize the performance of both power MOSFETs and IGBTs. The
Company believes that its power MOSFET patents also apply to a broad range of
High Voltage Control ICs.
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High Voltage Control ICs are used in a wide variety of power supply, motor
and lighting control applications. These include industrial motor controls, home
appliance motor controls, solenoid drivers, welding equipment, telecom
switchers, computer/peripherals, instrumentation and test equipment, electronic
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 of power conversion.
These products condition power to make it more efficient and useable,
principally in industrial end products that require power-handling capability
from one amp to 5000 amps and from 20 volts to 5000 volts. Applications include
motor and lighting controls, 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 of power conversion. Output rectification reconfigures
the elements into a form usable by electrically operated equipment. Schottky
diodes are used with power MOSFETs in high-frequency applications such as
computer/peripherals. The Company's trademarked HEXFRED-Registered Trademark-
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 expose silicon wafers to chemicals that change their
electrical properties. The chemicals are applied in patterns that define cells
or circuits within 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. Power
semiconductors generally use the process technology and equipment already proven
in ICs manufacturing.
The Company has production facilities in California, England, Italy, Mexico
and India. In addition, the Company has equipment at, or manufacturing supply
agreements with, subcontractors located in the Philippines, Japan, Taiwan,
Malaysia, and the United States.
IR fabricates substantially all of its power MOSFET wafers at HEXFET America
in Temecula, California. A wafer fabrication facility for IGBTs and other MOSFET
devices as well as assembly operations for government and other advanced
products are located in El Segundo, California. Facilities that assemble HEXFETs
and other 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 MOSFET products, IGBTs and other modules. The Company's Oxted,
England facility, which qualifies as a duty-free facility, assembles MOSFETs,
IGBTs, Schottky and diodes. Since April 1, 1994 the Company has manufactured
substantially all its high power rectifiers and thyristors at its Turin, Italy
facility. The Company also has arrangements with third parties for product
assembly in the Philippines, Malaysia, Taiwan, Japan and Mexico. In a duty-free
zone in India, the Company has an assembly facility for rectifiers and
thyristors.
To meet rising demand for power MOSFETs, the Company is expanding wafer
fabrication at HEXFET America. The Company believes that the estimated $75
million expansion will increase its power MOSFET fabrication capacity by about
75% and is expected to support about $185 million in additional product
shipments at full utilization.
The expansion will position IR to aggressively address the fastest growing
segments of the power transistor market, high density 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. A core process with shared elements for both products
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will enable the facility to combine flexibility with efficient high-volume
manufacturing techniques. 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 expansion is on schedule and within budget at this time. The
Company has completed substantially all equipment installation and has begun
internal qualification and operator and technician training. Customer
qualifications are expected to begin in September, and manufacturing is
scheduled to begin to ramp up by the end of the calendar year.
Shortly after the close of the fiscal year, IR announced plans to transfer
assembly lines from HEXFET America to its assembly facility in Tijuana, Mexico
and to independent subcontractors. Designed to allow the California plant to
focus on expansion of its benchmark wafer fabrication capability and to reduce
the cost of assembling the Company's HEXFET-Registered Trademark- power MOSFET
chips into finished devices, the move will affect only the assembly phase of
manufacturing. The Company's 75 percent expansion of wafer fabrication capacity
is unaffected by the move. The assembly lines will be moved out of the
California plant over a 12 to 18 month period.
MARKETING, SALES AND DISTRIBUTION
The Company markets its products through sales personnel, representatives,
or 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 1995 the Company's sales by region were approximately 46%
from North America, 28% from Europe, and 26% from Asia. The Company's domestic
direct sales force is organized in four sales zones. In Western Europe, the
Company's products are sold through its own sales force as well as through sales
agents and distributors. The Company's European sales and representative offices
are in England, Italy, Sweden, France, Germany, Finland, Denmark, Russia,
Poland, the Czech Republic, and Hungary. In Asia IR has sales and representative
liaison offices in India, Japan, Singapore, China, Hong Kong, and Korea.
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 General Motors Corp., Ford, Delco, Siemens AG and
Bosch. International Business Machines Corp., Hewlett Packard Co., Apple
Computer Inc. and Compaq purchase the Company's products in the computer
segment. Consumer electronics customers include Philips and Sony. Customers in
the telecommunications segment include AT&T Technologies, Inc. and Nokia. The
Company also sells its products to distributors including Arrow Electronics,
Future Electronics, and Pioneer Electronics/Pioneer Technology.
BACKLOG
As of June 30, 1995, the Company's backlog of orders was $210.8 million
compared to $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.
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In fiscal years 1995, 1994 and 1993, the Company spent approximately $20.1
million, $16.4 million and $14.1 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; High Voltage Control ICs for lighting and motor control
applications; and IGBT devices for motor controls. IR's research and development
program is focused on advancing and diversifying the HEXFET product line,
expanding the related IGBT products, and developing High Voltage Control ICs and
other power products that work in combination with HEXFETs 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 64 unexpired U.S. patents and 45 U.S. patents pending.
Those patents fundamental to the Company's products expire between 2000 and
2010. In addition, the Company has 60 foreign patents and 73 foreign patents
pending in a number of countries. The Company 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 Company pays Unitrode Corporation
approximately 12% of the Company'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.
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 13 companies: CP Clare Corporation,
Harris Corporation; Hitachi, Ltd.; Matsushita Electronics Corporation;
Mitsubishi Electric 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 1995, $9,743,000 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"). The patents subject to reexamination are
fundamental to the Company's MOS transistors and their loss would allow
competitors to use currently patented features of the Company's MOS transistor
technology without liability for infringement of those patents. On the following
dates, the PTO granted requests for reexamination of the following patents of
the Company: November 13, 1992 and September 12, 1994 on patent 4,642,666;
September 12, 1994 on patent 4,959,699; September 23, 1994 and June 28, 1995 on
patent 5,008,725; January 17, 1995 on patent 5,130,767; June 5, 1995 on patent
5,191,396; and June 14,1995 on patent 4,593,302. On February 14, 1995, the PTO
issued a reexamination certificate, confirming the patentability of the
Company's U.S. patent 4,705,759.
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
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greater financial resources than IR. The Company believes that its breadth of
product line and its ability to combine products that serve the different
functions into one package distinguish it from its competitors. IR's products
compete with products manufactured by others based on breadth of product line,
quality, price, reliability, over-all performance of the 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.
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 the Company, for cost recovery and contribution
under CERCLA. The lawsuit against the Company, 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. In June 1995, the Company was named among
others as a party defendant in Federal Court apparently in connection with a
third consent decree with respect to the OII Site. The Company recently received
a letter (dated July 25, 1995) from the U.S. Department of Justice offering to
settle claims against Rachelle relating to the first three elements of cleanup
work at the OII Site for the sum of $4,953,148. (The final remedy assessment has
not yet been made). The letter stated that if the offer is not accepted by
September 1, 1995, enforcement action will follow. The Department of Justice
letter is being evaluated. Claims have been made with the Company's insurers
with respect to the OII Site matter; however, there can be no assurance that
insurance coverage attaches to these claims. 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. It was determined that the property required clean-up of
seepage from a storage tank, at an estimated additional cost of $525,000. The
Company commenced the clean-up in fiscal year 1994, and through June 30, 1995
approximately $450,000 in clean-up costs have been incurred which 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 knows 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 (resulting from sending carbon canisters for regeneration to a facility in
the county) 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. Initial information
indicates that less than one percent of all contaminated carbon sent to the site
by PLPs was contributed by the Company. What amount, if any, the Company may be
asked to contribute to solve the groundwater problem is unknown.
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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, in June 1995, agreed to join a group of other PRPs to
remove contamination from the site. Although the final outcome is not known and
depends on final clean-up costs and the allocation scheme, the group currently
estimates a total clean-up cost of about $1.8 million to $2.5 million, of which
about $6,000 to $9,000 might be requested to be borne by the Company.
EMPLOYEES
As of June 30, 1995, the Company employed approximately 3,310 people, of
whom approximately 2,190 are employed in North America, 1,070 in Western 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.
ITEM 2. PROPERTIES
The Company's operations occupy a total of approximately 889,000 square
feet, of which approximately 502,000 square feet are located within the United
States. Of the worldwide total, approximately 268,000 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:
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TOTAL SQUARE
FEET
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FACILITY OWNED LEASED EXPIRATION OF LEASE
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<S> <C> <C> <C>
Temecula, California................... 287,000 -- --
El Segundo, California................. 93,000 115,000 March 31, 1996 - July 31, 2004
Tijuana, Mexico........................ -- 89,000 (1)
Oxted, England......................... 50,000 15,000 March 27, 2012
Turin, Italy........................... 110,000 6,000 August 31, 1995
<FN>
------------------------
(1) In May 1995 the Company purchased land in Tijuana, Mexico on which it
intends to construct a new assembly facility. Since the Company's lease on
its current assembly facility in Mexico expired, it has rented the same
space on a month to month basis. The Company has identified comparable
space available for lease on comparable terms if such assembly facility
needs to be moved prior to completion of the new facility.
</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 81.4% of its worldwide manufacturing capacity. To meet rising
demand for power MOSFETs, 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 increase the Company's
wafer capacity in power MOSFETs 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, Finland,
Scandinavia, Russia, Czech Republic, Hungary, Hong Kong, Japan, China, Korea,
Singapore, and India which operate in leased facilities.
ITEM 3. 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
8
<PAGE>
4,495,513 and 4,712,127. SGS alleges, in substance, that the Company's power
MOSFET, power IC and IGBT products infringe the '314 patent, that the Company's
IGBT products infringe the '513 patent and that certain packages for the
Company'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. The Company cross-appealed a separate ruling by the District Court
denying the Company's motion for summary judgment that the '314 patent is
invalid. In July 1994, the Federal Circuit vacated the District Court's grants
of summary judgment as to the '513, '127 and '314 patents and affirmed the
District Court's denial of the Company's motion for summary judgment of
invalidity of the '314 patent. The Federal Circuit ordered, however, that the
case should proceed in California. A trial date of November 14, 1995 has been
set for the '513 patent, but proceedings on the '314 and '127 patents are
essentially stayed pending completion of reexamination of these patents in the
PTO.
In separate proceedings before the same California District Court, the
Company sought enforcement of a prior license agreement between the Company 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 the Company's U.S. patents 4,959,699 and 4,642,666 on SGS's
sales of power MOSFET, IGBT and power IC products. SGS appealed this decision to
the Federal Circuit, which on May 10, 1995 affirmed the decision in favor of the
Company. SGS subsequently made the required past royalty payment.
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. This action has been essentially stayed pending
completion of reexamination of these patents by the PTO.
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 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. The Court has scheduled trial to begin in December 1995.
No provision for any liability that may result upon adjudication of these
matters has been made in the consolidated financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS
Not applicable.
9
<PAGE>
ADDITIONAL ITEM. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of IR are:
<TABLE>
<S> <C> <C>
Eric Lidow 82 Chairman of the Board
Alexander Lidow 40 Chief Executive Officer; Director
Derek B. Lidow 42 Chief Executive Officer; Director
Robert J. Mueller 66 Executive Vice President -- External Affairs
and Business Development; Director
Michael P. McGee 36 Vice President -- Chief Financial Officer
George Krsek 74 Director
Jack O. Vance 70 Director
Rochus E. Vogt 65 Director
Donald S. Burns 70 Director
James D. Plummer 50 Director
</TABLE>
Eric Lidow is a founder of the Company, has been a director of the Company
since its inception in 1947 and was Chief Executive Officer until March 6, 1995.
Mr. Lidow continues as Chairman of the Board and also serves as Chairman of the
Company's Executive Committee.
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 and Chief Executive Officer on March 6, 1995. 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 and Chief Executive
Officer on March 6, 1995. 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 to the time he joined the
Company, Mr. McGee was a senior manager and audit manager at Ernst and Young.
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, and serves
as Chairman of the Company's Audit Committee.
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 and also serves as
10
<PAGE>
Chairman of the Company's Compensation and Stock Option Committee. 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 the R. Stanton Avery Distinguished Service
Professor and 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.
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, Hillhaven Corporation and International
Technology Corporation.
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.
PART II
ITEM 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDERS'
MATTERS
PRICE RANGE OF COMMON STOCK
(IN DOLLARS)
<TABLE>
<CAPTION>
SECOND QUARTER THIRD QUARTER FOURTH QUARTER
FIRST QUARTER
------------------ ------------------ ------------------ ------------------ STOCKHOLDERS
FISCAL YEAR HIGH LOW HIGH LOW HIGH LOW HIGH LOW AT YEAR END
------------ ------- ------- ------- ------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995........ 22 1/4 15 1/8 24 1/4 19 1/4 26 1/4 22 5/8 33 3/8 23 1/4 1,771
1994........ 13 1/8 10 1/4 14 7/8 10 1/4 19 13 7/8 17 1/8 13 1/2 1,787
</TABLE>
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "IRF".
No dividends have been recently declared or paid. The Company does not
intend to pay cash dividends in the foreseeable future as all funds will be used
to expand operations. Furthermore, under certain credit agreements, the Company
is not permitted to pay any cash dividends.
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data as of June 30, 1995 and 1994 and
for the fiscal years ended June 30, 1995, 1994 and 1993 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, 1993, 1992 and 1991, and for the fiscal years ended June 30, 1992 and
1991 are derived from audited consolidated financial statements of the Company
which are not included herein.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
---------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (IN THOUSANDS
EXCEPT PER SHARE DATA) (1)
Revenues........................................ $ 429,026 $ 328,882 $ 281,732 $ 265,495 $ 252,800
Cost of sales................................... 278,202 219,944 202,684 186,437 167,044
----------- ----------- ----------- ----------- -----------
Gross profit.................................... 150,824 108,938 79,048 79,058 85,756
Selling and administrative expense.............. 82,328 69,008 62,637 58,771 51,544
Research and development expense................ 20,108 16,381 14,083 9,405 7,538
Restructuring charge............................ -- -- -- -- 1,000
----------- ----------- ----------- ----------- -----------
Operating profit................................ 48,388 23,549 2,328 10,882 25,674
Interest expense, net........................... (377) (3,625) (2,250) (1,436) (13,266)
Other income (expense).......................... (544) (1,050) (2,675) 1,066 5,825
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes and
extraordinary item............................. 47,467 18,874 (2,597) 10,512 18,233
Provision for income tax........................ 8,069 3,160 436 1,275 1,086
----------- ----------- ----------- ----------- -----------
Income (loss) before extraordinary item......... 39,398 15,714 (3,033) 9,237 17,147
Extraordinary item, net......................... -- -- -- -- 726
----------- ----------- ----------- ----------- -----------
Net income (loss)............................... $ 39,398 $ 15,714 $ (3,033) $ 9,237 $ 16,421
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Income (loss) per share:
Before extraordinary item..................... $ 1.68 $ 0.78 $ (0.15) $ 0.46 $ 1.30
Extraordinary item............................ -- -- -- -- (0.06)
----------- ----------- ----------- ----------- -----------
Net income (loss) per share................... $ 1.68 $ 0.78 $ (0.15) $ 0.46 $ 1.24
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Average common and common equivalent shares
outstanding.................................... 23,510 20,428 20,087 20,107 13,210
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
<CAPTION>
AT JUNE 30,
---------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (IN THOUSANDS)
Working capital................................. $ 127,751 $ 67,165 $ 58,116 $ 67,538 $ 74,900
Total assets.................................... 496,184 330,574 278,448 285,880 250,263
Short-term debt................................. 25,235 33,310 27,539 27,135 15,821
Long-term debt, less current maturities......... 23,881 26,817 11,810 11,535 11,921
Stockholders' equity............................ 345,181 202,943 186,074 191,703 179,535
<FN>
------------------------
(1) Certain reclassifications have been made to previously reported amounts to
conform with current year presentation.
</TABLE>
12
<PAGE>
ITEM 7. 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 financial
data as a percentage of revenues.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
JUNE 30,
-------------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Revenues................................................... 100.0% 100.0% 100.0%
Cost of sales.............................................. 64.8 66.9 71.9
----- ----- -----
Gross profit............................................... 35.2 33.1 28.1
Selling and administrative expense......................... 19.2 21.0 22.2
Research and development expense........................... 4.7 5.0 5.0
----- ----- -----
Operating profit........................................... 11.3 7.1 0.9
Interest expense, net...................................... (0.1) (1.1) (0.8)
Other expense.............................................. (0.1) (0.3) (1.0)
----- ----- -----
Income (loss) before income taxes.......................... 11.1 5.7 (0.9)
Provision for income taxes................................. 1.9 0.9 0.2
----- ----- -----
Net income (loss).......................................... 9.2% 4.8% (1.1)%
----- ----- -----
----- ----- -----
</TABLE>
1995 COMPARED WITH 1994
Revenues for fiscal 1995 increased 30.4% to $429.0 million from $328.9
million in the prior year. The Company's revenue increase reflected continued
growing demand for the Company's power MOSFET and related devices which resulted
in a 34% increase in revenues from these products. Revenues from the thyristor
and rectifier product lines increased 17% from the prior period. Changes in
foreign exchange rates positively impacted revenues by approximately $11.1
million. Revenues for fiscal 1995 also included $9.7 million of net patent
royalties compared to $9.0 million in the prior period.
Gross profit was 35.2% of revenues ($150.8 million) in fiscal 1995 versus
33.1% of revenues ($108.9 million) in fiscal 1994. The increased margin
reflected greater manufacturing volume and efficiencies and a greater
contribution from new higher margin products.
In fiscal 1995, selling and administrative expense was 19.2% of revenues
($82.3 million) versus 21.0% of revenues ($69.0 million) in fiscal 1994. The
decreased percentage reflects the Company's continued commitment to reducing
operating expenses as a percentage of revenues.
In fiscal 1995, the Company's research and development expenditures
increased $3.7 million to $20.1 million (4.7% of revenues) from $16.4 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 and expansion of the related IGBT products, the development of High Voltage
Control ICs and power products that work in combination with HEXFETs and IGBTs
to improve system performance.
The major components of other expense include a $1.0 million charge for the
transfer of assembly operations to the Company's Mexican subsidiary, $0.3
million of severance costs, $0.3 million on the disposal of property, plant and
equipment, $0.3 million of local taxes and $0.5 million in legal fees, offset by
$0.3 million in foreign currency transaction gains and $1.8 million of net
patent royalty revenues related to prior years.
In fiscal 1995, net interest expense decreased by $3.2 million from the
prior year. The decrease was due to approximately $2.4 million in interest
income earned in the current year on funds received
13
<PAGE>
from a November 1994 offering of the Company's common stock and an increase of
$1.7 million of interest capitalized in the current year, partially offset by
increased interest expense in the first half of the year on higher average debt
balances over the prior year.
1994 COMPARED WITH 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.
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 MOSFET 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 pruning 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 and expansion of the related IGBT products, 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 an activity started in fiscal 1994, in Japan, where
efforts are directed at reducing assembly costs and developing 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.
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 June 30, 1995, the Company maintained cash and cash equivalent balances
of $50.8 million and $3.0 million of short term investments. In addition, the
Company had established $78.5 million of domestic and foreign revolving lines of
credit, against which $17.3 million had been borrowed. Based on covenant and
collateral limitations, the Company had $51.7 million available for borrowing
against these lines at June 30, 1995. Additionally, the Company had at its
disposal $25.0 million of unused
14
<PAGE>
bank term-loan facilities and $23.8 million of unused credit lines for capital
equipment financing. At June 30, 1995, the Company had made purchase commitments
for capital equipment of approximately $24.9 million.
During fiscal 1996 the Company plans to spend approximately $75 million on
capital expenditures for the continuing expansion of its global wafer
fabrication and assembly capacity. The Company intends to fund these capital
expenditure and working capital requirements through cash and cash equivalents
on hand, anticipated cash flow from operations, and as needed, from funds
available from revolving credit, term loan and equipment financing facilities.
The Company may also consider the use of funds from other external sources,
including, but not limited to, public or private offerings of debt or equity.
Although the Company believes that the class action lawsuits brought against
the Company and its Board of Directors (See "Legal Proceedings") are without
merit, the ultimate outcome thereof cannot be presently determined. Accordingly,
the Company has not made any provision for any liability, if any, that may
result upon adjudication of these matters. For the possible effects of
environmental matters on liquidity, see "Business -- Environmental Matters".
FOREIGN CURRENCY TRANSACTIONS
Due to the global nature of its operations, the Company is subject to the
effect of international currency fluctuations. In fiscal year 1995, over 50% of
the Company's revenues were derived from sales in foreign markets. In the years
ended June 30, 1995, 1994 and 1993, foreign currency fluctuations did not
significantly impact net income, the Company recognized net foreign currency
transactions gains of $347,000, $376,000 and $129,000, respectively.
The Company may manage potential foreign currency exposure by entering into
forward exchange contracts and options. These contracts are generally not
speculative in nature as the resulting gains or losses generally offset any
losses or gains on the underlying hedged transactions. Cash in excess of
operating requirements is maintained in the United States.
INCOME TAXES
Due in part to the utilization of net operating loss carryforwards ("NOLs"),
the Company's effective income tax rate in fiscal 1995 was approximately 17%. At
June 30, 1995, the Company had fully utilized its NOL's for federal income tax
purposes. The Company also has approximately $4.9 million of tax credits
available to offset future U.S. taxes and approximately $1 million to offset
future state taxes. When available tax credits are fully utilized, the Company
will be subject to an estimated annual tax rate in the range of 35% to 40%.
15
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants................................. 17
Financial Statements
Consolidated Statement of Operations for the Fiscal Years Ended
June 30, 1995, 1994, and 1993.................................. 18
Consolidated Balance Sheet as of June 30, 1995 and 1994......... 19
Consolidated Statement of Stockholders' Equity for the Fiscal
Years Ended June 30, 1995, 1994, and 1993...................... 20
Consolidated Statement of Cash Flows for the Fiscal Years Ended
June 30, 1995, 1994, and 1993.................................. 21
Notes to Consolidated Financial Statements...................... 22
Supporting Financial Statement Schedule:
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE NO. PAGE
------------------------------------------------------------------ ----
<S> <C> <C>
II Valuation and Qualifying Accounts and Reserves for the
Fiscal Years Ended June 30, 1995, 1994, and 1993.......... F-1
</TABLE>
Schedules other than those listed above have been omitted since they are
either not required, are not applicable, or the required information is shown in
the consolidated financial statements or related notes.
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Stockholders and Board of Directors
International Rectifier Corporation
We have audited the accompanying consolidated financial statements and the
financial statement schedule of International Rectifier Corporation and
Subsidiaries as of June 30, 1995 and 1994, and for the fiscal years ended June
30, 1995, 1994 and 1993 as listed on the index on page 16 of this Form 10-K.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of International
Rectifier Corporation and Subsidiaries at June 30, 1995 and 1994, and the
consolidated results of their operations and their cash flows for the fiscal
years ended June 30, 1995, 1994 and 1993, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
As discussed in Note 10 to the accompanying consolidated financial
statements, three class action lawsuits have been filed against the Company and
its Board of Directors (certain 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 L.L.P.
Los Angeles, California
July 27, 1995
17
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN 000'S EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues................................................................... $ 429,026 $ 328,882 $ 281,732
Cost of sales.............................................................. 278,202 219,944 202,684
----------- ----------- -----------
Gross profit............................................................. 150,824 108,938 79,048
Selling and administrative expense......................................... 82,328 69,008 62,637
Research and development expense........................................... 20,108 16,381 14,083
----------- ----------- -----------
Operating profit......................................................... 48,388 23,549 2,328
Other income (expense):
Interest, net............................................................ (377) (3,625) (2,250)
Other, net............................................................... (544) (1,050) (2,675)
----------- ----------- -----------
Income (loss) before income taxes.......................................... 47,467 18,874 (2,597)
Provision for income taxes (Note 5)........................................ 8,069 3,160 436
----------- ----------- -----------
Net income (loss).......................................................... $ 39,398 $ 15,714 $ (3,033)
----------- ----------- -----------
----------- ----------- -----------
Net income (loss) per share................................................ $ 1.68 $ 0.78 $ (0.15)
----------- ----------- -----------
----------- ----------- -----------
Average common and common equivalent shares outstanding.................... 23,510 20,428 20,087
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of this statement.
18
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN 000'S EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1995 1994
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents..................................................... $ 50,820 $ 13,051
Short-term investments........................................................ 3,000 --
Trade accounts receivable, less allowance for doubtful accounts ($901 in 1995
and $677 in 1994)............................................................ 94,095 67,595
Inventories................................................................... 73,155 73,429
Deferred income taxes (Note 5)................................................ 10,630 --
Prepaid expenses.............................................................. 2,112 2,779
-------- --------
Total current assets........................................................ 233,812 156,854
Property, plant and equipment, at cost, less accumulated depreciation ($130,480
in 1995 and $112,411 in 1994).................................................. 245,218 158,567
Investments and long-term notes receivable...................................... 2,362 2,248
Other assets.................................................................... 14,792 12,905
-------- --------
Total assets................................................................ $496,184 $330,574
-------- --------
-------- --------
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Current liabilities:
Bank loans (Note 2)........................................................... $ 17,250 $ 27,205
Long-term debt, due within one year (Note 2).................................. 7,985 6,105
Accounts payable.............................................................. 53,771 36,965
Accrued salaries, wages and commissions....................................... 11,517 10,264
Other accrued expenses........................................................ 15,538 9,150
-------- --------
Total current liabilities................................................... 106,061 89,689
Long-term debt, less current maturities (Note 2)................................ 23,881 26,817
Deferred income................................................................. 675 1,199
Other long-term liabilities..................................................... 10,311 9,320
Deferred income taxes (Note 5).................................................. 10,075 606
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:
25,180,009 shares in 1995 and 20,352,277 shares in 1994...................... 25,180 20,352
Preferred shares, $1 par value, authorized: 1,000,000; issued and outstanding:
none in 1995 and 1994........................................................ -- --
Capital contributed in excess of par value of shares.......................... 265,326 168,078
Retained earnings............................................................. 58,898 19,500
Cumulative translation adjustments............................................ (4,223) (4,987)
-------- --------
Total stockholders' equity.................................................. 345,181 202,943
-------- --------
Total liabilities and stockholders' equity.................................. $496,184 $330,574
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of this statement.
19
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN 000'S EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CAPITAL
CONTRIBUTED
IN EXCESS
OF CUMULATIVE
COMMON PAR VALUE RETAINED TRANSLATION
SHARES OF SHARES EARNINGS ADJUSTMENTS TOTAL
--------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
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:
208,700 - exercise of stock options................ 209 1,559 -- -- 1,768
74,032 - stock purchase plan....................... 74 841 -- -- 915
4,545,000 - stock offering......................... 4,545 92,553 -- -- 97,098
Tax benefits from exercise of stock options.......... -- 2,295 -- -- 2,295
Net income for the year ended June 30, 1995.......... -- -- 39,398 -- 39,398
Cumulative translation adjustments................... -- -- -- 764 764
--------- ----------- --------- ----------- -----------
BALANCE, JUNE 30, 1995............................... $ 25,180 $ 265,326 $ 58,898 $ (4,223) $ 345,181
--------- ----------- --------- ----------- -----------
--------- ----------- --------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of this statement.
20
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN 000'S)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
----------------------------------
1995 1994 1993
------------ --------- ---------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss).......................................................... $ 39,398 $ 15,714 $ (3,033)
Adjustment to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization............................................ 23,444 18,018 16,524
Deferred income.......................................................... (524) (203) (513)
Deferred income taxes.................................................... (1,178) 272 (159)
Deferred compensation.................................................... 1,471 1,473 1,529
Change in working capital (Note 1)......................................... 3,707 (9,109) 3,943
------------ --------- ---------
Net cash provided by operating activities.................................... 66,318 26,165 18,291
------------ --------- ---------
Cash flow from investing activities:
Additions to property, plant and equipment................................. (106,902) (24,686) (16,994)
Purchase of short-term investments......................................... (57,581) -- --
Proceeds from sale of short-term investments............................... 54,581 -- --
Investment in other noncurrent assets...................................... (3,615) (4,979) (4,158)
------------ --------- ---------
Net cash used in investing activities........................................ (113,517) (29,665) (21,152)
------------ --------- ---------
Cash flow from financing activities:
Proceeds from issuance of (payments on) short-term bank debt, net.......... (11,542) 2,623 5,333
Proceeds from issuance of long-term debt................................... 9,435 10,326 2,038
Payments on long-term debt and obligations under capital leases............ (11,302) (5,809) (5,268)
Net proceeds from issuance of common stock................................. 99,781 1,048 1,885
Other...................................................................... (1,979) (125) (1,201)
------------ --------- ---------
Net cash provided by financing activities.................................... 84,393 8,063 2,787
------------ --------- ---------
Effect of exchange rate changes on cash and cash equivalents................. 575 (57) 72
------------ --------- ---------
Net increase (decrease) in cash and cash equivalents......................... 37,769 4,506 (2)
Cash and cash equivalents beginning of year.................................. 13,051 8,545 8,547
------------ --------- ---------
Cash and cash equivalents end of year........................................ $ 50,820 $ 13,051 $ 8,545
------------ --------- ---------
------------ --------- ---------
</TABLE>
The accompanying notes are an integral part of this statement.
21
<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.
FISCAL YEAR
Fiscal years 1995 and 1994 consist of 52 weeks ending July 2 and July 3,
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 to all customers,
including distributors, at the time of shipment.
SHORT TERM INVESTMENTS
The Company's short term investments consist of investment grade money
market instruments and government securities. All of the Company's investments
have original maturities of less than one year. In accordance with the criteria
established by Statement of Financial Accounting Standard No. 115, "Accounting
for Certain Investments in Debt and Equity Securities", all investments have
been classified as "available-for-sale". The Company utilizes the specific
identification method for determining the cost of the investments. At June 30,
1995 the cost of the investments approximates the market value.
INVENTORIES
Inventories are stated at the lower of cost (principally first-in,
first-out) or market. Inventories at June 30, 1995 and 1994 were comprised of
the following (000's):
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Raw materials.......................................................... $ 19,974 $ 15,118
Work-in-process........................................................ 32,967 26,965
Finished goods......................................................... 20,214 31,346
--------- ---------
$ 73,155 $ 73,429
--------- ---------
--------- ---------
</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
22
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the equipment. Depreciation expense for the fiscal years ended June 30, 1995,
1994, and 1993 was $21,819,000, $15,880,000, and $14,160,000, respectively.
Property, plant and equipment at June 30, 1995 and 1994 was comprised of the
following (000's):
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Buildings and improvements......................................... $ 73,027 $ 72,004
Equipment.......................................................... 210,934 169,988
Construction in progress........................................... 84,318 22,525
Less accumulated depreciation...................................... (130,480) (112,411)
------------ -----------
237,799 152,106
Land............................................................... 7,419 6,461
------------ -----------
$ 245,218 $ 158,567
------------ -----------
------------ -----------
</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, 1995 and 1994 are as follows (000's):
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Equipment............................................................ $ 62,751 $ 62,533
Less Accumulated depreciation........................................ (38,980) (35,171)
---------- ----------
$ 23,771 $ 27,362
---------- ----------
---------- ----------
</TABLE>
Repairs and maintenance costs are charged to expense. In the fiscal years ended
June 30, 1995, 1994 and 1993, repairs and maintenance costs were $11,977,000,
$8,144,000 and $7,721,000 respectively.
FOREIGN CURRENCY TRANSLATION
The financial position and results of operations 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 1995, 1994 and 1993,
the Company recognized foreign currency transaction gains of $347,000, $376,000,
and $129,000, 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 $18,875,000 of
undistributed earnings of foreign subsidiaries since management considers these
earnings to be invested indefinitely or substantially offset by foreign tax
credits.
23
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 common stock equivalents.
Common stock equivalents for stock options of 243,056 and 112,700 were utilized
in the computation of earnings per share in 1995 and 1994, 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 related patent.
STATEMENT OF CASH FLOWS
The Company invests excess cash from operations in investment grade money
market instruments. 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>
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Trade accounts receivable, net............................ $ (23,938) $ (11,701) $ (2,871)
Inventories............................................... 613 (10,427) 3,390
Prepaid expenses.......................................... 737 (1,031) (789)
Accounts payable.......................................... 16,787 9,123 4,316
Accrued salaries, wages and commissions................... 1,277 918 243
Other accrued expenses.................................... 8,231 4,009 (346)
---------- ---------- ---------
$ 3,707 $ (9,109) $ 3,943
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
Supplemental disclosures of cash flow information (000's):
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Cash paid during the year for:
Interest.................................................... $ 4,578 $ 3,612 $ 3,246
Income taxes................................................ 3,879 802 1,376
Interest capitalized.......................................... 2,164 453 1,357
Non cash financing activity:
Assets acquired through capital leases...................... 792 12,675 4,275
</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 on average are
due in 60 days. Credit losses have consistently been within management's
expectations.
FINANCIAL INSTRUMENTS
The Company operates internationally, giving rise to exposure to market
risks from changes in foreign exchange rates. The Company enters into forward
foreign exchange contracts and foreign
24
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
currency options to hedge certain foreign currency denominated receivables and
payables from its foreign subsidiaries. The related gains and losses on these
contracts are included in "Other income (expense)". The Company does not hold or
issue financial instruments for trading purposes.
Forward foreign exchange contracts outstanding at June 30, 1995 had
maturities of less than six months and were denominated in Japanese Yen and
British Pound Sterling. Counterparties to the transactions were large financial
institutions. At June 30, 1995, the Company had approximately $11.1 million
outstanding in forward foreign exchange contracts and had no outstanding foreign
currency options.
RECLASSIFICATION
Certain reclassifications have been made to previously reported amounts to
conform with the current year presentation.
2. LONG-TERM DEBT AND OTHER LOANS
In February 1995, the Company modified its existing $25 million unsecured
credit facility from Sanwa Bank California ("Sanwa Facility"). The modified
facility was increased to $30 million, consisting of a $5 million revolving line
of credit and a $25 million term loan facility. In March 1995, the Company
increased its existing unsecured revolving line of credit with Wells Fargo Bank,
N.A. ("Wells Facility") from $10 million to $25 million. In June 1995, the
Company established an additional unsecured revolving line of credit of $10
million with Nationsbank of Texas, N.A. ("Nationsbank Facility"). Interest rates
for loans under the Sanwa Facility and Wells Facility are at prime, or the banks
cost of funds plus 1.00%, or LIBOR plus 1.00%, while the interest rates for
loans under the Nationsbank Facility are at Prime or LIBOR plus 1.00% (at the
Company's option). The Wells Facility and Sanwa Facility, which expire on
October 31, 1996, and the Nationsbank Facility, which expires on June 14, 1996,
contain the same financial covenants and ratios which affect the availability of
funds, and prohibit the Company from paying cash dividends. At June 30, 1995,
there were no outstanding borrowings under these three facilities.
In February 1995, as part of the modified credit facility with Sanwa Bank
California, described above, the Company may draw down up to $25 million prior
to December 31, 1995 on its $25 million unsecured term loan facility ("Sanwa
Term Facility"). Interest rates for such loans are at prime, or LIBOR plus
1.00%, or the bank's fixed rate (at the Company's option). Principal repayments
on loans under the Sanwa Term Facility are required to be made in equal
quarterly installments from March 31, 1998 through December 31, 2001. This
facility contains the same financial covenants and ratios as contained in the
three unsecured revolving credit facilities mentioned above. At June 30, 1995,
no borrowings were outstanding under this facility.
The Company also had an additional $38.5 million of revolving credit
facilities at foreign locations. The interest rate on borrowings from these
facilities ranged from 2.4% to 11.0% at June 30, 1995. Under the terms of the
agreements, the availability of funds is impacted by various financial covenants
and collateral requirements. At June 30, 1995, there was $17.3 million
outstanding under these foreign credit facilities, and the weighted average
interest rate was 5.9%. The weighted average interest rate for short term
borrowings during fiscal year 1995 was also 5.9%.
Based on covenant and collateral limitations under the above credit
facilities, the Company had $51.7 million available for borrowing at June 30,
1995.
25
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. LONG-TERM DEBT AND OTHER LOANS (CONTINUED)
The following is a summary of the Company's long-term debt and other loans
at June 30, 1995 and 1994 (000's):
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Capitalized lease obligations payable in varying monthly installments primarily at rates
from 6.0% to 12.6%........................................................................ $ 13,221 $ 16,115
10.55% property mortgage due in equal monthly installments to 2011......................... -- 4,300
Domestic bank loans collateralized by equipment, payable in varying monthly installments at
rates from 7.4% to 8.7%, due in 1995 through 2000......................................... 8,337 3,097
Foreign bank loans collateralized by property and/or equipment, payable in varying monthly
installments at rates from 8.0% to 10.8%, due in 1997 through 2000........................ 3,894 4,803
Foreign unsecured bank loans payable in varying monthly installments at rates from 3.4% to
8.4%, due in 1998 through 2006............................................................ 6,414 4,607
--------- ---------
31,866 32,922
Less current portion of long-term debt..................................................... (7,985) (6,105)
--------- ---------
$ 23,881 $ 26,817
--------- ---------
--------- ---------
</TABLE>
Principal payments on long-term debt are as follows: 1997 $8,216,000; 1998
$7,901,000; 1999 $4,405,000; 2000 $2,220,000; and $1,139,000 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 to cover an
additional 1,000,000 shares. During fiscal 1995 and 1994, 74,032 and 69,065
shares were purchased at an aggregate purchase price of $915,000 and $723,000,
respectively. Shares authorized under this plan that remained unissued were
980,971 and 1,055,003 at June 30, 1995 and 1994, 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, 1995, 1994 and 1993,
374,211, 304,503 and 300,061 options, respectively, were added to the plan.
During fiscal year 1995, 8,150 shares expired under the 1979 and 1984 plans.
26
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. CAPITAL STOCK (CONTINUED)
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>
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...................................................... 681,200 4.50 to 21.62
----------
Options granted............................................................... 338,100 18.62 to 31.87
Options exercised............................................................. (208,700) 4.50 to 21.62
Options expired or canceled................................................... (8,400) 4.50 to 21.62
----------
Outstanding, June 30, 1995 at an average price of $19.64........................ 802,200 $ 5.87 to $31.87
----------
----------
</TABLE>
The following table summarizes the options exercisable:
<TABLE>
<CAPTION>
SHARES PRICE RANGE
--------- ------------------
<S> <C> <C>
June 30, 1995..................................................................... 189,640 $7.50 to $21.62
June 30, 1994..................................................................... 264,120 4.50 to 21.62
June 30, 1993..................................................................... 216,760 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,
-----------------------------------
<S> <C> <C> <C>
1995 1994 1993
----------- ----------- ---------
Options available for grant at June 30..................................... 386,575 350,214 262,511
Total reserved common stock shares for stock option plans.................. 1,188,775 1,031,414 776,321
</TABLE>
27
<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. Revenues from
unaffiliated customers is based on the location of the customer. Geographic
segment information including sales and transfers between geographic areas is
presented below:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED (000'S)
-------------------------------------
<S> <C> <C> <C>
1995 1994 1993
----------- ----------- -----------
Revenues from Unaffiliated Customers
United States............................................................ $ 196,520 $ 154,684 $ 129,597
Europe................................................................... 122,391 87,245 81,702
Other.................................................................... 110,115 86,953 70,433
----------- ----------- -----------
Total.................................................................. $ 429,026 $ 328,882 $ 281,732
----------- ----------- -----------
----------- ----------- -----------
Transfers between Geographic Areas
United States............................................................ $ 128,406 $ 97,896 $ 84,753
Europe................................................................... 67,281 48,864 56,119
Other.................................................................... 3,366 1,379 2,602
----------- ----------- -----------
Total.................................................................. $ 199,053 $ 148,139 $ 143,474
----------- ----------- -----------
----------- ----------- -----------
Total Revenues
United States............................................................ $ 324,926 $ 252,580 $ 214,350
Europe................................................................... 189,672 136,109 137,821
Other.................................................................... 113,481 88,332 73,035
Intersegment eliminations................................................ (199,053) (148,139) (143,474)
----------- ----------- -----------
Total.................................................................. $ 429,026 $ 328,882 $ 281,732
----------- ----------- -----------
----------- ----------- -----------
Operating Profit
United States............................................................ $ 38,924 $ 18,173 $ 1,108
Europe................................................................... 7,428 4,710 409
Other.................................................................... 2,036 666 811
----------- ----------- -----------
Total.................................................................. $ 48,388 $ 23,549 $ 2,328
----------- ----------- -----------
----------- ----------- -----------
Identifiable Assets
United States (1)........................................................ $ 269,737 $ 189,591 $ 164,485
Europe................................................................... 93,517 74,533 61,364
Other.................................................................... 35,765 28,696 22,506
----------- ----------- -----------
Total.................................................................. $ 399,019 $ 292,820 $ 248,355
----------- ----------- -----------
----------- ----------- -----------
U.S. Export Sales to Unaffiliated Customers by Destination of Sale
Europe................................................................... $ 9,231 $ 4,362 $ 3,293
Asia..................................................................... 18,026 20,094 13,319
Other.................................................................... 3,345 4,829 4,057
----------- ----------- -----------
Total.................................................................. $ 30,602 $ 29,285 $ 20,669
----------- ----------- -----------
----------- ----------- -----------
<FN>
------------------------
(1) Excluding general corporate assets.
</TABLE>
28
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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 asset (liability) as of June
30, 1995 and June 30, 1994 are as follows (000's):
<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
<S> <C> <C>
Deferred tax liability:
Depreciation............................................................ $ (10,948) $ (9,215)
Deferred tax assets:
Reserves for books, not deducted........................................ 5,431 3,380
Net operating loss carryovers........................................... -- 9,815
Credit carryovers....................................................... 5,894 5,417
Other................................................................... 178 593
------------- -------------
Total deferred tax assets............................................... 11,503 19,205
Valuation allowance..................................................... -- (10,596)
------------- -------------
Net deferred tax asset (liability)...................................... $ 555 $ (606)
------------- -------------
------------- -------------
</TABLE>
Income (loss) before income taxes is as follows (000's):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Operations:
Domestic........................................................... $ 39,719 $ 15,626 $ (1,590)
Foreign............................................................ 7,748 3,248 (1,007)
--------- --------- ---------
$ 47,467 $ 18,874 $ (2,597)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision (benefit) for income taxes consists of (000's):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Current income taxes:
Domestic............................................................... $ 6,356 $ 1,539 $ (122)
Foreign................................................................ 2,874 1,331 788
--------- --------- ---------
9,230 2,870 666
--------- --------- ---------
Deferred income taxes:
Domestic............................................................... (1,458) -- (160)
Foreign................................................................ 297 290 (70)
--------- --------- ---------
(1,161) 290 (230)
--------- --------- ---------
Total provision.......................................................... $ 8,069 $ 3,160 $ 436
--------- --------- ---------
--------- --------- ---------
</TABLE>
29
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
Deferred taxes result primarily from temporary differences relating to
depreciation, financial statement reserves, and state taxes.
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
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Statutory tax rate (benefit)................................................ 35.0% 35.0% (34.0)%
Change in valuation allowance............................................... (21.7) (24.8) --
Foreign tax differential.................................................... 1.8 2.6 40.9
Domestic loss producing no current tax benefit.............................. -- -- 16.6
State taxes, net of federal tax benefit..................................... 1.0 1.5 (7.5)
Tax credits................................................................. (3.0) -- --
Other, net.................................................................. 3.9 2.4 0.8
--------- --------- ---------
17.0% 16.7% 16.8%
--------- --------- ---------
--------- --------- ---------
</TABLE>
During fiscal 1995, the Company fully utilized its $27.3 million of U.S.
federal income tax net operating loss carryovers. The estimated tax benefit
during fiscal 1995 from utilization of the net operating loss carryover was $9.7
million of which $2.3 million increased capital contributed in excess of par
value of shares due to the exercise of stock options.
At June 30, 1995, the Company has approximately $2.0 million, $1.7 million,
and $0.2 million, respectively, of investment, research and development, and
foreign tax credit carryforwards available to reduce income taxes otherwise
payable, which expire from 1996 to 2010. In addition, the Company has
approximately $1.0 million of alternative minimum tax credits, which can be
carried over indefinitely to offset regular tax liabilities to the extent of the
alternative minimum tax, and a $1.0 million state tax credit which expires in
2002.
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 $1,027,000,
$841,000, and $511,000 for fiscal years 1995, 1994, and 1993, respectively.
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 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
30
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. ENVIRONMENTAL MATTERS (CONTINUED)
against a number of other PRPs, including the Company, for cost recovery and
contribution under CERCLA. The lawsuit against the Company, 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. In June 1995, the Company
was named among others as a party defendant in Federal Court apparently in
connection with a third consent decree with respect to the OII Site. The Company
recently received a letter (dated July 25, 1995) from the U.S. Department of
Justice offering to settle claims against Rachelle relating to the first three
elements of cleanup work at the OII Site for the sum of $4,953,148. (The final
remedy assessment has not yet been made). The letter stated that if the offer is
not accepted by September 1, 1995, enforcement action will follow. The
Department of Justice letter is being evaluated. Claims have been made with the
Company's insurers with respect to the OII Site matter; however, there can be no
assurance that insurance coverage attaches to these claims. 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. It was determined that the property required clean-up of
seepage from a storage tank, at an estimated additional cost of $525,000. The
Company commenced the clean-up in fiscal year 1994 and through June 30, 1995
approximately $450,000 in clean-up costs have been incurred which 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 knows 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 (resulting from sending carbon canisters for regeneration to a facility in
the county) 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. Initial information
indicates that less than one percent of all contaminated carbon sent to the site
by PLPs was contributed by the Company. What amount, if any, the Company may be
asked to contribute to solve the groundwater problem is unknown.
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, in June 1995, agreed to join a group of other PRPs to
remove contamination from the site. Although the final outcome is not known and
depends on final clean-up costs and the allocation scheme, the group currently
estimates a total clean-up cost of about $1.8 million to $2.5 million, of which
about $6,000 to $9,000 might be requested to be borne by the Company.
31
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS
The future minimum lease commitments under non-cancelable capital and
operating leases of equipment and real property at June 30, 1995 are as follows
(000's):
<TABLE>
<CAPTION>
FISCAL CAPITAL OPERATING TOTAL
YEARS LEASES LEASES COMMITMENTS
-------------------------------------------------------- --------- --------- -------------
<S> <C> <C> <C>
1996.................................................... $ 5,191 $ 6,140 $ 11,331
1997.................................................... 4,934 5,209 10,143
1998.................................................... 4,165 2,055 6,220
1999.................................................... 1,103 659 1,762
2000.................................................... 2 338 340
Later years............................................. -- 1,452 1,452
Less imputed interest................................... (2,174) -- (2,174)
--------- --------- -------------
Total minimum lease payment............................. $ 13,221 $ 15,853 $ 29,074
--------- --------- -------------
--------- --------- -------------
</TABLE>
Total rental expense on all operating leases charged to income was
$7,965,000, $6,723,000, and $5,591,000 in fiscal years 1995, 1994 and 1993,
respectively.
9. INTELLECTUAL PROPERTY RIGHTS
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"). The patents subject to reexamination are
fundamental to the Company's MOS transistors and their loss would allow
competitors to use currently patented features of the Company's MOS transistor
technology without liability for infringement of those patents. On the following
dates, the PTO granted requests for reexamination of the following patents of
the Company: November 13, 1992 and September 12, 1994 on patent 4,642,666;
September 12, 1994 on patent 4,959,699; September 23, 1994 and June 28, 1995 on
patent 5,008,725; January 17, 1995 on patent 5,130,767; June 5, 1995 on patent
5,191,396; and June 14, 1995 on patent 4,593,302. On February 14, 1995, the PTO
issued a reexamination certificate, confirming the patentability of the
Company's U.S. patent 4,705,759.
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, power IC and IGBT products infringe the '314 patent, that the Company's
IGBT products infringe the '513 patent and that certain packages for the
Company'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. The Company cross-appealed a separate ruling by the District Court
denying the Company's motion for summary judgment that the '314 patent is
invalid. In July 1994, the Federal Circuit vacated the District Court's grants
of summary judgment as to the '513, '127 and '314 patents and affirmed the
District Court's denial of the Company's motion for summary judgment of
invalidity of the '314 patent. The Federal
32
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. LITIGATION (CONTINUED)
Circuit ordered, however, that the case should proceed in California. A trial
date of November 14, 1995 has been set for the '513 patent, but proceedings on
the '314 and '127 patents are essentially stayed pending completion of
reexamination of these patents in the PTO.
In separate proceedings before the same California District Court, the
Company sought enforcement of a prior license agreement between the Company 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 the Company's U.S. patents 4,959,699 and 4,642,666 on SGS's
sales of power MOSFET, IGBT and power IC products. SGS appealed this decision to
the Federal Circuit, which on May 10, 1995 affirmed the decision in favor of the
Company. SGS subsequently made the required past royalty payment.
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. This action has been essentially stayed pending
completion of reexamination of these patents by the PTO.
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 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. The Court has scheduled trial to begin in December 1995.
No provision for any liability that may result upon adjudication of these
matters has been made in the consolidated financial statements.
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 $632,500. 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. The agreement was amended on April 12, 1995 to provide
that upon retirement Mr. Lidow's pension would be based, in addition to his
salary, on the average of the prior three years' cash bonuses, if any. The
pension would further be adjusted annually to account for any increase in the
Consumer Price Index. Upon Mr. Lidow's death, payments will be continued to his
wife, if she survives
33
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. EXECUTIVE AGREEMENT (CONTINUED)
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, $1,068,000,
$572,000, and $572,000, have been expensed in fiscal years 1995, 1994, and 1993,
respectively.
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data is as follows (000's except per share
data):
<TABLE>
<CAPTION>
NET
GROSS NET INCOME
REVENUES PROFIT INCOME PER SHARE
----------- --------- --------- -----------
<S> <C> <C> <C> <C>
1995
1st Quarter....................................................... $ 92,253 $ 31,514 $ 6,498 $ 0.32
2nd Quarter....................................................... 102,814 35,792 8,368 0.37
3rd Quarter....................................................... 111,867 39,506 10,752 0.43
4th Quarter....................................................... 122,092 44,012 13,780 0.54
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
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
For information called for by Items 10, 11, 12 and 13, reference is made to
the Registrant's definitive proxy statement for its Annual Meeting of
Stockholders, to be held November 20, 1995, which will be filed with the
Securities and Exchange Commission within 120 days after June 30, 1995, and
which is incorporated herein by reference. Certain information concerning the
Directors and Executive Officers of the Company is included in Part I. See
"Additional Item" page 10.
PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
a. Financial Statements and Financial Statement Schedule being filed as
part of this report are listed in the index on page 16.
b. Exhibits filed as part of this report are listed on the Exhibit Index on
page 35.
34
<PAGE>
EXHIBIT INDEX
INCORPORATED BY REFERENCE:
<TABLE>
<CAPTION>
EXHIBIT
NO. ITEM DOCUMENT
---------- -------------------------------------------------- --------------------------------------------------
<S> <C> <C>
3(a) Certificate of Incorporation of the Company, as Report on Form 10-Q for the quarterly period ended
amended to date December 31, 1990, as amended by Form 8 dated
March 6 and March 12, 1991 as filed with the
Securities and Exchange Commission, File No.
1-7935 (Exhibit 3(a))
3(b) Amended and restated Form 10-Q -- for the quarterly period ended March
By-Laws of the Company 31, 1995 as filed with the Securities and Exchange
Commission, File No. 1-7935
10(a) Technical Assistance Agreement dated March 30, Registration Statement on Form S-2 as filed with
1983 between the Company and Unitrode Corporation the Securities and Exchange Commission,
Registration No. 2-89410 (Exhibit 10.8)
10(b) Amended and Restated License Agreement between Form 10-K -- Annual Report Pursuant to Section 13
International Rectifier Corporation and Siliconix or 15(d) of the Securities Exchange Act of 1934
incorporated dated April 10, 1990 for Fiscal Year Ended June 30, 1990, Commission
File No. 1-7935
10(c) Amended and Restated Settlement Agreement between Form 10-K -- Annual Report Pursuant to Section 13
International Rectifier Corporation and Siliconix or 15(d) of the Securities Exchange Act of 1934
incorporated dated July 27, 1990 for Fiscal Year Ended June 30, 1990, Commission
File No. 1-7935
10(d) Amendment to Technical Assistance Agreement, Report on Form 10-Q for the quarterly period ended
effective as of August 27, 1987, by and between December 31, 1990 as amended by Form 8 dated April
the Company and Unitrode Corporation 15, 1991, Commission File No. 1-7935 (Exhibit
10(l))
10(e) International Rectifier Corporation Stock Option Registration Statement on Form S-8 as filed with
Plan of 1984 (Second Amendment) the Securities and Exchange Commission,
Registration No. 33-40208.
10(f) Executive Employment Agreement dated May 15, 1991 Form 10-K -- Annual Report Pursuant to Section 13
between International Rectifier Corporation and or 15(d) of the Securities Exchange Act of 1934
Eric Lidow for Fiscal Year Ended June 30, 1991, Commission
File No. 1-7935
10(g) International Rectifier Corporation Stock Option Registration Statement on Form S-8 as filed with
Plan of 1992 the Securities and Exchange Commission,
Registration No. 33-63958 (Exhibit 8)
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
INCORPORATED BY REFERENCE: -- CONTINUED
EXHIBIT
NO. ITEM DOCUMENT
---------- -------------------------------------------------- --------------------------------------------------
<S> <C> <C>
10(h) Line of Credit Agreement between International Form 10-K -- Annual Report Pursuant to Section 13
Rectifier Corporation and Sanwa Bank California or 15(d) of the Securities Exchange Act of 1934
dated as of June 30, 1993 and amended as of August for Fiscal Year Ended June 30, 1993, Commission
24, 1993 File No. 1-7935
10(i) Amendment to International Rectifier Corporation Registration Statement on Form S-8 as filed with
1984 Stock Participation Plan the Securities and Exchange Commission,
Registration No. 33-53589 (Exhibit 4.1)
10(j) Amendments to Line of Credit Agreement between Form 10-K -- Annual Report Pursuant to Section 13
International Rectifier Corporation and Sanwa Bank or 15(d) of the Securities Exchange Act of 1934
California dated as of November 22, 1993 and July for Fiscal Year Ended June 30, 1994, Commission
1, 1994 File No. 1-7935
10(k) Security Agreement between International Rectifier Form 10-K -- Annual Report Pursuant to Section 13
Corporation and Nationsbanc Leasing Corporation of or 15(d) of the Securities Exchange Act of 1934
North Carolina dated as of July 1, 1994 for Fiscal Year Ended June 30, 1994, Commission
File No. 1-7935
10(l) Revolving Credit Agreement between International Form 10-K -- Annual Report Pursuant to Section 13
Rectifier Corporation and Wells Fargo Bank, N.A. or 15(d) of the Securities Exchange Act of 1934
dated as of July 1, 1994 for Fiscal Year Ended June 30, 1994, Commission
File No. 1-7935
10(m) Loan and Security Agreement between Sanwa General Form 10-K -- Annual Report Pursuant to Section 13
Equipment Leasing, a Division of Sanwa Business or 15(d) of the Securities Exchange Act of 1934
Credit Corporation and International Rectifier for Fiscal Year Ended June 30, 1994, Commission
Corporation dated as of July 1, 1994 File No. 1-7935
</TABLE>
36
<PAGE>
SUBMITTED HEREWITH:
See page 16 for an index of Financial Statements and Schedules being filed as
part of this report.
<TABLE>
<CAPTION>
EXHIBIT
NO. ITEM DOCUMENT
---------- -------------------------------------------------- --------------------------------------------------
<S> <C> <C>
10(n) Amendments to Line of Credit Agreement between
International Rectifier Corporation and Sanwa Bank
California dated as of December 30, 1994 and
February 28, 1995
10(o) Amendments to Revolving Credit Agreement between
International Rectifier Corporation and Wells
Fargo Bank, N.A. dated as of December 30, 1994 and
March 31, 1995
10(p) Amendments to Security Agreement between
International Rectifier Corporation and
Nationsbanc Leasing Corporation of North Carolina
dated as of August 15, 1994, November 3, 1994 and
March 8, 1995
10(q) Revolving Credit Agreement between International
Rectifier Corporation and Nationsbank of Texas,
N.A. dated June 15, 1995
10(r) Amendment to Executive Employment Agreement dated
April 12, 1995 between International Rectifier
Corporation and Eric Lidow
21 List of Subsidiaries
23 Consent of Independent Accountants
</TABLE>
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL RECTIFIER CORPORATION
(Registrant)
By MICHAEL P. MCGEE Date: 8/24/95
------------------------------ ------------------------------
Michael P. McGee
VICE PRESIDENT, CHIEF
FINANCIAL OFFICER
AND PRINCIPAL ACCOUNTING
OFFICER
Each person whose signature appears below hereby authorizes Michael P.
McGee, as attorney-in-fact and agent, with full powers of substitution, to sign
on his behalf, individually and in the capacities stated below, and to file any
and all amendments to this Form 10-K, and other documents in connection
therewith, with the Securities and Exchange Commission, granting to said
attorney-in-fact and agent full power and authority to perform any other act on
behalf of the undersigned required to be done in the premises.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
------------------------------ ---------------------------------- ------------
ERIC LIDOW 8/24/95
------------------------------ Chairman of the Board ------------
Eric Lidow
ALEXANDER LIDOW 8/24/95
------------------------------ Director, Chief Executive Officer ------------
Alexander Lidow
DEREK B. LIDOW 8/24/95
------------------------------ Director, Chief Executive Officer ------------
Derek B. Lidow
ROBERT J. MUELLER 8/24/95
------------------------------ Director, Executive Vice President ------------
Robert J. Mueller
GEORGE KRSEK 8/24/95
------------------------------ Director ------------
George Krsek
JACK O. VANCE 8/24/95
------------------------------ Director ------------
Jack O. Vance
(Signatures continued on next page)
<PAGE>
SIGNATURES
(CONTINUED)
SIGNATURES TITLE DATE
------------------------------ ---------------------------------- ------------
ROCHUS E. VOGT 8/24/95
------------------------------ Director ------------
Rochus E. Vogt
DONALD S. BURNS 8/24/95
------------------------------ Director ------------
Donald S. Burns
JAMES D. PLUMMER 8/24/95
------------------------------ Director ------------
James D. Plummer
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS ENDED JUNE 30, 1995, 1994 AND 1993
(IN 000'S)
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO BALANCE
BEGINNING COST AND CHARGED TO DEDUCTIONS AT END OF
DESCRIPTION OF PERIOD EXPENSES OTHER (A) PERIOD
---------------------------------------------------- ----------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
1995
Allowance for doubtful accounts..................... $ 677 $ 703 $ -- $ (479 ) $ 901
----------- ----------- ---------- ----------- ---------
Deferred tax valuation allowance.................... $ 10,596 $ -- $ (10,596) $ -- $ 0
----------- ----------- ---------- ----------- ---------
Inventory valuation reserve......................... $ 2,798 $ 4,420 $ -- $ (2,189 ) $ 5,029
----------- ----------- ---------- ----------- ---------
1994
Allowance for doubtful accounts..................... $ 607 $ 577 $ -- $ (507 ) $ 677
----------- ----------- ---------- ----------- ---------
Deferred tax valuation allowance (B)................ $ 15,546 $ -- $ (4,950) $ -- $ 10,596
----------- ----------- ---------- ----------- ---------
Inventory valuation reserve......................... $ 2,052 $ 1,997 $ -- $ (1,251 ) $ 2,798
----------- ----------- ---------- ----------- ---------
1993
Allowance for doubtful accounts..................... $ 1,413 $ (78 ) $ -- $ (728 ) $ 607
----------- ----------- ---------- ----------- ---------
Inventory valuation reserve......................... $ 2,742 $ 485 $ -- $ (1,175 ) $ 2,052
----------- ----------- ---------- ----------- ---------
<FN>
------------------------
(A) Deductions include the write-off of uncollectible amounts with respect to
trade accounts receivable, obsolete and scrap inventory, and the effects of
Statement of Financial Accounting Standards ("SFAS") No. 52.
(B) Effective July 1, 1993, the Company adopted the provisions of SFAS No. 109,
"Accounting for Income Taxes" which requires recognition of deferred tax
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 had no
material impact on the Company's financial position or results from
operations. Prior year's financial statements have not been restated.
</TABLE>
F-1
<PAGE>
AMENDMENT TO LINE OF CREDIT AGREEMENT
This Fourth Amendment to Line of Credit Agreement (the "Amendment") is
made and entered into this 30th day of December, 1994, by and between SANWA BANK
CALIFORNIA (the "Bank") and INTERNATIONAL RECTIFIER CORPORATION (the "Borrower")
with respect to the following:
This Amendment shall be deemed to be a part of and subject to that
certain Line of Credit Agreement dated as of June 30, 1993, as it may be amended
from time to time, and any and all addenda and riders thereto (collectively the
"Agreement"). Unless otherwise defined herein, all terms used in this Amendment
shall have the same meanings as in the Agreement. To the extent that any of the
terms or provisions of this Amendment conflict with those contained in the
Agreement, the terms and provisions contained herein shall control.
WHEREAS, the Borrower and the Bank mutually desire to extend and/or
modify the Agreement.
NOW THEREFORE, for value received and hereby acknowledged, the
Borrower and the Bank agree as follows:
1. MODIFICATION OF LOANS. Section 7.10 of the Agreement is
deleted in its entirety and the following is substituted in lieu thereof:
"7.10 LOANS: Not make any loans or advances or extend
credit to any third person, including, but not limited
to, directors, officers, shareholders, employees,
affiliated entities and subsidiaries of the Borrower,
except for credit extended in the ordinary course of
the Borrower's business as presently conducted,
provided however, that Borrower may make loans or
advances or extend credit to employees of Borrower in
an aggregate amount not to exceed $750,000.00 in any
one fiscal year and provided further, that Borrower may
make loans or advances or extend credit to affiliated
entities and subsidiaries of Borrower in an aggregate
amount not to exceed $15,000,000.00 in the aggregate".
2. CONFIRMATION OF OTHER TERMS AND CONDITIONS OF THE AGREEMENT.
Except as specifically provided in this Amendment, all other terms, conditions
and covenants of the Agreement unaffected by this Amendment shall remain
unchanged and shall continue in full force and effect and the Borrower hereby
covenants and agrees to perform and observe all terms, covenants and agreements
provided for in the Agreement, as hereby amended.
IN WITNESS WHEREOF, this Amendment has been executed by the parties
hereto as of the date first hereinabove written.
BANK: BORROWER:
SANWA BANK CALIFORNIA INTERNATIONAL RECTIFIER CORPORATION
By:/s/ Janice Upton By: /s/ Michael P. McGee
--------------------------- ---------------------------------------
Janice Upton Michael P. McGee
Vice President Vice President, Chief Financial Officer
------------------------------ ------------------------------------------
(Name/Title) (Name/Title)
By:
-------------------------------------
-----------------------------------------
(Name/Title)
<PAGE>
AMENDMENT TO LINE OF CREDIT AGREEMENT
This Fifth Amendment to Line of Credit Agreement (the "Amendment") is made
and entered into this 28th day of February, 1995, by and between SANWA BANK
CALIFORNIA (the "Bank") and INTERNATIONAL RECTIFIER CORPORATION (the "Borrower")
with respect to the following:
This Amendment shall be deemed to be a part of and subject to that certain
Line of Credit Agreement dated as of June 30, 1993, as it may be amended from
time to time, and any and all addenda and riders thereto (collectively the
"Agreement"). Unless otherwise defined herein, all terms used in this Amendment
shall have the same meanings as in the Agreement. To the extent that any of the
terms or provisions of this Amendment conflict with those contained in the
Agreement, the terms and provisions contained herein shall control.
WHEREAS, the Borrower and the Bank mutually desire to extend and/or modify
the Agreement.
NOW THEREFORE, for value received and hereby acknowledged, the Borrower and
the Bank agree as follows:
1. MODIFICATION OF LINE OF CREDIT. The Line of Credit provided for
in Section 2.01 of the Agreement is reduced to $5,000,000.00.
2. CHANGE IN INTEREST RATE. Section 2.04 (b) and (c) of the
Agreement are deleted in their entirety and the following is substituted in lieu
thereof:
"(b) EUROCURRENCY ADVANCES: For Advances denominated in Dollars
or in Alternate Currency, a fixed rate quoted by the Bank for
one, three, six, nine or twelve months or for such other period
of time that the Bank may quote and offer (provided that any such
period of time does not extend beyond the Expiration Date) [the
"Eurocurrency Interest Period"] for Advances in the minimum
amount of $500,000 and in $100,000 increments thereafter. Such
interest rate shall be a percentage, rounded upward to the
nearest one-hundredth of one percent, equivalent to 1% in excess
of the Bank's Eurocurrency Rate for Dollars or such Alternate
Currency which is that rate determined by the Bank's Treasury
Desk as being the approximate rate at which the Bank could
purchase Dollars or Alternate Currency deposits in an amount
approximately equal to the amount of the relevant Advance and for
a period of time approximately equal to the relevant Eurocurrency
Interest Period (adjusted for any and all assessments, surcharges
and reserve requirements pertaining to the purchase by the Bank
of such Alternate Currency deposits [the "Eurocurrency Rate"].
An Advance which bears interest at the Eurocurrency Rate is
hereinafter referred to as the "Eurocurrency Advance".
(c) COST OF FUNDS ADVANCES. For Advances denominated in
Dollars, the Bank hereby agrees to make advances to the Borrower,
at Borrower's election, at a fixed rate for such period of time
that the Bank may quote and offer, provided that any such period
of time shall be for at least 30 days and provided further that
any such period of time does not extend beyond the Expiration
Date (the "Cost of Funds Interest Period") for Advances in the
minimum amount $500,000 and in $100,000 increments thereafter.
Such interest rate shall be a percentage, rounded upward to the
nearest one-hundredth of one percent, equivalent to 1% per annum
in excess of the rate which the Bank determines in its sole and
absolute discretion to be equal to the Bank's cost of acquiring
funds (adjusted for any and all assessments, surcharges and
reserve requirements pertaining to the borrowing or purchase by
the Bank of such funds) in an amount approximately equal to the
amount of the relevant Advance and for a period of time
approximately equal to the relevant Cost of Funds Interest Period
(the "Cost of Funds Rate"). Advances based upon the Fixed Rate
are hereinafter referred to as "Cost of Funds Advances".
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<PAGE>
3. MODIFICATION OF ACQUISITIONS. Section 7.01 of the Agreement is
deleted in its entirety and the following is substituted in lieu thereof:
"7.01 PRESERVATION OF EXISTENCE; COMPLIANCE WITH APPLICABLE LAWS:
Maintain and preserve its existence and all rights and privileges
now enjoyed; not liquidate or dissolve, merge or consolidate with
or into, any other business organization, provided however, that
Borrower may acquire any other businesses for up to $100,000,000
in the aggregate; and conduct its business and operations in
accordance with all applicable laws, rules and regulations".
4. MODIFICATION OF REPORTING REQUIREMENTS. Section 7.06 (a) of the
Agreement is deleted in its entirety and the following is substituted in lieu
thereof:
"(a) Not later than 120 days after the end of each of the
Borrower's fiscal years, a copy of the annual audited financial
report and Securities Exchange Commission Form 10-K of the
Borrower for such year, all certified to as having been prepared
in accordance with generally accepted accounting principles
consistently applied by a firm of certified public accountants
acceptable to Bank, together with the consolidating balance
sheets and income statements for the Borrower and its
subsidiaries for such year".
5. CHANGE IN INDEBTEDNESS. Section 7.09 of the Agreement is deleted
in its entirety and the following is substituted in lieu thereof:
"7.09 ADDITIONAL DOMESTIC INDEBTEDNESS: Not, after the date
hereof, create, incur or assume, directly or indirectly, any
additional Indebtedness nor make any fixed capital expenditure or
any commitment therefor, for uses which would be, in accordance
with generally accepted accounting principles, reported as
Domestic capital leases ("Capital Expenditures") other than (i)
Indebtedness or Capital Expenditures owed or to be owed to the
Bank or (ii) Indebtedness or Capital Expenditures to trade
creditors incurred in the ordinary course of the Borrower's
business or (iii) any Indebtedness for Capital Expenditures in
the aggregate greater than $75,000,000.00 in any one fiscal year
or (iv) Indebtedness owed to other financial institutions under
revolving lines of credit or (v) Indebtedness of up to
$75,000,000 in connection with any acquisitions".
6. CHANGE IN LOANS. Section 7.10 of the Agreement is deleted in its
entirety and the following is substituted in lieu thereof:
"7.10 LOANS: Not make any loans or advances or extend credit to
any third person, including, but not limited to, directors,
officers, shareholders, employees, affiliated entities and
subsidiaries of the Borrower, except for credit extended in the
ordinary course of the Borrower's business as presently
conducted, provided however, that Borrower may make loans or
advances or extend credit to employees of Borrower in an
aggregate amount not to exceed $1,000,000.00 in any one fiscal
year and provided further, that Borrower may make loans or
advances or extend credit to affiliated entities and subsidiaries
of Borrower in an aggregate amount not to exceed $15,000,000.00
in the aggregate".
7. CHANGE IN LIENS. Section 7.11 of the Agreement is deleted in
its entirety and the following is substituted in lieu thereof:
"7.11 LIENS AND ENCUMBRANCES: Not create, assume or permit to
exist any security interest, encumbrance, mortgage, deed of
trust, or other lien (including, but not limited to, a lien of
attachment, judgment or execution) affecting any of the
Borrower's Domestic properties, or execute or allow to be filed
any financing statement or continuation thereof affecting any of
such properties, except for (i) Permitted Domestic Liens or as
otherwise provided in this Agreement, (ii) purchase money
security interests or capital leases of up to $75,000,000 for
equipment including mortgage financing for the Borrower's
Temecula, California property in any one fiscal year".
8. MODIFICATION OF FINANCIAL CONDITION. Section 7.14 of the
Agreement is deleted in its entirety and the following is substituted in lieu
thereof:
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"7.14 FINANCIAL CONDITION: Maintain at all times:
(a) A minimum consolidated Effective Tangible Net
Worth of at least $175,000,000.00 plus, in each case, 50% of
annual net income, the proceeds of any equity issuance,
conversion of debt into equity and any grant of rights to
subscribe for shares of the Borrower, commencing with the
fiscal year-end June 30, 1994.
(b) A ratio of consolidated Debt to consolidated
Effective Tangible Net Worth of not more than 0.90 to 1.
(c) A ratio of consolidated current assets to
consolidated current liabilities of not less than 1.75 to 1.
For the purposes hereof, outstanding Advances under the Line
of Credit and under any other revolving lines of credit
(whether with Bank or a third party) shall be included in
consolidated current liabilities.
(d) A ratio of the sum of net income, plus
depreciation expense, plus amortization expense, plus net
interest expense, each for the immediately preceding 4
fiscal quarters to the sum of the current portion of long-
term Debt then due for the fourth preceding fiscal quarter,
plus net interest expense for the immediately preceding 4
fiscal quarters of not less than 1.5 to 1.
9. CONFIRMATION OF OTHER TERMS AND CONDITIONS OF THE AGREEMENT.
Except as specifically provided in this Amendment, all other terms, conditions
and covenants of the Agreement unaffected by this Amendment shall remain
unchanged and shall continue in full force and effect and the Borrower hereby
covenants and agrees to perform and observe all terms, covenants and agreements
provided for in the Agreement, as hereby amended.
IN WITNESS WHEREOF, this Amendment has been executed by the parties
hereto as of the date first hereinabove written.
BANK: BORROWER:
SANWA BANK CALIFORNIA INTERNATIONAL RECTIFIER CORPORATION
By: /s/ Janice Upton By: /s/ Michael P. McGee
------------------------------------- --------------------------------
Janice Upton, Vice President Vice President & CFO
---------------------------------------- -----------------------------------
(Name/Title) (Name/Title)
By:
--------------------------------
-----------------------------------
(Name/Title)
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<PAGE>
TERM LOAN AGREEMENT
This Term Loan Agreement (the "Agreement") is made and entered into as
of this 28th day of February, 1995, by and between SANWA BANK CALIFORNIA (the
"Bank") and INTERNATIONAL RECTIFIER CORPORATION (the "Borrower"), on the terms
and conditions that follow:
SECTION I
DEFINITIONS
1.01 CERTAIN DEFINED TERMS: Unless elsewhere defined in this
Agreement, the following terms shall have the following meanings (such meanings
to be generally applicable to the singular and plural forms of the terms
defined):
(a) "BUSINESS DAY": shall mean a day other than a Saturday or
Sunday on which commercial banks are open for business in California, USA.
(b) "CONSOLIDATED OPERATING LOSS": shall mean a loss from
operations before other income and expenses, income taxes and extraordinary
items as set forth on the Borrower's consolidated statement of income.
(c) "DEBT": shall mean all liabilities of the Borrower as set
forth on its balance sheet less Subordinated Debt.
(d) "DOMESTIC": shall mean the consolidated United States and
Mexican maquiladora operations of the Borrower.
(e) "EFFECTIVE TANGIBLE NET WORTH": shall mean the Borrower's
stated net worth plus Subordinated Debt but less all intangible assets of the
Borrower (i.e., goodwill, trademarks, patents, copyrights, organization expense,
loans and advances to employees, and similar intangible items), but excluding
any cumulative translation adjustments to equity for the value of foreign assets
based upon changes in foreign exchange rates and excluding redemption of
employee stock options.
(f) "ERISA": shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time, including (unless the context
otherwise requires) any rules or regulations promulgated thereunder.
(g) "EVENT OF DEFAULT": shall have the meaning set forth in
Section 6.
(h) "INDEBTEDNESS": shall mean, with respect to the Borrower,
(i) all indebtedness for borrowed money and (ii) for the deferred purchase
price of property or services due more than 45 days from the date of payment
specified on the invoice for such obligation in respect of which the Borrower is
primarily liable as obligor and (iii) obligations under leases which shall have
been or should be, in accordance with generally accepted accounting principles,
reported as capital leases in respect of which the Borrower is primarily liable.
(i) "OBLIGATIONS": shall mean all amounts owing by the Borrower
to the Bank pursuant to this Agreement.
(j) "PERMITTED DOMESTIC LIENS": shall mean: (i) liens and
security interests securing indebtedness owed by the Borrower to the Bank;
(ii) liens for taxes, assessments or similar charges either not more than 45
days past due or being contested in good faith; (iii) liens of materialmen,
mechanics, warehousemen, or carriers or other like liens arising in the
ordinary course of business and securing obligations which are not more than
45 days past due or being contested in good faith; (iv) purchase money liens
or purchase money security interests upon or in any property acquired or held
by the Borrower in the ordinary course of business to secure Indebtedness
outstanding on the date hereof or permitted to be incurred under Section 5.09
hereof; (v) liens and security interests which, as of the date hereof, have
been disclosed to and approved by the Bank in writing; (vi) liens in
connection with workers' compensation, unemployment insurance and such other
types of insurance; (vii) liens to secure performance bonds and bid bonds and
other similar obligations; (viii) liens resulting from zoning restrictions,
easements and such other similar restrictions on the use of real property;
and (ix) liens arising from judgments and attachments that would not
constitute an Event of Default hereunder.
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<PAGE>
(k) "SUBORDINATED DEBT": shall mean such liabilities of the
Borrower which have been subordinated to those owed to the Bank in a manner
acceptable to the Bank.
1.02 ACCOUNTING TERMS: All references to financial statements,
assets, liabilities, and similar accounting items not specifically defined
herein shall mean such financial statements or such items prepared or determined
in accordance with generally accepted accounting principles consistently applied
and, except where otherwise specified, all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.
1.03 OTHER TERMS: Other terms not otherwise defined shall have the
meanings attributed to such terms in the California Uniform Commercial Code.
SECTION 2
THE TERM LOAN
2.01 TERM LOAN. The Bank agrees to lend to the Borrower in up to 5
drawings in the minimum amount of $1,000,000 upon the Borrower's request made
prior to December 31, 1995, (the "Drawdown Period") up to the maximum amount of
$25,000,000 (the "Term Loan").
A. PURPOSE. Proceeds from the Term Loan shall be used to
finance acquisition of assets.
B. TERM LOAN ACCOUNT. The Bank shall maintain on its books a
record of account in which the Bank shall make entries setting forth all
payments made, the application of such payments to interest and principal,
accrued and unpaid interest (if any) and the outstanding principal balance under
the Term Loan (the "Term Loan Account"). The Bank shall provide the Borrower
with a monthly statement of the Borrower's Term Loan Account, which statement
shall be considered to be correct and conclusively binding on the Borrower
unless the Borrower notifies the Bank to the contrary within 30 days after the
Borrower's receipt of any such statement which it deems to be incorrect.
C. INTEREST. Interest shall accrue on the outstanding
principal balance or any portion of the outstanding principal balance of the
Term Loan at one of the following rates as elected by Borrower:
(a) VARIABLE RATE BALANCES. The outstanding principal
balance of the Term Loan ("Term Balance") shall bear interest at a rate equal to
Bank's Reference Rate per annum, as it may change from time to time ("Variable
Rate"). The rate of interest shall be adjusted concurrently with any change in
Bank's Reference Rate. The Term Balance bearing interest at the Variable Rate
is hereinafter referred to as "Variable Rate Balances".
(b) FIXED RATE BALANCES. A fixed rate for such period
of time that the Bank may quote and offer in its sole discretion from time to
time (the "Fixed Rate"), provided that any such period of time shall be for at
least 7 days and provided further that any such period of time does not extend
beyond the maturity date of the Term Loan (the "Fixed Rate Interest Period") The
Bank shall provide the Borrower with a statement of the Borrower's Fixed Rate,
which statement shall be considered to be correct and conclusively binding on
the Borrower unless the Borrower notifies the Bank to the contrary within 30
days after the Borrower's receipt of any such statement which it deems to be
incorrect. The Term Balance bearing interest at the Fixed Rate is hereinafter
referred to as "Fixed Rate Balances".
(c) EURODOLLAR BALANCES. A fixed rate quoted by the
Bank for a minimum of 30 days or for such other period of time that the Bank may
quote and offer [the "Eurodollar Interest Period"] for Term Balances in the
minimum amount of $100,000.00. Such interest rate shall be a percentage
equivalent to 1.00% per annum in excess of the Bank's Eurodollar Rate which is
that rate determined by the Bank's Treasury Desk as being the approximate rate
at which the Bank could purchase offshore U.S. dollar deposits in an amount
approximately equal to the amount of the relevant Term Balance and for a period
of time approximately equal to the relevant Eurodollar Interest Period (adjusted
for any and all assessments, surcharges and reserve requirements pertaining to
the purchase by the Bank of such U.S. dollar deposits) [the "Eurodollar Rate"].
Term Balances based upon the Eurodollar Rate is hereinafter referred to as the
"Eurodollar Balances".
Borrower hereby promises and agrees to pay interest on any
Variable Rate Balances monthly in arrears on the first calendar day of each
month.
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<PAGE>
Interest on any Eurodollar Balance or any Fixed Rate Balance with
a Eurodollar Interest Period or a Fixed Rate Interest Period (hereinafter
referred to as an "Interest Period") of 93 or less days shall be paid on the
last day of the relevant Eurodollar Interest Period or Fixed Rate Interest
Period pertaining to such Eurodollar Balance or Fixed Rate Balance. Interest on
any Eurodollar Balance or Fixed Rate Balance with an Eurodollar Interest Period
or Fixed Rate Interest Period in excess of 93 days shall be paid quarterly
(i.e., on the last day of each 3 month period occurring in such Interest Period)
and on the last day of the relevant Eurodollar Interest Period or Fixed Rate
Interest Period pertaining to such Eurodollar Balance or Fixed Rate Balance.
Interest shall be calculated on a year of 360 days for actual
days elapsed.
(d) NOTICE OF ELECTION TO ADJUST INTEREST RATE. Upon
telephonic notice which shall be received by the Bank at or before 2:00 p.m.
(California time) on a business day, the Borrower may elect:
(1) The interest on a Variable Rate Balance
shall be adjusted to accrue at the Fixed Rate or the Eurodollar Rate; provided,
however, that such notice shall be received by the Bank no later than two
business days prior to the day (which shall be a business day) on which Borrower
requests that interest be adjusted to accrue at the Fixed Rate or Eurodollar
Rate.
(2) That interest on a Fixed Rate Balance or
Eurodollar Balance shall continue to accrue at a newly quoted Fixed Rate or
Eurodollar Rate as the case may be or shall be adjusted to commence to accrue at
the Variable Rate; provided, however that such notice shall be received by the
Bank no later than two business days prior to the last day of the Interest
Period or Eurodollar Interest Period pertaining to such Fixed Rate Balance or
Eurodollar Balance. If the Bank shall not have received notice as prescribed
herein of Borrower's election that interest on any Fixed Rate Balance or
Eurodollar Balance shall continue to accrue at the Fixed Rate or Eurodollar Rate
as the case may be, Borrower shall be deemed to have elected that interest
thereon shall be adjusted to accrue at the Variable Rate upon the expiration of
the Interest Period pertaining to such Term Balance.
(e) PREPAYMENT. Notwithstanding anything to the
contrary in the Agreement, no prepayment shall be made on any Fixed Rate Balance
or Eurodollar Balance except on a day which is the last day of the relevant
Interest Period or Eurodollar Interest Period pertaining thereto. If the whole
or any part of any Fixed Rate Balance or Eurodollar Balance is prepaid by reason
of acceleration or otherwise, the Borrower shall upon the Bank's request,
promptly pay to and indemnify the Bank for all costs and any loss (including
interest) actually incurred by the Bank and any loss (excluding loss of profit
resulting from the re-employment of funds) sustained by the Bank as a
consequence of such prepayment. Any prepayment shall first be applied to pay
accrued interest, then be applied to reduce the principal balance payable on the
date set forth in numbered paragraph 3 hereinbelow, and the remaining portion
(if any) of such prepayment shall then be applied to pay the principal
installment(s) of latest maturity under this Term Loan.
(f) INDEMNIFICATION FOR FIXED RATE AND EURODOLLAR RATE
COSTS. During any period of time in which interest on any Term Balance is
accruing on the basis of the Fixed Rate or Eurodollar Rate, the Borrower shall,
upon the Bank's written request, which request shall explain in reasonable
detail the reason for such costs or payments, promptly pay to and reimburse the
Bank for all costs incurred and payments made by the Bank by reason of any
future assessment, reserve, deposit or similar requirements or any surcharge,
tax or fee imposed upon the Bank or as a result of the Bank's compliance with
any directive or requirement of any regulatory authority pertaining or relating
to funds used by the Bank in quoting and determining the Fixed Rate or
Eurodollar Rate.
(g) CONVERSION FROM FIXED RATE OR EURODOLLAR RATE TO
VARIABLE RATE. In the event that the Bank shall at any time determine that the
accrual of interest on the basis of the Fixed Rate or Eurodollar Rate (i) is
infeasible because the Bank is unable to determine the Fixed Rate or Eurodollar
Rate due to the unavailability of U.S. dollar deposits, contracts or
certificates of deposit in an amount approximately equal to the amount of the
relevant Balance and for a period of time approximately equal to the relevant
Interest Period; or (ii) is or has become unlawful or infeasible by reason of
the Bank's compliance with any new law, rule, regulation, guideline or order, or
any new interpretation of any present law, rule, regulation, guideline or order,
then the Bank shall give telephonic notice thereof (confirmed in writing) to the
Borrower, in which event any Fixed Rate Balance or Eurodollar Balance shall be
deemed to be a Variable Rate Balance and interest shall thereupon immediately
accrue at the Variable Rate.
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<PAGE>
D. PRINCIPAL. The Borrower hereby promises and agrees to pay
the outstanding principal of the Term Loan as of December 31, 1995, in 15 equal
installments of 1/16th of the outstanding principal balance of the Term Loan as
of December 31, 1995, commencing on March 31, 1998, and continuing on the last
day of each calendar quarter thereafter up to and including September 30, 2001.
On December 31, 2001, the Borrower hereby promises and agrees to pay to the Bank
the entire unpaid principal balance, together with accrued and unpaid interest.
Each payment received by the Bank shall be applied to pay interest
then due and unpaid and the remainder thereof (if any) shall be applied to pay
principal.
E. ACCOUNT DEBIT. Upon prior notice to the Borrower from the
Bank, the Borrower hereby authorizes the Bank, if and to the extent payment owed
to the Bank under the Term Loan is not made when due, after giving effect to any
grace period, to charge, from time to time, against any or all of the Borrower's
deposit accounts with the Bank any amount so due.
F. COMMITMENT FEE. Borrower agrees to pay to Bank a commitment
fee during the Drawdown Period of .25% per annum on the undrawn portion of the
Term Loan, payable quarterly in arrears and computed on a year of 360 days for
actual days elapsed.
2.02 LIMITATIONS.
(a) Notwithstanding anything to the contrary herein, the
Borrower shall not be required to make any payment to the Bank with respect to
any indemnity required pursuant to Sections 2.01 C.(f) ("Affected Section")
unless Bank shall have given notice to Borrower promptly upon the Rosemead
Commercial Banking Center of Bank, or its equivalent successor, becoming aware
of any circumstance requiring the Borrower to make any payment under an Affected
Section;
(b) The Borrower shall not be responsible for payment of any
amounts payable under any Affected Section to the extent determined to be as a
result of the Bank's gross negligence or willful misconduct.
(c) The Bank shall use its reasonable efforts (consistent with
its internal policy and legal and regulatory restrictions) to take any action if
the taking of such action would avoid the need for, or reduce the amount of, any
additional amounts payable under any Affected Section or not require the
prepayment of a Fixed Rate Advance and would not, in the reasonable judgment of
the Bank, be otherwise disadvantageous to the Bank.
SECTION 3
CONDITIONS OF LENDING
3.01 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE: The obligation of
the Bank to make the first extension of credit to or on account of the Borrower
hereunder is subject to the conditions precedent that the Bank shall have
received before the date of such first extension of credit all of the following,
in form and substance satisfactory to the Bank:
(a) Evidence that the execution, delivery and performance by the
Borrower of this Agreement and any document, instrument or agreement required
hereunder have been duly authorized.
(b) A flat fee of $62,500.00 which shall include all of Bank's
out-of-pocket expenses.
(c) Such other evidence as the Bank may reasonably request to
establish the consummation of the transaction contemplated hereunder and
compliance with the conditions of this Agreement.
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<PAGE>
SECTION 4
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties
to the Bank, which representations and warranties are continuing:
4.01 STATUS: The Borrower is a corporation duly organized and validly
existing under the laws of the State of Delaware and is properly licensed and is
qualified to do business and in good standing in, and, where necessary to
maintain the Borrower's rights and privileges, has complied in all material
respects with the fictitious name statute, of every jurisdiction in which the
Borrower is doing business.
4.02 AUTHORITY: The execution, delivery and performance by the
Borrower of this Agreement and any instrument, document or agreement required
hereunder have been duly authorized and do not and will not: (i) violate any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect having application to the
Borrower; (ii) result in a breach of or constitute a default under any material
indenture or loan or credit agreement or other material agreement, lease or
instrument to which the Borrower is a party or by which it or its properties may
be bound or affected; or (iii) require any consent or approval of its
stockholders or violate any provision of its articles of incorporation or by-
laws.
4.03 LEGAL EFFECT: This Agreement constitutes, and any instrument,
document or agreement required hereunder when delivered hereunder will
constitute, legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms except as the
same may be limited by applicable bankruptcy, insolvency, reorganization or
similar laws relating to or limiting creditor' rights generally and subject to
the availability of equitable remedies.
4.04 FINANCIAL STATEMENTS: All financial statements, financial
information and other financial data which may have been or which may hereafter
be submitted by the Borrower to the Bank are and have been or will be prepared
in accordance with generally accepted accounting principles consistently applied
and fairly present in all material respects, as of the date of such statements,
information or data, the financial condition or, as applicable, the other
information disclosed therein. Since the most recent submission of such
financial information or data to the Bank, the Borrower represents and warrants
that no material adverse change in the Borrower's financial condition or
operations has occurred which has not been fully disclosed to the Bank in
writing.
4.05 LITIGATION: Except as have been disclosed to the Bank in
writing, there are no actions, suits or proceedings pending or, to the knowledge
of the Borrower, threatened against or affecting the Borrower or the Borrower's
properties before any court or administrative agency which could reasonably be
expected, if determined adversely to the Borrower, to have a material adverse
effect on the Borrower's financial condition or operations.
4.06 TITLE TO ASSETS: The Borrower has good and marketable title to
all of its assets. The Domestic assets are not subject to any security
interest, encumbrance, lien or claim of any third person except for Permitted
Domestic Liens.
4.07 ERISA: If the Borrower has a pension, profit sharing or
retirement plan subject to ERISA, such plan has been and will continue to be
funded in accordance with its terms and otherwise complies with and continues to
comply with the requirements of ERISA, except as disclosed in writing to the
Bank prior to the date of this Agreement.
4.08 TAXES: The Borrower has filed all tax returns required to be
filed and paid all taxes shown thereon to be due, including interest and
penalties, other than such taxes which are currently payable without penalty or
interest or those which are being duly contested in good faith.
4.09 REGULATION U: The proceeds of the Advances will not be used to
purchase or carry margin stock.
4.10 ENVIRONMENTAL COMPLIANCE: The Borrower has implemented and
complied in all material respects with all applicable federal, state and local
laws, ordinances, statutes and regulations with respect to hazardous or toxic
wastes, substances or related materials, industrial hygiene or environmental
conditions. Except as previously disclosed to the Bank in writing, there are
no suits, proceedings, claims or disputes pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or its property claiming
violations of and federal, state or local law, ordinance, statute or regulation
relating to hazardous or toxic wastes, substances or related materials.
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<PAGE>
SECTION 5
COVENANTS
The Borrower covenants and agrees that, during the term of this
Agreement, and so long thereafter as the Borrower is indebted to the Bank under
this Agreement, the Borrower will, unless the Bank shall otherwise consent in
writing:
5.01 PRESERVATION OF EXISTENCE; COMPLIANCE WITH APPLICABLE LAWS:
Maintain and preserve its existence and all rights and privileges now enjoyed;
not liquidate or dissolve, merge or consolidate with or into, any other business
organization, provided however, that Borrower may acquire any other businesses
for up to $100,000,0000 in the aggregate; and conduct its business and
operations in accordance with all applicable laws, rules and regulations.
5.02 MAINTENANCE OF INSURANCE: Maintain insurance in such amounts
and covering such risks as is usually and prudently carried by companies engaged
in similar businesses and owning similar properties in the same general areas in
which the Borrower operates.
5.03 MAINTENANCE OF PROPERTIES: The Borrower shall also maintain and
preserve all its properties in good working order and condition in accordance
with the general practice of other businesses of similar character and size,
ordinary wear and tear excepted.
5.04 PAYMENT OF OBLIGATIONS AND TAXES: Make timely payment of all
assessments and taxes and all of its liabilities and obligations unless the same
are being contested in good faith by appropriate proceedings with the
appropriate court or regulatory agency, provided however that Borrower may make
payment of trade payables in accordance with its customary business practices.
For purposes hereof, the Borrower's issuance of a check, draft or similar
instrument without delivery to the intended payee shall not constitute payment.
5.05 INSPECTION RIGHTS: At any reasonable time and from time to time,
permit the Bank or any representative thereof to examine and make copies of the
records and visit the properties of the Borrower and discuss the business and
operations of the Borrower with any designated representative thereof. If the
Borrower shall maintain any records (including, but not limited to, computer
generated records or computer programs for the generation of such records) in
the possession of a third party, the Borrower hereby agrees to notify such third
party to permit the Bank free access to such records at all reasonable times and
to provide the Bank with copies of any records which it may reasonably request,
all at the Borrower's expense, the amount of which shall be payable within 30
days following demand.
5.06 REPORTING AND CERTIFICATION REQUIREMENTS: Deliver or cause to be
delivered to the Bank in form and detail satisfactory to the Bank:
(a) Not later than 120 days after the end of each of the
Borrower's fiscal years, a copy of the annual audited financial report and
Securities Exchange Commission Form 10-K of the Borrower for such year, all
certified to as having been prepared in accordance with generally accepted
accounting principles consistently applied by a firm of certified public
accountants acceptable to Bank, together with the consolidating balance sheets
and income statements for the Borrower and its subsidiaries for such year.
(b) Not later than 60 days after the end of each fiscal quarter,
the Borrower's Securities Exchange Commission Form 10-Q, together with the
consolidating balance sheets and income statements for the Borrower and its
subsidiaries, each as of the end of such period.
(c) Promptly upon the Bank's request, such other information
pertaining to the Borrower as the Bank may reasonably request.
5.07 PAYMENT OF DIVIDENDS: Not declare or pay any dividends on any
class of stock now or hereafter outstanding except dividends payable solely in
the Borrower's capital stock.
5.08 REDEMPTION OR REPURCHASE OF STOCK: Not redeem or repurchase any
class of the Borrower's stock now or hereafter outstanding, provided however,
Borrower may redeem or repurchase any class of the Borrower's stock in an amount
not to exceed $l,000,000.00 in any one fiscal year .
-6-
<PAGE>
5.09 ADDITIONAL DOMESTIC INDEBTEDNESS: Not, after the date hereof,
create, incur or assume, directly or indirectly, any additional Indebtedness nor
make any fixed capital expenditure or any commitment therefor, for uses which
would be, in accordance with generally accepted accounting principles, reported
as Domestic capital leases ("Capital Expenditures") other than (i) Indebtedness
or Capital Expenditures owed or to be owed to the Bank or (ii) Indebtedness or
Capital Expenditures to trade creditors incurred in the ordinary course of the
Borrower's business or (iii) any Indebtedness for Capital Expenditures in the
aggregate greater than $75,000,000.00 in any one fiscal year or (iv)
Indebtedness owed to other financial institutions under revolving lines of
credit or (v) Indebtedness of up to $75,000,000 in connection with any
acquisitions.
5.10 LOANS: Not make any loans or advances or extend credit to any
third person, including, but not limited to, directors, officers, shareholders,
employees, affiliated entities and subsidiaries of the Borrower, except for
credit extended in the ordinary course of the Borrower's business as presently
conducted, provided however, that Borrower may make loans or advances or extend
credit to employees of Borrower in an aggregate amount not to exceed
$1,000,000.00 in any one fiscal year and provided further, that Borrower may
make loans or advances or extend credit to affiliated entities and subsidiaries
of Borrower in an aggregate amount not to exceed $15,000,000.00 in the
aggregate.
5.11 LIENS AND ENCUMBRANCES: Not create, assume or permit to exist
any security interest, encumbrance, mortgage, deed of trust, or other lien
(including, but not limited to, a lien of attachment, judgment or execution)
affecting any of the Borrower's Domestic properties, or execute or allow to be
filed any financing statement or continuation thereof affecting any of such
properties, except for (i) Permitted Domestic Liens or as otherwise provided in
this Agreement, (ii) purchase money security interests or capital leases of up
to $75,000,000 for equipment including mortgage financing for the Borrower's
Temecula, California property in any one fiscal year.
5.12 TRANSFER ASSETS: Not, after the date hereof, sell, contract for
sale, convey, transfer, assign, lease or sublet, any of its assets except in the
ordinary course of business as presently conducted by the Borrower, which
ordinary course of business includes, but is not limited to, sale-leasebacks of
equipment and, then, only at then prevailing market rates for such assets.
5.13 CHANGE IN NATURE OF BUSINESS: Not make any material change in
the fundamental nature of its business as existing or conducted as of the date
hereof.
5.14 FINANCIAL CONDITION: Maintain at all times:
(a) A minimum consolidated Effective Tangible Net Worth of at
least $175,000,000.00 plus, in each case, 50% of annual net income, the proceeds
of any equity issuance, conversion of debt into equity and any grant of rights
to subscribe for shares of the Borrower, commencing with the fiscal year-end
June 30, 1994.
(b) A ratio of consolidated Debt to consolidated Effective
Tangible Net Worth of not more than 0.90 to 1.
(c) A ratio of consolidated current assets to consolidated
current liabilities of not less than 1.75 to 1. For the purposes hereof,
outstanding Advances under the Line of Credit and under any other revolving
lines of credit (whether with Bank or a third party) shall be included in
consolidated current liabilities.
(d) A ratio of the sum of net income, plus depreciation expense,
plus amortization expense, plus net interest expense, each for the immediately
preceding 4 fiscal quarters to the sum of the current portion of long-term Debt
then due for the fourth preceding fiscal quarter, plus net interest expense for
the immediately preceding 4 fiscal quarters of not less than 1.5 to 1.
5.15 COMPENSATION OF EMPLOYEES: Compensate its employees for services
rendered at an hourly rate at least equal to the minimum hourly rate prescribed
by any applicable federal or state law or regulation.
5.16 NOTICE: Give the Bank prompt written notice of any and all (i)
Events of Default; (ii) litigation, arbitration or administrative proceedings to
which the Borrower is a party and in which the claim or liability exceeds
$1,000,000; and (iii) other matters, other than matters of a general economic
nature (other than those matters relating primarily to the Borrower or the
industries in which the Borrower conducts its businesses) which have resulted
in, or could reasonably be expected to, result in a material adverse change in
the financial condition or business operations of the Borrower.
5.17 CONSOLIDATED OPERATING LOSS: Not incur for any two consecutive
quarters a cumulative Consolidated Operating Loss in excess of $10,000,000.00.
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<PAGE>
5.18 Environmental Compliance. The Borrower shall:
(a) Implement and comply in all material respects with all
applicable federal, state and local laws, ordinances, statutes and regulations
with respect to hazardous or toxic wastes, substances or related materials,
industrial hygiene or to environmental conditions.
(b) Own, use, generate, manufacture, store, handle, treat,
release or dispose of any hazardous or toxic wastes, substances or related
materials, only if such ownership or use would not result in a material adverse
change in the Borrower's financial condition, operations or assets.
(c) Give prompt written notice of any discovery of or suit,
proceeding, claim, dispute, threat, inquiry or filing respecting hazardous or
toxic wastes, substances or related materials.
(d) At all times indemnify and hold harmless Bank from and
against any and all liability arising out of the use, generation, manufacture,
storage, handling, treatment, disposal or presence of hazardous or toxic wastes,
substances or related materials, other than liability arising out of the Bank's
gross negligence or willful misconduct.
SECTION 6
EVENTS OF DEFAULT
Any one or more of the following described events shall constitute an
event of default (an "Event of Default") under this Agreement:
6.01 NON-PAYMENT: The Borrower shall fail to pay any Obligations
within 10 days of when due.
6.02 PERFORMANCE UNDER THIS AND OTHER AGREEMENTS: The Borrower shall
fail in any material respect to perform or observe any term, covenant or
agreement contained in this Agreement or in any document, instrument or
agreement evidencing or relating to any Indebtedness of the Borrower, other than
immaterial Indebtedness described in clause (ii) of Section 1.01(h) (whether
such Indebtedness is owed to the Bank or to third persons if such failure would
permit such third persons to accelerate the Indebtedness), and any such failure
(exclusive of the payment of money to the Bank under this Agreement or under any
other instrument, document or agreement, which failure shall constitute and be
an immediate Event of Default if not paid when due or when demanded to be due,
but after giving effect to any grace period therefore) shall continue for more
than 30 days after written notice from the Bank to the Borrower of the existence
and character of such Event of Default.
6.03 REPRESENTATIONS AND WARRANTIES; FINANCIAL STATEMENTS: Any
representation or warranty made by the Borrower under or in connection with this
Agreement or any financial statement given by the Borrower or any guarantor
shall prove to have been incorrect in any material respect when made or given or
when deemed to have been made or given.
6.04 INSOLVENCY: The Borrower shall: (i) become insolvent or be
unable to pay its debts as they mature; (ii) make an assignment for the benefit
of creditors or to an agent authorized to liquidate any substantial amount of
its properties and assets; (iii) file a voluntary petition in bankruptcy or
seeking reorganization or to effect a plan or other arrangement with creditors;
(iv) file an answer admitting the material allegations of an involuntary
petition relating to bankruptcy or reorganization or join in any such petition;
(v) become or be adjudicated a bankrupt; (vi) apply for or consent to the
appointment of, or consent that an order be made, appointing any receiver,
custodian or trustee, for itself or any of its properties, assets or businesses;
or (vii) any receiver, custodian or trustee shall have been appointed for all or
substantial part of its properties, assets or businesses and shall not be
discharged within 60 days after the date of such appointment.
6.05 EXECUTION: Any writ of execution or attachment or any judgment
lien which individually exceeds $2,000,000 or which, in the aggregate, exceeds
$5,000,000.00 shall be issued against any property of the Borrower and shall not
be discharged or bonded against or released within 60 days after the issuance or
attachment of such writ or lien.
6.06 SUSPENSION: The Borrower shall voluntarily suspend the
transaction of business or allow to be suspended, terminated, revoked or expired
any permit, license or approval of any governmental body materially necessary to
conduct the Borrower's business as now conducted.
-8-
<PAGE>
6.07 CHANGE IN OWNERSHIP: There shall occur a sale, transfer,
disposition or encumbrance (whether voluntary or involuntary to), or an
agreement shall be entered into to do so with, any Person or group of Persons
(as such terms are defined pursuant to Federal securities laws) with respect to
more than 20% of the issued and outstanding capital stock of the Borrower and,
as a result thereof, such Person or group of Persons has the ability to direct
or cause the direction of the management and policies of the Borrower.
SECTION 7
REMEDIES ON DEFAULT
Upon the occurrence and during the continuation of any Event of
Default, the Bank may, at its sole and absolute election, without demand and
only upon such notice as may be required by law:
7.01 ACCELERATION: Declare any or all of the Borrower's Indebtedness
owing to the Bank, whether under this Agreement or any other document,
instrument or agreement, immediately due and payable, whether or not otherwise
due and payable.
7.02 CEASE EXTENDING CREDIT: Cease extending credit to or for the
account of the Borrower under this Agreement or under any other agreement now
existing or hereafter entered into between the Borrower and the Bank.
7.03 TERMINATION: Terminate this Agreement as to any future
obligation of the Bank without affecting the Borrower's Obligations to the Bank
or the Bank's rights and remedies under this Agreement or under any other
document, instrument or agreement.
7.04 NON-EXCLUSIVITY OF REMEDIES: Exercise one or more of the Bank's
rights set forth herein or seek such other rights or pursue such other remedies
as may be provided by law, in equity or in any other agreement now existing or
hereafter entered into between the Borrower and the Bank, or otherwise.
SECTION 8
MISCELLANEOUS
8.01 DEFAULT INTEREST RATE: The Borrower shall pay the Bank interest
on any indebtedness or amount payable under this Agreement, from the date that
such indebtedness or amount became due or was demanded to be due until paid in
full, at a rate which is 3% in excess of the Variable Rate otherwise provided
under this Agreement.
8.02 RELIANCE: Each warranty, representation, covenant, obligation
and agreement contained in this Agreement shall be conclusively presumed to have
been relied upon by the Bank regardless of any investigation made or information
possessed by the Bank and shall be cumulative and in addition to any other
warranties, representations, covenants and agreements which the Borrower now or
hereafter shall give, or cause to be given, to the Bank in writing, other than
those implied hereunder.
8.03 ATTORNEYS' FEES: In the event of any action in relation to this
Agreement or any document, instrument or agreement executed with respect to,
evidencing or securing the Obligations, the prevailing party, in addition to all
other sums to which it may be entitled, shall be entitled to reasonable
attorneys' fees.
-9-
<PAGE>
8.04 NOTICES: All notices, payments, requests, information and
demands which either party hereto may desire, or may be required to give or make
to the other party hereto, shall be given or made to such party by hand delivery
or through deposit in the United States mail, postage prepaid, or by telecopier
addressed as set forth below or to such other address as may be specified from
time to time in writing by either party to the other.
TO THE BORROWER: TO THE BANK:
INTERNATIONAL RECTIFIER CORPORATION SANWA BANK CALIFORNIA
233 Kansas Street 9000 East Valley Blvd.
El Segundo, CA 90245 Rosemead, CA 91770
Attn: Treasury Department Attn: David Carr
Vice President
Telecopier No. (310) 640-6575 Telecopier No. (818) 312-5751
8.05 WAIVER. Neither the failure nor delay by the Bank in exercising
any right hereunder or under any document, instrument or agreement mentioned
herein shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder or under any other document, instrument or
agreement mentioned herein preclude other or further exercise thereof or the
exercise of any other right; nor shall any waiver of any right or default
hereunder, or under any other document, instrument or agreement mentioned
herein, constitute a waiver of any other right or default or constitute a waiver
of any other default of the same or any other term or provision.
8.06 CONFLICTING PROVISIONS: To the extent the provisions contained
in this Agreement are inconsistent with those contained in any other document,
instrument or agreement executed pursuant hereto, the terms and provisions
contained herein shall control. Otherwise, such provisions shall be considered
cumulative.
8.07 BINDING EFFECT; ASSIGNMENT: This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank. The Bank may sell, assign or grant participations in
amounts of $5,000,000 or greater, in all or any portion of its rights and
benefits hereunder, provided, however, that Bank will not make any assignment
without the Borrower's prior written consent that would be (i) not to any
Federal Reserve Bank as collateral (ii) to more than one bank or a syndication
of banks, or (iii) to any assignee in the semi-conductor industry. The Borrower
agrees that, in connection with any such sale, grant or assignment, the Bank may
deliver to the prospective buyer, participant or assignee financial statements
and other relevant information relating to the Borrower if such third party
agrees in writing to abide by the confidentiality provisions of Section 8.12
hereof.
8.08 JURISDICTION: This Agreement, and any documents, instruments or
agreements mentioned or referred to herein shall be governed by and construed
according to the laws of the State of California, to the jurisdiction of whose
courts the parties hereby submit.
8.09 WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK EACH WAIVE
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS,
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. THE BORROWER AND THE BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
8.10 HEADINGS: The headings herein set forth are solely for the
purpose of identification and have no legal significance.
-10-
<PAGE>
8.11 ENTIRE AGREEMENT: This Agreement and all documents, instruments
and agreements mentioned herein constitute the entire and complete understanding
of the parties with respect to the transactions contemplated hereunder. All
previous conversations, memoranda and writings between the parties pertaining to
the transactions contemplated hereunder not incorporated or referenced in this
Agreement or in such documents, instruments and agreements are superseded
hereby.
8.12 CONFIDENTIALITY: The Bank shall, and shall cause its officers,
employees, directors, agents, legal counsel and other professional advisors to,
hold all non-public information obtained pursuant to this Agreement in
accordance with its customary procedures for handling confidential information
of this nature and in accordance with safe and sound banking practices. The
Bank shall use its best efforts to notify the Borrower prior to any disclosure
of any such non-public information, unless prohibited by applicable law, rule,
regulation or order.
8.13 IMMATERIALITY: Notwithstanding anything herein to the contrary,
any breach of any representations and warranties contained in Section 4 hereof
or the covenants in Sections 5.01, 5.03, 5.04, 5.11, 5.12 or 5.18 shall not be
deemed to be an Event of Default or prohibit any extension of credit hereunder
if, in the aggregate, such defaults could not reasonably be expected to have a
material adverse effect on the Borrower's financial condition, operations or
assets.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first hereinabove written.
BANK: BORROWER:
SANWA BANK CALIFORNIA INTERNATIONAL RECTIFIER CORPORATION
By: /s/ David Carr /s/ Janice Upton By: /s/ Michael P. McGee
------------------------------------- -----------------------------
Name: David Carr Janice Upton Name: Michael P. McGee
----------------------------------- ---------------------------
Title: Vice President Vice President Title: Vice President & CFO
---------------------------------- ------------------------
ATTEST: By:___________________________
Name:_________________________
Title:________________________
-11-
<PAGE>
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT
This FIRST AMENDMENT dated December 30, 1994 (the "First Amendment")
to the Revolving Credit Agreement dated as of July 1, 1994 (the "Agreement")
between INTERNATIONAL RECTIFIER CORPORATION (the "Borrower") and WELLS FARGO
BANK, N.A. ("Wells Fargo") WITNESSES the following:
WHEREAS the Borrower has requested that Wells Fargo permit the
Borrower to obtain Cost of Funds Advances for Interest Periods of up to 29 days
as well as periods of 1, 3, 6, 9, 12 and 18 months; and
WHEREAS Wells Fargo is willing to make Cost of Funds Advances to the
Borrower for periods of up to 29 days as well as periods of 1, 3, 6, 9, 12 and
18 months; and
WHEREAS the Borrower has requested that Wells Fargo permit the
Borrower to make loans or advances or extensions of credit to its Subsidiaries
and to other corporations, associations and business entities of which the
Borrower owns directly or indirectly more than ten percent (10%) of their voting
securities in an aggregate amount not to exceed $15,000,000 at any one time
outstanding for all such Subsidiaries together with all such other related
corporations, associations and business entities; and
WHEREAS Wells Fargo is willing to allow the Borrower to make loans and
advances and extensions of credit to its Subsidiaries and to other such
corporations, associations and business entities so long as such loans, advances
and extensions of credit do not in the aggregate for all such Subsidiaries
together with all such other related corporations, associations and business
entities exceed $15,000,000 at any one time outstanding;
NOW, THEREFORE, Wells Fargo and the Borrower agree as follows:
1. USE OF CERTAIN TERMS. Terms defined in the Agreement and not
defined in this First Amendment are used in this First Amendment with their
defined meanings in the Agreement.
2. COST OF FUNDS INTEREST PERIODS. Wells Fargo and the Borrower
agree that starting on December 30, 1994 the Cost of Funds Interest Periods will
be periods of any number of days up to 29 days or periods of 1, 3, 6, 9, 12 and
18 months as designated by the Borrower. To that end the definition of "Cost of
Funds Interest Period" in Section 1.01 (h) of the Agreement and the wording of
Section 2.04 of the Agreement are hereby amended to read in their entirety as
follows:
"(h) "COST OF FUNDS INTEREST PERIOD" shall mean, for each Cost
of Funds Advance, a period of any number of days up to 29 days or a
period of one (1), three (3), six (6), nine (9), twelve (12) or
eighteen (18) months, as designated by the Borrower, during which all
or a portion of the Advances under the Revolving Credit Facility bear
interest determined in relation to the Cost of Funds Rate; provided,
however, that (a) if a Cost of Funds Interest Period of one month or
more commences on a date for which there is no corresponding date in
the month in which such Cost of Funds Interest Period is to end, such
Cost of Funds Interest Period shall end on the last Business Day of
such
<PAGE>
month; (b) if the last day of any Cost of Funds Interest Period occurs
on a day which is not a Business Day, such Cost of Funds Interest
Period shall be extended to expire on the next succeeding Business
Day; and (c) no Cost of Funds Interest Period may extend beyond the
Maturity Date."
"2.04 INTEREST ON ADVANCES. Interest shall accrue from the
date of each Advance at one of the following rates, as quoted by Wells
Fargo and as elected by the Borrower pursuant to this Section 2.04 or
Section 2.05 of this Agreement:
(A) PRIME RATE ADVANCES. For Advances designated as
Prime Rate Advances, a fluctuating rate per annum equal to the Prime
Rate in effect from time to time. Interest shall be adjusted
concurrently with any change in the Prime Rate.
(B) LIBO RATE ADVANCES. For Advances designated as
LIBO Rate Advances, a fixed rate per annum determined by Wells Fargo
to be one and one-quarter percent (1.25%) above the LIBO Rate in
effect on the first day of the LIBO Rate Interest Period for the
Advance.
(C) COST OF FUNDS ADVANCES. For Advances designated
as Cost of Funds Advances, a fixed rate per annum determined by Wells
Fargo to be one and one-quarter percent (1.25%) above the Cost of
Funds Rate in effect on the first day of the Cost of Funds Interest
Period for the Advance.
All interest on Advances shall be computed on the basis of a 360 day
year, actual days elapsed. Interest on Prime Rate Advances and Cost
of Funds Advances shall be paid in Dollars in arrears in monthly
installments commencing on the first day of the month following the
date of the first such Advance and continuing on the first day of each
month thereafter; provided, however, that if a Cost of Funds Advance
is for 29 days or less interest will be paid in the last day of the
Cost of Funds Interest Period for such Advance. Interest on any LIBO
Rate Advance shall be paid in arrears on the last day of the LIBO Rate
Interest Period pertaining to such LIBO Rate Advance and, if such
Interest Period is greater than three months, on that date falling
three months (if the LIBO Rate Interest Period is six months), three
months and six months (if the LIBO Rate Interest Period is nine
months) and three months, six months and nine months (if the LIBO Rate
Interest Period is twelve months) after the first day of such Interest
Period."
3. LOANS TO SUBSIDIARIES AND OTHER RELATED CORPORATIONS,
ASSOCIATIONS AND BUSINESS ENTITIES. Wells Fargo and the Borrower agree that
starting on December 30, 1994 the Borrower may, despite the prohibition against
loans or advances or credit extensions to third persons in Section 6.10 of the
Agreement, make loans or advances or extensions of credit to its Subsidiaries
and to other corporations, associations and business entities of which the
Borrower owns directly or indirectly more than ten percent (10%) of their voting
securities in an aggregate amount not to exceed $15,000,000 for all its
Subsidiaries together with all such other related corporations, associations and
business entities. To that end, Section 6.10 of the Agreement is hereby
amended to read in its entirety as follows:
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<PAGE>
"6.10 LOANS. Not make any loans or advances or extensions of
credit to any third person, including, but not limited to, directors,
officers, shareholders, employees, affiliated entities and
Subsidiaries of the Borrower, except for credit extended in the
ordinary course of the Borrower's business as presently conducted;
provided, however, that the Borrower may make loans or advances or
extensions of credit to (i) employees of the Borrower in an aggregate
amount not to exceed $750,000.00 in any one fiscal year for all such
employees, and (ii) Subsidiaries and other corporations, associations
and business entities of which the Borrower owns directly or
indirectly more than ten percent (10%) of their voting securities in
an aggregate amount not to exceed $15,000,000.00 at any one time
outstanding for all such Subsidiaries together with all such other
related corporations, associations and business entities."
4. EFFECTIVE DATE. This First Amendment shall be effective on
December 30, 1994.
5. REPRESENTATIONS AND WARRANTIES. In order to induce Wells Fargo
to enter into this First Amendment and to amend the Agreement in the manner
provided in this First Amendment, the Borrower hereby warrants that (i) the
representations and warranties contained in Section 5 of the Agreement are true
and correct on the date of this First Amendment, and (ii) no Event of Default,
as specified in Section 7 of the Agreement, and no event which with notice or
lapse of time or both would become such an Event of Default, has occurred and is
continuing on the date of this First Amendment.
6. AGREEMENT OTHERWISE UNALTERED. Except as expressly modified by
this First Amendment, the Agreement shall continue to be and shall remain in
full force and effect.
IN WITNESS WHEREOF, Wells Fargo and the Borrower by their respective
duly authorized officers or representatives have caused this First Amendment to
be duly executed as of the day and year first written above.
INTERNATIONAL RECTIFIER CORPORATION
By: /s/ Michael P. McGee
------------------------------------
Michael P. McGee
Title: Vice President, Chief Financial Officer
----------------------------------------
WELLS FARGO BANK, N.A.
By: /s/ Daniel S. Silmore
------------------------------------
Title: Assistant Vice President
-------------------------------
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<PAGE>
SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT
This SECOND AMENDMENT dated as of March 31, 1995 ("Second Amendment") to
the Revolving Credit Agreement dated as of July 1, 1994 as amended by the First
Amendment dated December 30, 1994 (collectively, "Agreement") between
INTERNATIONAL RECTIFIER CORPORATION ("Borrower") and WELLS FARGO BANK, N.A.
("Wells Fargo") WITNESSES the following:
WHEREAS, Borrower has requested that Wells Fargo amend the Agreement to,
among other things, increase the Commitment to Twenty-Five Million Dollars
($25,000,000) and to increase the Letter of Credit Commitment and the Letter of
Credit Sub-Facility to Twelve Million Five Hundred Thousand Dollars
($12,500,000); and
WHEREAS, Wells Fargo is willing to increase the Commitment to Twenty-Five
Million Dollars ($25,000,000), to increase the Letter of Credit Commitment and
the Letter of Credit Sub-Facility to Twelve Million Five Hundred Thousand
Dollars ($12,500,000), and to amend the Agreement in other respects;
NOW THEREFORE, Wells Fargo and Borrower agree as follows:
1. USE OF CERTAIN TERMS. Terms defined in the Agreement and not defined
in this Second Amendment are used in this Second Amendment with their defined
meanings in the Agreement.
2. COMMITMENT. Wells Fargo and Borrower agree that the Commitment shall
be increased from Ten Million Dollars ($10,000,000) to Twenty-Five Million
Dollars ($25,000,000). To that end, the Agreement shall be amended to delete
"Ten Million Dollars ($10,000,000)" from the definition of "Commitment" in
Section 1.01(e) of the Agreement and from the definition of "Revolving Credit
Facility" in Section 1.01(pp) and Section 2.01 of the Agreement, and "Twenty-
Five Million ($25,000,000)" shall be inserted in lieu thereof.
3. LETTER OF CREDIT COMMITMENT. Wells Fargo and Borrower agree that the
Letter of Credit Commitment shall be increased from Five Million Dollars
($5,000,000) to Twelve Million Five Hundred Dollars ($12,500,000). To that end,
the Agreement shall be amended to delete "Five Million Dollars ($5,000,000)"
from the definition of "Letter of Credit Commitment" in Section 1.01(w) of the
Agreement, from the definition of "Letter of Credit Sub-Facility" in Section
1.01(x) of the Agreement and from the last line of Section 3.01 of the
Agreement, and "Twelve Million Five Hundred Thousand ($12,500,000)" shall be
inserted in lieu thereof.
4. NOTE. In order to effectuate the increase in the Commitment, Borrower
agrees to execute a new revolving credit facility note ("New Note") the form of
which is attached hereto as Exhibit A. Upon the execution of the New Note by
Borrower, all references in the Agreement
<PAGE>
to the "Revolving Credit Facility Note" or the "Note" shall mean the New Note.
The New Note shall supersede and replace the Note.
5. DEFINITION OF DOMESTIC INDEBTEDNESS. The following definition shall be
added to Section 1.1 of the Agreement:
"Domestic Indebtedness" shall mean all Indebtedness incurred by
Borrower in connection with Borrower's Domestic operations."
6. ADDITIONAL DOMESTIC INDEBTEDNESS. The Borrower and Wells Fargo agree
that Section 6.09 of the Agreement shall be amended. To that end, Section 6.09
is hereby deleted in its entirety and a new Section 6.09 is hereby added to the
Agreement as follows:
"6.09 ADDITIONAL DOMESTIC INDEBTEDNESS. Not, after the date hereof,
create, incur or assume, directly or indirectly any additional
Domestic Indebtedness other than (i) indebtedness owed or to be owed
to Wells Fargo or Sanwa Bank California, or (ii) Indebtedness to trade
creditors incurred in the ordinary course of the Borrower's business,
or (iii) Indebtedness in an aggregate amount not exceeding
$75,000,000.00 in any one of the Borrower's fiscal years for new
equipment financing, capital leases, and financing for the Temecula
Facility, (iv) Indebtedness owed to other financial institutions under
revolving lines of credit, and (v) Indebtedness of up to
$75,000,000.00 incurred in connection with business acquisitions made
by the Borrower."
7. LOANS. Borrower and Wells Fargo agree that Section 6.10 of the
Agreement shall be amended. To that end, Section 6.10 of the Agreement shall
be deleted in its entirety and a new Section 6.10 shall be added to the
Agreement as follows:
"6.10 LOANS. Not make any loans or advances or extend credit to any
third person including, but not limited to, directors, officers,
shareholders, employees, affiliated entities and Subsidiaries of the
Borrower, except for credit extended in the ordinary course of the
Borrower's business as presently conducted; provided, however, that
the Borrower may make loans or advances or extend credit to employees
of the Borrower in an aggregate amount not to exceed $1,000,000.00 in
any one fiscal year for all such employees; and provided further that
the Borrower may make loans or advances or extend credit to
Subsidiaries and affiliated entities of the Borrower in an aggregate
amount not to exceed $15,000,000.00 in any one fiscal year for all
such affiliated entities and Subsidiaries."
8. LIENS AND ENCUMBRANCES. Borrower and Wells Fargo agree that
Section 6.11 shall be amended. To that end, Section 6.11 (ii) shall be amended
to delete "$55,000,000.00" and to insert "$75,000,000.00" in lieu thereof.
- 2 -
<PAGE>
9. FINANCIAL CONDITION. Borrower and Wells Fargo agree that 6.18 of
the Agreement shall be amended. To that end, Section 6.18 of the Agreement
shall be deleted in its entirety and a new Section 6.18 shall be added to the
Agreement as follows:
"6.18 FINANCIAL CONDITION. Maintain at all times:
(a) A minimum consolidated Effective Tangible Net Worth of at
least $175,000,000.00, plus 50% of annual net income, 100% of the
proceeds of any equity issuance, 100% of the conversion of debt into
equity, and 100% of any grant of rights to subscribe for shares of the
Borrower, commencing with the fiscal year-end June 30, 1994.
(b) A ratio of consolidated Debt to consolidated Effective
Tangible Net Worth of not more than .90 to 1.
(c) A ratio of consolidated current assets to consolidated
current liabilities (including, but not limited to, amounts
outstanding under this Agreement and all amounts outstanding under
other revolving lines of credit, whether with another bank or a third
party), of not less than 1.75 to 1."
(d) A ratio of the sum of net income, plus depreciation expense,
plus amortization expense, plus net interest expense, each for the immediately
preceding four fiscal quarters to the sum of the current portion of long-term
Debt then due for the fourth preceding fiscal quarter, plus net interest expense
for the immediately preceding four fiscal quarters of not less than 1.5 to 1."
10. LIBO RATE ADVANCES. Wells Fargo and Borrower agree that the interest
rate on LIBO Rate Advances shall be decreased. To that end, Section 2.04(b)
shall be modified to delete "one-quarter percent (1.25%)" and to insert "one
percent (1.00%)" in lieu thereof.
11. COSTS OF FUNDS ADVANCES. Borrower and Wells Fargo agree that the
interest rate on Cost of Funds Advances shall be decreased. To that end,
Section 2.04(c) shall be amended to delete "one and one-quarter percent (1.25%)"
and to insert in lieu thereof "one percent (1.00%)" in lieu thereof.
12. ACQUISITIONS. Borrower and Wells Fargo agree that Section 6 of the
Agreement shall be amended to add a new covenant regarding acquisitions by
Borrower. To that end, a new Section 6.20 shall be added to the Agreement as
follows:
"6.20. Acquisitions. Borrower may acquire any other businesses for an
amount equal to or less than $100,000,000.00 in the aggregate."
13. CONDITIONS PRECEDENT. This Second Amendment shall become effective as
of the date ("Second Amendment Effective Date") that each of the conditions
precedent set
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<PAGE>
forth below shall have been fulfilled to the satisfaction of Wells Fargo,
PROVIDED that the Second Amendment Effective Date shall not occur later than
March 31, 1995:
(a) AMENDMENT. Wells Fargo shall have received counterparts of
this Second Amendment, duly executed by the Borrower and Wells Fargo.
(b) NO DEFAULT OR EVENT OF DEFAULT. No Event of Default, as
specified in Section 7 of the Agreement, and no event which with notice or lapse
of time or both would become such an Event of Default, has occurred and is
continuing on the date of this Second Amendment.
(c) REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Borrower in this Second Amendment and in Section 5 of the
Agreement after giving effect to this Second Amendment shall be true and correct
in all material respects on and as of the Second Amendment Effective Date as if
made on such date except where such representations and warranties expressly
relate to an earlier date in which case such representations and warranties
shall be true and correct in all material respects as of such earlier date.
(d) Wells Fargo shall have received the New Note duly executed
by the Borrower.
14. AGREEMENT OTHERWISE UNALTERED. Except as expressly modified by this
Second Amendment, the Agreement shall continue to be and shall remain in full
force and effect.
IN WITNESS WHEREOF, Wells Fargo and Borrower by their respective duly
authorized officers or representatives have caused this Second Amendment to be
duly executed as of the day and year first written above.
INTERNATIONAL RECTIFIER
CORPORATION
By: /s/ Michael P. McGee
----------------------------------------
Title: VICE PRESIDENT & CFO
-------------------------------------
WELLS FARGO BANK
NATIONAL ASSOCIATION
By: /s/ Brian McDonald
----------------------------------------
Title: Assistant Vice President
------------------------------------
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<PAGE>
REVOLVING CREDIT FACILITY NOTE
$25,000,000 El Segundo, California
March 31 , 1995
FOR VALUE RECEIVED, the undersigned, INTERNATIONAL RECTIFIER CORPORATION
("Borrower"), promises to pay to the order of WELLS FARGO BANK, N.A. ("Wells
Fargo") at Wells Fargo's 'office at 420 Montgomery Street, San Francisco,
California, or at such other place in the State of California as Wells Fargo may
designate, in lawful money of the United States of America and in immediately
available funds, the principal sum of Twenty-Five Million Dollars ($25,000,000),
or so much thereof as may be advanced and be outstanding.
Borrower further agrees to pay interest (whether before or after any breach
of this Note) at said office, in like funds and currency, on the unpaid
principal amount owing hereunder from time to time from the date hereof until
such amount shall have become due and payable (whether at the stated maturity,
by acceleration or otherwise) at either (a) a fluctuating rate per annum at all
times equal to the Prime Rate in effect from time to time, (b) a fixed rate per
annum determined by Wells Fargo to be one and percent (1.00%) above the LIBO
Rate in effect on the first day of any LIBO Rate Interest Period for a LIBO Rate
Advance, or (c) a fixed rate per annum determined by Wells Fargo to be one
percent (1.00%) above the Cost of Funds Rate in effect on the first day of any
Cost of Funds Interest Period for a Cost of Funds Advance. When interest is
determined in relation to the Prime Rate, each change in the rate of interest
hereunder shall become effective on the date each Prime Rate change is announced
within Wells Fargo. Interest shall also be payable on any overdue payment of
principal and (to the extent permitted by law) interest as set forth in the
Credit Agreement (as defined below).
With respect to each interest rate selection by Borrower, the date,
principal amount, rate of interest, term of the applicable Interest Period for a
LIBO Rate Advance and a Cost of Funds Advance, and any payments applicable
thereto, shall be set forth by Wells Fargo on the reverse of this Note or on
such schedules as Wells Fargo shall maintain for such purposes. Absent manifest
error, such notations on this Note or on such schedules, and all endorsements by
Wells Fargo thereon, shall be conclusive evidence of all such items.
This Note is the Revolving Credit Facility Note defined in and made
pursuant to that certain Revolving Credit Agreement dated as of July 1, 1994,
between Borrower and Wells Fargo, as amended from time to time, ("Credit
Agreement"). All terms defined in the Credit Agreement shall have the same
meanings when used in this Note, and the rate of interest applicable under this
Note shall change from time to time in accordance with the terms of the Credit
Agreement. This Note supercedes and replaces that certain Revolving Credit
Facility Note dated July 1, 1994, in the principal amount of Ten Million Dollars
($10,000,000)and executed by Borrower pursuant to the Credit Agreement.
The unpaid principal balance of this obligation at any time shall be the
total of all amounts advanced under this Note by the holder of this Note less
the amount of all principal payments made on this Note by or for Borrower, which
balance may be endorsed on this
<PAGE>
Note from time to time by Wells Fargo. Notwithstanding anything in this Note to
the contrary, the outstanding principal balance of this Note, together with the
aggregate amount of all outstanding Letters of Credit (as defined in the Credit
Agreement), shall not at any time exceed the maximum principal amount set forth
above, or such lesser amount as is then available under this Note if the maximum
principal amount of this Note is reduced pursuant to the provisions of the
Credit Agreement.
Interest accrued on this Note shall be due and payable as provided in the
Credit Agreement. The outstanding principal balance of this Note, together with
all accrued and unpaid interest thereon, shall also be due and payable on the
Maturity Date (as defined in the Credit Agreement).
Borrower may prepay principal on this Note solely in accordance with the
terms of the Credit Agreement. Each payment of principal on this Note shall be
credited to the portions of this Note which bear interest determined in relation
to the Prime Rate, the LIBO Rate and the Cost of Funds Rate in accordance with
the application of payment provisions of the Credit Agreement.
Advances under this Note, to the total amount of the principal sum stated
above and in accordance with the provisions of the Credit Agreement, may be made
by the holder at the oral or written request of Darryl T, Mikuni, Rose M.
Marcario, Michael P. McGee or Deidre J. Samuels, any one acting alone, who are
authorized to request Advances and direct the disposition of any such Advances
until written notice of the revocation of such authority or the substitution of
new named people with such authority is received by the holder of this Note.
Upon the occurrence of any Event of Default (as defined in the Credit
Agreement) Wells Fargo, at Wells Fargo's option, may declare all sums of
principal and interest outstanding under this Note to be immediately due and
payable, without presentment, demand, protest or notice of dishonor, all of
which are expressly waived by Borrower, and Wells Fargo shall have all rights,
powers and remedies set forth in the Credit Agreement.
Borrower agrees to pay, immediately upon demand, the full amount of all
costs and expenses, including reasonable attorneys' fees (including, but not
limited to, allocated costs for in-house legal services), incurred by Wells
Fargo in connection with the enforcement of any rights of Wells Fargo and/or the
collection of any amounts which become due to Wells Fargo under this Note, and
the prosecution or defense of any action in any way related to this Note,
including, but not limited to, any action for declaratory relief.
-2-
<PAGE>
This Note shall be governed by and be construed in accordance with the
laws of the State of California.
INTERNATIONAL RECTIFIER
CORPORATION
By:
/s/ M. McGee
---------------------------------------
Name: M. McGee
---------------------------------
Title: Vice President & CFO
---------------------------
-3-
<PAGE>
SECURITY AGREEMENT
AMENDMENT NO. 1
THIS SECURITY AGREEMENT AMENDMENT NO. 1, dated as of August 15, 1994, (the
"Security Agreement Amendment No. 1") is by and between
INTERNATIONAL RECTIFIER CORPORATION, a Delaware corporation with its
principal place of business located in El Segundo, California (the "Debtor");
and
NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, a North Carolina
corporation with its principal place of business located in Charlotte, North
Carolina (the "Secured Party").
RECITALS
A. The Debtor and Secured Party entered into a Security Agreement dated
as of July 1, 1994 (the "Security Agreement").
B. The Debtor and Secured Party desire to amend certain provisions of the
Security Agreement as more specifically set forth hereinafter.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
Section 19 of the Security Agreement is hereby amended to read in its
entirety as follows:
"SECTION 19
EARLY TERMINATION
Except as hereinafter set forth Debtor may not prepay the Term Loans in
whole or in part. So long as no Event of Default (or event which with notice or
lapse of time or both would constitute an Event of Default) shall have occurred
and be continuing, Debtor may, upon thirty (30) days prior written notice to
Secured Party that Debtor desires to prepay the entire amount of a Term Loan
with respect to the Equipment subject to a specific Security Agreement Schedule,
prepay the entire amount of such Term Loan on the date specified in such notice
(the "Early Termination Date"). On such Early Termination Date, Debtor shall
pay to Secured Party an amount equal to the sum of: (a) all Amortization
Payments for such Equipment due and unpaid, together with Amortization Payments
accrued through such Early Termination Date; (b) the Termination Value of the
Equipment as of the Early Termination Date; (c) all costs and expenses incurred
or sustained by Secured Party in connection with such early termination and all
amounts such Debtor shall be required to pay Secured Party pursuant to any
indemnity provision contained in this Security Agreement; and (d) interest on
each of the foregoing and on all amounts not paid when due under any provision
contained in the Security Agreement at the rate of the lesser of (i) the Prime
Rate plus two percent (2%) per annum (computed on the basis of the actual number
of days elapsed over a 360 day year or (ii) the highest rate Debtor may lawfully
contract for, be charged and pay. For purposes of this Section 19, Amortization
Payments shall be prorated daily and the Termination Values set forth in the
applicable Security
<PAGE>
Agreement Schedule shall be prorated daily by interpolation on a straight line
basis to the date of payment. The Termination Values set forth in the Security
Agreement Schedules will include the following prepayment premiums:
Type of Equipment Year of Prepayment Premium (%)
----------------- ------------------ -----------
Three year Equipment: 1 2
2 2
3 0
Five year Equipment: 1 3
2 3
3 2
4 0
5 0
Seven year Equipment: 1 3
2 3
3 3
4 2
5 2
6 0
7 0"
IN WITNESS WHEREOF, the parties hereto, as of the day and year above written,
have caused this Security Agreement Amendment No. 1 to be executed in their
respective corporate names by their duly authorized officials.
DEBTOR:
INTERNATIONAL RECTIFIER CORPORATION
By: /s/ Michael P. McGee
-------------------------------
Title: Vice President, Chief Financial
-------------------------------
Officer
-------------------------------
SECURED PARTY:
NATIONSBANC LEASING CORPORATION OF
NORTH CAROLINA
By: /s/ M. Randall Ross
-------------------------------
Title: Senior Vice President
----------------------------
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<PAGE>
SECURITY AGREEMENT
AMENDMENT NO. 2
THIS SECURITY AGREEMENT AMENDMENT NO. 2, dated as of November 3, 1994, (the
"Security Agreement Amendment No. 2") is by and between
INTERNATIONAL RECTIFIER CORPORATION, a Delaware corporation with its
principal place of business located in El Segundo, California (the "Debtor");
and
NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, a North Carolina
corporation with its principal place of business located in Charlotte, North
Carolina (the "Secured Party").
RECITALS
A. The Debtor and Secured Party entered into a Security Agreement dated
as of July 1, 1994, as amended (the "Security Agreement").
B. The Debtor and Secured Party desire to amend certain provisions of the
Security Agreement as more specifically set forth hereinafter.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. Section 1.2 of the Security Agreement, second to last sentence is
hereby amended to read in its entirety:
"No Term Loan shall exceed the Cost of Equipment securing such
Term Loan and the aggregate Term Loans plus the total outstanding Progress
Payment Loans shall not exceed $25,000,000 (the "Total Commitment"), of which no
more than $3,000,000 shall be computer equipment."
2. Section 4.2 of the Security Agreement is amended by adding the
following sentences to the end thereof:
"Amortization Payments on Term Loans with fixed interest rates
shall be determined as set forth in the Summary of Terms between Secured Party
and Debtor dated February 25, 1994 (the "Summary of Terms"). Amortization
Payments on Term Loans that are Floating Rate Loans shall be determined as
follows: The principal portion of each quarterly Amortization Payment for a
Floating Rate Loan shall be established by mutual agreement as set forth in the
Security Agreement Schedule relating to the Floating Rate Loan. The interest
portion of each Amortization Payment for a Floating Rate Loan shall be
determined in accordance with Section 4.6 below."
<PAGE>
3. Section 4.3 of the Security Agreement is amended to read in its
entirety as follows:
"4.3. NON-UTILIZATION FEE. Debtor agrees to pay Secured Party, on the
Final Commencement Date, a non-utilization fee equal to one-half of one percent
(1/2%) of the amount, if any, by which ninety percent (90%) of $15,000,000.00
exceeds the Total Secured Party's Cost of Equipment subject to this Security
Agreement on the Final Commencement Date."
4. Section 4.5 shall be added to the Security Agreement and shall read in
its entirety as follows:
"4.5. INTEREST RATES. Interest rates on Term Loans shall be either fixed
in accordance with the Summary of Terms or shall be based on the LIBOR Rate in
accordance with Section 4.6 below."
5. Section 4.6 shall be added to the Security Agreement and shall read in
its entirety as follows:
"4.6. FLOATING RATE LOANS. Floating Rate Loans shall be made in accordance
with the following provisions:
(a) DEFINITIONS.
(1) "BUSINESS DAY" means a day when banks are open for business
in Charlotte, North Carolina.
(2) "CLOSING DATE" means the date on which a Floating Rate Loan
is made.
(3) "EURODOLLAR RESERVE REQUIREMENT" means for each Interest
Period, the percentage applicable two Business Days before the first
day of such Interest Period under regulations issued from time to time
by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal
reserve requirement) for a member bank of the Federal Reserve System
in New York City with respect to liabilities or assets consisting of
or including eurocurrency liabilities, as such term is defined in
Regulation D (or with respect to any other category of liabilities
which includes deposits by reference to which the interest rate on the
Floating Rate Loan is determined) having a term equal to the Interest
Period for which such Eurodollar Reserve Requirement is determined.
(4) "FLOATING RATE LOAN" means a Term Loan based on the LIBOR
Rate;
(5) "LIBOR RATE" means for each Interest Period, a per annum
interest rate equal to the per annum rate published in
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<PAGE>
the Eastern edition of The Wall Street Journal in the Money Rates
Section, on each particular day two (2) Business Days prior to the
first day of each successive Interest Period as the appropriate
London Interbank Offered Rate (LIBOR) for a term of three (3) months,
or if The Wall Street Journal is not published on any such date, then
as published therein for the immediately preceding Business Day,
provided, however, that in the event that The Wall Street Journal is
not published, or does not report the London Interbank Offered Rate,
for three consecutive Business Days, then the LIBOR Rate for each
applicable Interest Period will be a per annum interest rate equal to
the per annum rate obtained by dividing (a) the rate of interest
determined by NationsBank of Georgia, N.A. to be the average (rounded
upward to the nearest whole multiple of 1/16 of 1% per annum, if such
average is not such a multiple) of the per annum rates at which
deposits in U.S. dollars are offered to NationsBank of Georgia, N.A.
in the London interbank Eurodollar market at 11:00 A.M. (Atlanta,
Georgia time) (or as soon thereafter as is practicable), in each case
two Business Days before the first day of such Interest Period in an
amount substantially equal to the then current outstanding principal
balance of the Lease and for a period equal to such Interest Period by
(b) a percentage equal to 100% minus the Eurodollar Reserve
Requirement for such Interest Period.
(6) "INTEREST PERIOD," as to any Floating Rate Loan, means the
period commencing on the Closing Date of such Floating Rate Loan and
ending on but excluding the corresponding day in the third succeeding
calendar month; PROVIDED, that each subsequent Interest Period shall
commence on the last day of the previous one;
(7) "INTEREST PAYMENT DATE" as to any Floating Rate Loan, means
the last day of the Interest Period. If any Interest Payment Date
falls on a date which is not a Business Day, such Interest Payment
Date shall be deemed to be the next succeeding Business Day;
(8) "PRIME LOAN" means a loan based on the Prime Rate;
(9) "PRIME RATE" means the rate of interest publicly announced
by NationsBank of North Carolina, N.A. in Charlotte, North Carolina
from time to time as its "Prime Rate." The Prime Rate is not
necessarily the best or lowest rate of interest offered by NationsBank
of North Carolina, N.A.
- 3 -
<PAGE>
(b) NOTICE. As to each Floating Rate Loan, the Debtor shall give
Secured Party prior written, telegraphic or telephonic notice (i) not later
than 11:00 a.m. (Charlotte, North Carolina time) at least three Business
Days prior to the date of the requested Floating Rate Loan. Such notice
shall be irrevocable.
(c) INTEREST RATE OPTIONS. Floating Rate Loans shall bear interest
at a rate per annum (computed on the basis of the actual number of days
elapsed over a year of 360 days) equal to the LIBOR Rate plus 1.60% for
three and five year loans and the LIBOR Rate plus 1.95% for seven year
loans.
Interest shall be payable on each Interest Payment Date. Secured
Party shall determine the applicable LIBOR Rate on the date when such
determination is to be made in respect of such Interest Period (or as soon
thereafter as practicable) and shall notify the Debtor of the rate so
determined. Such determination shall be conclusive absent manifest error.
(d) MINIMUM AMOUNT. The minimum amount of each Floating Rate Loan
shall be $250,000.
(e) PREPAYMENTS. As set forth in Section 19 below, the Debtor shall
have the right at any time and from time to time to prepay any Floating
Rate Loan, on the last day of the then current Interest Period for such
Floating Rate Loan upon at least (30) days prior written notice to Secured
Party. If prepayment occurs during the first year of the loan, a
prepayment premium of 1% of the outstanding principal balance will be due
and payable.
(f) CONVERSION. Upon the occurrence of any of the events listed in
sections (g), (h) and (i) below, the Debtor, on such notice as provided in
Section (b), or the Secured Party shall have the right to convert any
Floating Rate Loan into a Prime Loan, subject to the following:
(1) No Event of Default shall have occurred and be
continuing, and the representations and warranties set out
in Section 18 shall be true and correct (except to the extent
such representations and warranties expressly relate to an
earlier date);
(2) Each conversion shall be effected by applying the
proceeds of the new Prime Loan to the Floating Rate Loan
being converted, and accrued interest on any Floating Rate
Loan being converted shall be paid by the Debtor at the
time of conversion;
(3) No Floating Rate Loan may be converted to a Prime Loan
except on the last day of an Interest Period;
(g) LIBOR RATE UNASCERTAINABLE. In the event that the Secured Party
shall determine that dollar deposits in the principal amount of any
requested
- 4 -
<PAGE>
Floating Rate Loans are not generally available in the London Interbank
Market, or that the rate at which such dollar deposits are being offered
will not adequately and fairly reflect the cost to the Bank or the Secured
Party of making or maintaining a Floating Rate Loan, or that reasonable
means do not exist for ascertaining the LIBOR Rate, the Secured Party shall
promptly give notice to the Debtor of such determination, and any request
by the Debtor for a Floating Rate Loan shall be deemed to be a request for
a Prime Loan. Until the circumstances giving rise to such notice no longer
exist, each request for a Floating Rate Loan shall be deemed to be a
request for a Prime Loan. All then existing Floating Rate Loans shall be
converted to Prime Rate Loans in accordance with Section (f) hereof.
Each determination by the Secured Party hereunder shall be conclusive
absent manifest error.
(h) ADDITIONAL COSTS.
(1) The Debtor shall pay directly to the Secured Party
from time to time such amounts as the Secured Party may determine
to be necessary to compensate it for any costs incurred by the
Secured Party or the Bank which the Secured Party determines are
attributable to its making or maintaining of any Floating Rate
Loans hereunder or its obligation to make any of such Floating
Rate Loans hereunder, or any reduction in any amount receivable
by the Secured Party or the Bank hereunder in respect of any of
such Floating Rate Loans or such obligation; or resulting from
any Regulatory Change (such increase in costs and reductions in
amounts receivable being herein called "Additional Costs") which:
(i) changes the basis of taxation of any amounts payable to the
Secured Party under this Security Agreement or the Term Loan Note
in respect of any of such Floating Rate Loans (other than taxes
imposed on the overall net income of the Secured Party for any of
such Floating Rate Loans); or (ii) imposes or modifies any
reserve, special deposit or similar requirements relating to any
extensions of credit or other assets of, or any deposits with or
liabilities of, the Secured Party or the Bank (including any
Floating Rate Loans or any deposits included in the definition of
"LIBOR Rate" herein); or (iii) imposes any other condition
affecting this Security Agreement (or any such extensions of
credit or liabilities). The Secured Party will notify the Debtor
of any event occurring after the date of this Security Agreement
which will entitle the Secured Party to compensation pursuant to
this Section as promptly as practicable after it obtains
knowledge thereof and determines to request such compensation.
The Secured Party will furnish the Debtor with a certificate
setting forth the basis and amount of each request by the Secured
Party for compensation under this Section. If the Secured Party
requests compensation from the Debtor under this Section, the
Debtor may, by notice to the Secured Party, request that such
Floating Rate
- 5 -
<PAGE>
Loans of the type with respect to which such compensation is
requested be converted into Prime Loans in accordance with
Section (f) hereof.
(2) Without limiting the effect of the foregoing
provisions of this Section, in the event that, by reason of any
Regulatory Change, the Secured Party or the Bank either (i)
incurs Additional Costs based on or measured by the excess above
a specified level of the amount of a category of deposits or
other liabilities of the Secured Party or the Bank which includes
deposits by reference to which the interest rate on Floating Rate
Loans is determined as provided in this Security Agreement or a
category of extensions of credit or other assets of the Secured
Party or the Bank which includes Floating Rate Loans or (ii)
becomes subject to restrictions on the amount of such a category
of liabilities or assets which it may hold, then, if the Secured
Party so elects by notice to the Debtor, the obligation of the
Secured Party to make Floating Rate Loans shall be suspended
until the date such Regulatory Change ceases to be in effect (and
all Floating Rate Loans held by such Secured Party then
outstanding shall be converted into Prime Loans in accordance
with Section (f) hereof).
(3) Determinations by the Secured Party for purposes
of this Section of the effect of any Regulatory Change on its
costs of making or maintaining Floating Rate Loans or on amounts
receivable by it in respect of Floating Rate Loans, and of the
additional amounts required to compensate such Secured Party in
respect of any Additional Costs, shall be conclusive, provided
that such determinations are made on a reasonable basis;
provided, however, that if such Regulatory Change or other
condition is determined to be invalid or inapplicable the Secured
Party will promptly refund any amount erroneously billed to the
Debtor together with interest thereon at the instrument rate.
(i) ILLEGALITY. Notwithstanding any other provision of this
Security Agreement, in the event that it becomes unlawful for the
Secured Party to (i) honor its obligation to make Floating Rate Loans
hereunder, or (ii) maintain Floating Rate Loans hereunder, then the
Secured Party shall promptly notify the Debtor thereof and the Secured
Party's obligation to make Floating Rate Loans shall be suspended
until such time as the Secured Party may again make and maintain
Floating Rate Loans and such Secured Party's outstanding Floating Rate
Loans shall be converted into Prime Rate Loans in accordance with
Section (f) hereof.
(j) CERTAIN CONVERSIONS OF LOANS. If the Floating Rate Loans of
a particular type (Floating Rate Loans of such type being herein
called "Affected Loans" and such type being herein called the
"Affected Type") are to
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<PAGE>
be converted pursuant to Sections (g), (h) and (i) hereof, the Secured
Party's Affected Loans shall be automatically converted into Prime
Loans on the last day(s) of the then current Interest Period(s) for
the Affected Loans (or, in the case of a conversion required by
Section (h) or (i) hereof, on such earlier date as the Secured Party
may specify to the Debtor) and, unless and until such Secured Party
gives notice as provided below that the circumstances specified which
give rise to such conversion no longer exist:
(1) to the extent that the Affected Loans have been so
converted, all payments and prepayments of principal which would
otherwise be applied to the Affected Loans shall be applied
instead to Prime Loans;
(2) all Floating Rate Loans which would otherwise be made
as Floating Rate Loans of the Affected Type shall be made instead
as Prime Loans.
(k) COMPENSATION. The Debtor shall pay to the Secured Party,
upon request, such amount or amounts as shall be sufficient (in the
reasonable opinion of the Secured Party) to compensate it for any
loss, cost or expense incurred by it as a result of:
(1) any payment, prepayment or conversion of a Floating
Rate Loan made by the Secured Party on a date other than the last
day of an Interest Period for such loan; or
(2) any failure by the Debtor to borrow a Floating Rate
Loan to be made on the date for such borrowing specified in the
relevant notice of borrowing made by the Debtor under Section (b)
hereof;
such compensation to include, without limitation, an amount equal to
the excess, if any, of (i) the amount of interest which would have
accrued on the principal amount so paid, prepaid or converted or not
borrowed for the period from the date of such payment, prepaying or
conversion or failure to borrow on the last day of the then current
Interest Period for such Floating Rate Loan (or, in the case of a
failure to borrow, the Interest Period for such Floating Rate Loan
which would have commenced on the date of such failure to borrow) at
the applicable rate of interest for such Floating Rate Loan provided
for herein over (ii) any lesser amount that would be realized by the
Secured Party in reemploying funds received in payment, prepayment or
conversion (or available in connection with a failure to borrow a
requested loan) by making a loan of the same type in the principal
amount paid, prepaid or not borrowed during the period from the date
of such payment, prepayment conversion or failure to borrow to the end
of the Interest Period for the loan that was paid, prepaid, converted
or not borrowed."
6. Section 19 of the Security Agreement is amended to read in its
entirety as follows:
- 7 -
<PAGE>
"SECTION 19
EARLY TERMINATION
Except as hereinafter set forth Debtor may not prepay the Term Loans in
whole or in part. So long as no Event of Default (or event which with notice or
lapse of time or both would constitute an Event of Default) shall have occurred
and be continuing, Debtor may, upon thirty (30) days prior written notice to
Secured Party that Debtor desires to prepay the entire amount of a Term Loan
with respect to the Equipment subject to a specific Security Agreement Schedule,
prepay the entire amount of such Term Loan on the date specified in such notice
(the "Early Termination Date"). Floating Rate Loans may only be prepaid on the
last day of an Interest Period. On such Early Termination Date, Debtor shall
pay to Secured Party an amount equal to the sum of: (a) all Amortization
Payments for such Equipment due and unpaid, together with Amortization Payments
accrued through such Early Termination Date; (b) the Termination Value of the
Equipment as of the Early Termination Date; (c) all costs, expenses, losses and
damages incurred or sustained by Secured Party in connection with such early
termination and all amounts such Debtor shall be required to pay Secured Party
pursuant to any indemnity provision contained in this Security Agreement; and
(d) interest on each of the foregoing and on all amounts not paid when due under
any provision contained in the Security Agreement at the rate of the lesser of
(i) the Prime Rate plus two percent (2%) per annum (computed on the basis of the
actual number of days elapsed over a 360 day year or (ii) the highest rate
Debtor may lawfully contract for, be charged and pay. For purposes of this
Section 19, Amortization Payments shall be prorated daily and the Termination
Values set forth in the applicable Security Agreement Schedule shall be prorated
daily by interpolation on a straight line basis to the date of payment. The
Termination Values set forth in the Security Agreement Schedules for Term Loans
other than Floating Rate Loans will include the following prepayment premiums:
- 8 -
<PAGE>
Type of Equipment Year of Prepayment Premium (%)
----------------- ------------------ -----------
Three year Equipment 1 2
2 2
3 0
Five year Equipment 1 3
2 3
3 2
4 0
5 0
Seven year Equipment 1 3
2 3
3 3
4 2
5 2
6 0
7 0
The Termination Values set forth in the Security Agreement Schedule for Floating
Rate Loans will include a prepayment premium of one percent (1%) for prepayments
during the first year."
7. Exhibit B to the Security Agreement is amended to read as set forth
in Exhibit B hereto.
8. Exhibit D to the Security Agreement is amended to read as set forth
in Exhibit D hereto.
- 9 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto, as of the day and year above written,
have caused this Security Agreement Amendment No. 2 to be executed in their
respective corporate names by their duly authorized officials.
DEBTOR:
INTERNATIONAL RECTIFIER CORPORATION
By: /s/ Eric Lidew
-------------------------------
Title: President and Chairman
------------------------------
SECURED PARTY:
NATIONSBANC LEASING CORPORATION OF
NORTH CAROLINA
By: /s/ M. Randall Ross
--------------------------------
Title: Senior Vice President
-----------------------------
- 10 -
<PAGE>
EXHIBIT B
SECURITY AGREEMENT SCHEDULE
NUMBER ____
This Security Agreement Schedule Number____ is dated_______________, 1994, and
is executed by INTERNATIONAL RECTIFIER CORPORATION ("Debtor") and NATIONSBANC
LEASING CORPORATION OF NORTH CAROLINA ("Secured Party") as a schedule to
Security Agreement as amended between Secured Party and Debtor dated July 1,
1994 and hereby incorporates by reference all of the terms, conditions and
provisions thereof.
1. EQUIPMENT FINANCED:
2. EQUIPMENT LOCATION:
3. COST OF EQUIPMENT:
a. Cost:
b. Sales Tax:
Total Cost of Equipment:
4. TERM LOAN:
Term Loan Amount:
Term Loan Commencement Date:
Term Loan Maturity Date:
The "Term Loan Term" shall be__________________________, beginning on the
Term Loan Commencement Date and ending on the Term Loan Maturity Date, both
dates inclusive.
5. AMORTIZATION PAYMENTS:
Amortization Payment Amount: [* $_________________] [** A Principal
Component as set forth in Annex A and an interest component determined as
set forth in Section 4.6 of the Security Agreement]
<PAGE>
Frequency of Amortization Payments: Quarterly in arrears
Number of Consecutive Amortization Payments:
Interest Rate: [* _____%] [** To be determined as set forth in Section 4.6
of the Security Agreement]
Amortization Payment Dates:
First Amortization Payment Date:
Last Amortization Payment Date:
6. FINAL PAYMENT AMOUNT:
7. UNAMORTIZED PRINCIPAL BALANCES: See Annex A attached hereto and made a part
hereof.
8. TERMINATION VALUES: See Annex A attached hereto and made a part hereof.
Debtor acknowledges and certifies solely to Secured Party that all of the
Equipment described hereinabove has been: (i) delivered to Debtor at the
Equipment Location specified above; (ii) thoroughly examined and inspected to
the complete satisfaction of Debtor; (iii) unconditionally accepted by Debtor,
in the condition received, for all purposes of the Security Agreement; (iv)
found by Debtor to be in good operating order, repair and condition; (v) found
to be of the size, design, quality, type and manufacturer selected by Debtor;
and (vi) found to be and is wholly suitable for Debtor's purposes. Debtor
further acknowledges and certifies that Secured Party has made no warranty,
express or implied, with respect to the Equipment or its delivery, and that the
insurance coverage required by Section 9 of the Security Agreement is in full
force and effect with respect to the Equipment, and that the insurance policies
or certificates evidencing such coverage have been delivered to Secured Party.
Debtor further acknowledges, certifies and agrees that the Equipment is subject
to the security interest granted by the Security Agreement, that such security
interest in favor of Secured Party is a first priority security interest and
that the Equipment is free of all liens, encumbrances or security interests
other than the security interest in favor of Secured Party.
The official signing this Security Agreement Schedule for Debtor certifies
to Secured Party that (a) no default or Event of Default has occurred and is
continuing, (b) no material adverse change has occurred in the business,
condition or operations of Debtor (financial or otherwise) since the date of the
last financial statements of Debtor, (c) no event has occurred or exists which
would impair the ability of Debtor to pay and perform its obligations under the
Security Agreement and (d) the representations and warranties of Debtor in the
Security Agreement are true and correct as of the date hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, as of the day and year first above
written, have caused this Security Agreement Schedule Number ___ to be executed
in their respective corporate names by their duly authorized officials.
NATIONSBANC LEASING CORPORATION INTERNATIONAL RECTIFIER
OF NORTH CAROLINA CORPORATION
(Secured Party) (Debtor)
By: By:
-------------------------------- ---------------------------------
Title: Title:
----------------------------- ------------------------------
* - TERM LOAN OTHER THAN FLOATING RATE LOAN
** - FLOATING RATE LOAN
<PAGE>
ANNEX A
TO
SECURITY AGREEMENT SCHEDULE NUMBER ___
Dated as of_____________, 1994
between
INTERNATIONAL RECTIFIER CORPORATION, as Debtor
NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, as Secured Party
Unamortized
Amortization Interest Principal Amortization Principal Termination
Payment Date Component Component Payment Balance Value
------------ --------- --------- ------------ ----------- -----------
[** See 1 below] [** See 2 below] [** See 3 below]
[** 1. To be determined as set forth in Section 4.6 of the Security
Agreement.
2. The total of the Interest Component determined as set forth in
Section 4.6 of the Security Agreement and the Principal
Component.
3. The Unamortized Principal Balance.]
<PAGE>
EXHIBIT D
TERM LOAN NOTE
$_______________ _____, 1994
FOR VALUE RECEIVED, the undersigned INTERNATIONAL RECTIFIER CORPORATION, a
Delaware corporation ("Debtor") HEREBY PROMISES TO PAY to the order of
NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, a North Carolina corporation
("Secured Party"), the principal sum of___________________________ and__/100
Dollars ($___________) [*in (__) consecutive quarterly installments of principal
and interest; each in the amount of ($__________) commencing on__________ and
ending on____________ (each such date, an "Amortization Payment Date"); and
with an additional installment of principal in the amount of________________
Dollars (__________) on__________; PROVIDED, that the last such installment
shall be in the amount necessary to repay in full the unpaid principal amount
hereof.] [**under the terms and conditions of the Security Agreement dated as of
July 1, 1994, as amended, by and between the Debtor and the Secured Party (the
"Security Agreement").]
[**The principal amount of this Term Loan Note shall be payable in_______
(__) consecutive quarterly payments, such installments being in the amounts and
being due as provided in the Security Agreement.
This Term Loan Note shall bear interest on the outstanding balance from
time to time at the rates as provided in Section 4.6(c) of the Security
Agreement until such principal and interest have been paid in full. Installments
of interest on the outstanding balance shall be due and payable in arrears on
Interest Payment Dates as provided in Security Agreement.]
All payments shall be payable, in lawful money of the United States and in
immediately available funds without setoff or counterclaim, to Secured Party at
its office at NationsBank Corporate Center, 100 North Tryon Street, NCl-007-12-
01, Charlotte, North Carolina 28255, or such other location as the holder
thereof shall notify Debtor in writing.
[*The Debtor promises to pay interest on the principal amount remaining
unpaid hereunder from the date hereof until said principal amount becomes due,
payable on each of the above-listed Amortization Payment Dates, at the rate of
___________ (__%) per annum (computed on the basis of the actual number of days
elapsed over a year of 360 days).] Any amount of principal hereof which is not
paid when due, whether at stated maturity, by acceleration or otherwise, shall
bear interest from the day when due until said principal amount is paid in full,
payable on demand at the rate equal to the lower of (i) Prime Rate plus two
percent (2%) per annum or (ii) the highest rate Debtor may lawfully contract
for, be charged and pay (the "Overdue Rate"). "Prime Rate" is defined as the
interest rate announced publicly in Charlotte, North Carolina by NationsBank of
North Carolina, N.A., which is not necessarily the lowest or best rate offered
by NationsBank of North Carolina, N.A.
- 1 -
<PAGE>
Each payment made under this Note shall be applied first to the payment of
all accrued and unpaid interest and then to the payment of unpaid principal.
This Note is a Term Loan Note referred to in, and is entitled to the
benefits of the Security Agreement. All terms and provisions of the Security
Agreement are deemed to be a part of this Note [*dated as of July 1, 1994, as
amended, (the "Security Agreement") between Debtor and Secured Party] as though
they were reproduced herein. Capitalized terms used herein and not otherwise
defined herein are used herein as defined in the Security Agreement. The
Security Agreement contains provisions, among others, for the acceleration of
the maturity hereof upon the happening of certain stated events. This Note may
be prepaid only as permitted by the Security Agreement or if Secured Party, at
its sole discretion, shall allow such prepayment any prepayment shall include
additional amounts required by the Security Agreement.
The references made herein to the Security Agreement shall neither affect
nor impair the absolute and unconditional obligation of Debtor to make payments
when due. Debtor, and each endorser or accommodation party hereto, or guarantor
hereof, jointly and severally waive presentment, demand, notice of intention to
accelerate, notice that acceleration has occurred, protect and all other demands
and notices in connection with the delivery, acceptance, performance, default or
enforcement of this Note.
Should any of the indebtedness represented by this Note be collected in any
proceeding, or this Note be placed in the hands of attorneys for collection
after default, Debtor agrees to pay, in addition to the principal and interest
due and payable hereon, all costs of collecting this Note, including reasonable
attorneys' fees and expenses.
Notwithstanding any provision to the contrary contained herein, Debtor (i)
shall be fully liable for the payment of all indebtedness outstanding hereunder
or under the Security Agreement; and (ii) nothing contained herein shall relieve
Debtor from liability resulting from its breach of any representation, covenant
or warranty contained in the Security Agreement.
- 2 -
<PAGE>
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
INTERNATIONAL RECTIFIER CORPORATION
By: _________________________________________
Name (Printed):______________________________
Title:_______________________________________
ATTEST:
By:________________________________
Title:_____________________________
(Corporate Seal)
* - TERM LOAN OTHER THAN FLOATING RATE LOAN
** - FLOATING RATE LOAN
-3-
<PAGE>
SECURITY AGREEMENT
AMENDMENT NO. 3
THIS SECURITY AGREEMENT AMENDMENT NO. 3, dated as of March 8, 1995, (the
"Security Agreement Amendment No. 3") is by and between
INTERNATIONAL RECTIFIER CORPORATION, a Delaware corporation with its
principal place of business located in El Segundo, California (the "Debtor");
and
NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, a North Carolina
corporation with its principal place of business located in Charlotte, North
Carolina (the "Secured Party").
RECITALS
A. The Debtor and Secured Party entered into a Security Agreement dated
as of July 1, 1994, as amended (the "Security Agreement").
B. The Debtor and Secured Party desire to amend certain provisions of the
Security Agreement as more specifically set forth hereinafter.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. The last sentence of Section 1.2 of the Security Agreement is amended
to read as follows:
"No Term Loan Commencement Date shall occur after December 29,
1995 (the "Final Commencement Date")".
2. Section 4.2 of the Security Agreement is amended to read as follows:
"4.2. TERM LOAN: AMORTIZATION PAYMENTS.
(a) TERM LOANS. The term of the loan for each item of Equipment shall be
set forth as the "Term Loan Term" in the Security Agreement Schedule pertaining
to such item of Equipment. The Term Loan Term to be set forth in the Security
Agreement Schedule shall not exceed the following: computer equipment: three (3)
years; electronic test production equipment: three (3) years, five (5) years or
seven (7) years. The Debtor shall pay the amortization payments ("Amortization
Payments") set forth in the applicable Security Agreement Schedule in successive
payments in arrears from the Term Loan Commencement Date set forth in the
Security Agreement Schedule. Amortization Payments shall consist of a principal
component and an interest component as set forth in the Security Agreement
Schedule.
<PAGE>
(b) FIXED RATE TERM LOANS. Amortization Payments on Term Loans with fixed
interest rates shall be determined as follows:
Debtor shall pay Secured Party successive quarterly payments in
arrears from the Term Loan Commencement Date(s). The payments shall
be fixed on each Term Loan Commencement Date based upon the interest
rate determined by the sum of (i) the applicable generic U.S. Treasury
yield as quoted by the Dow Jones/Telerate Inc. system at the opening
of business in Charlotte, North Carolina five (5) Business Days prior
to the Term Loan Commencement Date (the "Index") and (ii) the
applicable margin as follows:
<TABLE>
<CAPTION>
Term Loan Term Index Margin
-------------- ----- ------
<S> <C> <C>
three (3) years two (2) year U.S. Treasury 1.28%
five (5) years three (3) year U.S. Treasury 1.28%
seven (7) years four (4) year U.S. Treasury 1.50%
</TABLE>
(c) FLOATING RATE LOANS. Amortization Payments on Term Loans that are
Floating Rate Loans shall be determined as follows: The principal portion of
each quarterly Amortization Payment for a Floating Rate Loan shall be
established by mutual agreement as set forth in the Security Agreement Schedule
relating to the Floating Rate Loan. The interest portion of each Amortization
Payment for a Floating Rate Loan shall be determined in accordance with
Section 4.6 below."
3. Section 4.3 of the Security Agreement is amended to read as follows:
"4.3. NON-UTILIZATION FEE. Debtor agrees to pay Secured Party, on the
Final Commencement Date, a non-utilization fee equal to thirty-five one
hundredths of one percent (.35%) of the amount, if any, by which ninety percent
(90%) of $25,000,000.00 exceeds the Total Secured Party's Cost of Equipment
subject to this Security Agreement on the Final Commencement Date."
4. Section 4.5 shall be added to the Security Agreement and shall read in
its entirety as follows:
"4.5. INTEREST RATES. Interest rates on Term Loans shall be either fixed
in accordance with Section 4.2(b) above or shall be based on the LIBOR Rate in
accordance with Section 4.6 below.
5. The first sentence of paragraph (c) of Section 4.6 is amended to read
as follows:
"(c) INTEREST RATE OPTIONS. Floating Rate Loans shall bear interest
at a rate per annum (computed on the basis of a month of thirty days over a
year of 360 days) equal to the LIBOR Rate plus 1.15% for three and five
year loans and the LIBOR Rate plus 1.35% for seven year loans."
- 2 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto, as of the day and year above written,
have caused this Security Agreement Amendment No. 3 to be executed in their
respective corporate names by their duly authorized officials.
DEBTOR:
INTERNATIONAL RECTIFIER CORPORATION
By: /s/ Michael P. McGee
-------------------------------
Title: VICE PRESIDENT & CHIEF FINANCIAL OFFICER
------------------------------------------
SECURED PARTY:
NATIONSBANC LEASING CORPORATION OF
NORTH CAROLINA
By: /s/ M. Randall Ross
________________________________
Title: Senior Vice President
_____________________________
- 3 -
<PAGE>
REVOLVING CREDIT AGREEMENT
This Revolving Credit Agreement (the "Agreement") is made and entered into
as of June 15, 1995, by and between NATIONSBANK OF TEXAS, N.A. ("NationsBank")
and INTERNATIONAL RECTIFIER CORPORATION (the "Borrower") on the terms and
conditions set forth below:
SECTION I
DEFINITIONS
1.01 CERTAIN DEFINED TERMS. Unless elsewhere defined in this Agreement,
the following terms shall have the following meanings (such meanings to be
generally applicable to the singular and plural forms of the terms defined):
(a) "ADVANCE" shall mean an advance to the Borrower under the
Revolving Credit Facility.
(b) "AFFILIATE" shall mean, as to any Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person.
(c) "APPLICATIONS" shall mean NationsBank's form "Application" (in
the case of standby Letter of Credit) and form "Application" (in the case of a
commercial Letter of Credit) which are Exhibits A and B respectively to
NationsBank's form "Master Agreement for Letters of Credit" attached to this
Agreement as Exhibit B.
(d) "BANKRUPTCY CODE" shall mean the Bankruptcy Reform Act, Title 11
of the United States code, as amended or recodified from time to time.
(e) "BUSINESS DAY" shall mean a day other than a Saturday or Sunday
on which commercial banks are open for business in the State of Texas, and, with
respect to LIBO Rate Advances, on which dealings are carried on in the London
interbank market and banks are open for business in London.
(f) "COMMITMENT" shall mean the obligation of NationsBank, in
accordance with the terms of this Agreement, to make the Advances to the
Borrower and to issue Letters of Credit for the account of the Borrower in a
combined aggregate principal amount at any one time outstanding of Ten Million
Dollars ($10,000,000.00).
(g) "CONSOLIDATED OPERATING LOSS" shall mean a loss from operations
before other income and expenses, income taxes and extraordinary items as set
forth on the Borrower's consolidated statement of income.
<PAGE>
(h) "DEBT" shall mean all Indebtedness and other liabilities of the
Borrower or any Subsidiary and/or the Borrower and all the Subsidiaries, as the
case may be, as set forth on the Borrower's and/or such Subsidiary's balance
sheet.
(i) "DOLLARS" and "$" shall mean lawful money of the United States.
(j) "DOMESTIC" shall mean the consolidated United States and Mexican
maquiladora operations of the Borrower.
(k) "DOMESTIC INDEBTEDNESS" shall mean all Indebtedness incurred by
Borrower in connection with Borrower's Domestic operations.
(l) "EFFECTIVE TANGIBLE NET WORTH" shall mean the Borrower's stated
net worth, but less all intangible assets of the Borrower (that is, goodwill,
trademarks, patents, copyrights, organization expense, loans and advances to
employees, and similar intangible items), but excluding any cumulative
translation adjustments to equity for the value of foreign assets based upon
changes in foreign exchange rates.
(m) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time, including (unless the context
otherwise requires) any rules or regulations promulgated thereunder.
(n) "EVENT OF DEFAULT" shall have the meaning set forth in Section 7
of this Agreement.
(o) "FIXED RATE ADVANCES" shall mean the LIBO Rate Advances.
(p) "GAAP" shall mean generally accepted accounting principles in the
United States as in effect from time to time.
(q) "GOVERNMENTAL AUTHORITY" shall mean any domestic or foreign
national, state or local government, any political subdivision thereof, any
department, agency, authority or bureau of any of the foregoing, or any other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, but not limited to, the
Federal Deposit Insurance Corporation, the Board of Governors of the Federal
Reserve System, the Comptroller of the Currency, any central bank or any
comparable authority.
(r) "INDEBTEDNESS" shall mean, with respect to the Borrower, (i) all
indebtedness for borrowed money, and (ii) all indebtedness for the deferred
purchase price of property or services due more than 45 days from the date of
payment specified on the invoice for such obligation in respect of which the
Borrower is primarily liable as obligor, and (iii) obligations under leases
which
-2-
<PAGE>
shall have been or should be, in accordance with GAAP, reported as capital
leases in respect of which the Borrower is primarily liable.
(s) "INTEREST PERIOD" shall mean a LIBO Rate Interest Period.
(t) "LETTER OF CREDIT" shall mean a commercial and/or standby letter
of credit issued by NationsBank pursuant to the Revolving Credit Facility
subfeature for letters of credit, as described more fully in Section 3 of this
Agreement.
(u) "LETTER OF CREDIT AGREEMENTS" shall mean NationsBank's standard
"Master Agreement for Letters of Credit", substantially in the form of Exhibit B
attached hereto, and all related documents required in connection therewith.
(v) "LETTER OF CREDIT COMMITMENT" shall mean the obligation of
NationsBank, in accordance with the terms of this Agreement, to issue Letters of
Credit for the account of the Borrower in an aggregate face amount at any one
time outstanding, less any partial drawings paid by NationsBank under Letters of
Credit and not reimbursed by the Borrower, of Five Million Dollars
($5,000,000.00).
(w) "LETTER OF CREDIT SUB-FACILITY" shall mean the letter of credit
sub-facility described in Section 3 of this Agreement of the Revolving Credit
Facility, under which NationsBank agrees to issue commercial and standby letters
of credit for the account of the Borrower up to an amount of Five Million
Dollars ($5,000,000.00) at any one time outstanding.
(x) "LIBO RATE" shall mean, for each LIBO Rate Interest Period, a
rate per annum (rounded upward if necessary to the nearest 1/8th of 1 %) equal
to the quotient of (a) the rate per annum at which Dollar deposits are offered
to NationsBank in the London interbank eurodollar currency market on the second
Business Day prior to the commencement of such LIBO Rate Interest Period at or
about 11:00 a.m. London time (for delivery on the first day of such LIBO Rate
Interest Period) for a term comparable to such LIBO Rate Interest Period and in
an amount approximately equal to the amount of the LIBO Rate Advance to be
outstanding during such LIBO Rate Interest Period divided by (b) one minus the
Reserve Requirement for such LIBO Rate Advance in effect from time to time. The
LIBO Rate applicable to LIBO Rate Advances during each LIBO Rate Interest Period
shall be determined two Business Days prior to the first day of such LIBO Rate
Interest Period and will not be adjusted during such LIBO Rate Interest Period
to reflect any change in the applicable Reserve Requirement occurring during
such LIBO Rate Interest Period. Each change in the applicable Reserve
Requirement will affect the LIBO Rate applicable during LIBO Rate Interest
Periods commencing on or after the date of such change.
-3-
<PAGE>
(y) "LIBO RATE ADVANCE" shall mean an Advance in a minimum amount of
$500,000 and in $100,000 increments thereafter for which interest is based on
the LIBO Rate.
(z) "LIBO RATE INTEREST PERIOD" shall mean, for each LIBO Rate
Advance, a period of one (1) month, two (2) months, three (3) months, six (6)
months (if available), nine (9) months (if available) or twelve (12) months (if
available), as designated by the Borrower, during which all or a portion of the
Advances under the Revolving Credit Facility bear interest determined in
relation to the LIBO Rate; provided, however, that (a) if a LIBO Rate Interest
Period commences on a date for which there is no corresponding date in the month
in which such LIBO Rate Interest Period is to end, such LIBO Rate Interest
Period shall end on the last Business Day of such month, (b) if the last day of
any LIBO Rate Interest Period occurs on a day which is not a Business Day, such
LIBO Rate Interest Period shall be extended to expire on the next succeeding
Business Day; provided further, however, that if such extension would cause the
last day of any LIBO Rate Interest Period to occur in the next following
calendar month, such LIBO Rate Interest Period shall expire on the next
preceding Business Day, and (c) no LIBO Rate Interest Period may extend beyond
the Maturity Date.
(aa) "LIQUID ASSETS" shall mean all Domestic cash and cash equivalents
plus all Domestic accounts receivable, less any inter-company accounts
receivable.
(bb) "LOAN DOCUMENTS" shall mean this Agreement, the Note, the Letter
of Credit Agreements, and any foreign exchange agreements or contracts or
documents signed by the Borrower in favor of NationsBank which indicate on their
face or in their text that they are Loan Documents, and each other contract,
instrument and document required by or executed in connection with this
Agreement, the Note, the Letter of Credit Agreements, or any such foreign
exchange agreements or contracts or documents.
(cc) "MATURITY DATE" shall mean June 14, 1996 or the date of
termination of the Commitment pursuant to Section 7 of this Agreement, whichever
shall occur first.
(dd) "NOTE" shall mean the Revolving Credit Facility Note,
substantially in the form of Exhibit A attached hereto.
(ee) "OBLIGATIONS" shall mean all amounts owing by the Borrower to
NationsBank pursuant to this Agreement and the Loan Documents, including, but
not limited to, the unpaid principal amount of the Advances.
(ff) "OTHER TAXES" shall have the meaning assigned to it in Section
2.15(b) of this Agreement.
-4-
<PAGE>
(gg) "PERMITTED DOMESTIC LIENS" shall mean: (i) liens and security
interests securing indebtedness owed by the Borrower to NationsBank; (ii) liens
for taxes, assessments or similar charges either not more than 45 days past due
or being contested in good faith; (iii) liens of materialmen, mechanics,
warehousemen, or carriers or other like liens arising in the ordinary course of
business and securing obligations which are not more than 45 days past due or
being contested in good faith; (iv) purchase money liens or purchase money
security interests upon or in any property acquired or held by the Borrower in
the ordinary course of business to secure Indebtedness outstanding on the date
hereof or permitted to be incurred under Section 6.09 of this Agreement; (v)
liens and security interests which, as of the date hereof, have been disclosed
to and approved by NationsBank in writing; (vi) liens in connection with
workers' compensation, unemployment insurance and such other types of insurance;
(vii) liens to secure performance bonds and bid bonds and other similar
obligations; (viii) liens resulting from zoning restrictions, easements and such
other similar restrictions on the use of real property; and (ix) liens arising
from judgments and attachments that would not constitute an Event of Default
hereunder.
(hh) "PERSON" shall mean any individual, corporation, partnership,
joint venture or other organization or entity.
(ii) "PLAN" shall mean any defined employee pension benefit plan
maintained or contributed to by Borrower and insured by the Pension Benefit
Guaranty Corporation under title IV of ERISA.
(jj) "POTENTIAL EVENT OF DEFAULT" shall mean any condition, occurrence
or event which, after notice or the passage of time or both, would constitute an
Event of Default.
(kk) "PRIME RATE" shall mean, at any time, the rate of interest most
recently announced within NationsBank at its principal office in Dallas as its
Prime Rate, with the understanding that NationsBank's Prime Rate is one of its
base rates and serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto, and is evidenced by the
recording thereof in such internal publication or publications as NationsBank
may designate.
(ll) "PRIME RATE ADVANCE" shall mean an Advance for which interest is
based on the Prime Rate.
(mm) "RESERVE REQUIREMENT" shall mean, with respect to any day in a
LIBO Rate Interest Period, the aggregate of the reserve requirement rates
(expressed as a decimal) in effect on such day for eurocurrency funding
(currently referred to as "Eurocurrency liabilities in Regulation D of the Board
of Governors of the Federal Reserve System) maintained by a member bank of the
Federal Reserve System. As used herein, the term "Reserve Requirement" shall
include, but not be
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limited to, any basic, supplemental or emergency reserve requirements imposed on
any bank by any Governmental Authority.
(nn) "REVOLVING CREDIT ACCOUNT" shall mean the account in which
NationsBank makes entries for each Advance and such other debits and credits as
shall be appropriate in connection with the Revolving Credit Facility.
(oo) "REVOLVING CREDIT FACILITY" shall mean the credit facility
described in Section 2 of this Agreement under which all NationsBank offers
Borrower a revolving credit accommodation in the maximum total principal amount
of Ten Million Dollars ($10,000,000.00).
(pp) "SUBORDINATED DEBT" shall mean such liabilities of the Borrower
which have been subordinated to those owed to NationsBank in a manner acceptable
to NationsBank.
(qq) "SUBSIDIARY" shall mean any corporation, association or other
business entity of which Borrower owns directly or indirectly more than fifty
percent (50%) of the voting securities thereof or in which Borrower otherwise
owns a controlling interest.
(rr) "TAXES" shall have the meaning assigned to it in Section 2.15(a)
of this Agreement.
(ss) "TEMECULA FACILITY" shall mean the Borrower's wafer fabrication
and assembly plant existing on the date of this Agreement on the property owned
by the Borrower in Temecula, California, and the addition to such plant to be
built in the future.
1.02 ACCOUNTING TERMS. All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein shall
mean such financial statements or such items prepared or determined in
accordance with GAAP consistently applied and, except where otherwise specified,
all financial data submitted pursuant to this Agreement shall be prepared in
accordance with GAAP.
1.03 OTHER TERMS. Other terms not otherwise defined shall have the
meanings attributed to such terms in the California Uniform Commercial Code.
SECTION 2
REVOLVING CREDIT FACILITY
2.01 REVOLVING CREDIT FACILITY. On the terms and conditions as set forth
herein, NationsBank agrees to make Advances in Dollars to the Borrower from time
to time from the date hereof to the Maturity Date; provided, however, that the
aggregate amount of such Advances outstanding at any one time may not exceed
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$10,000,000.00 ("Revolving Credit Facility"). Within the foregoing limits, the
Borrower may borrow, partially or wholly prepay, and reborrow under this Section
2.
2.02 MAKING ADVANCES. Each Advance shall be conclusively deemed to have
been made at the request of and for the benefit of the Borrower when made upon
telephonic or facsimile request received from the Borrower, with a confirmation
in writing sent within two Business Days, and (i) when credited to any deposit
account of the Borrower maintained with NationsBank, or (ii) when paid in
accordance with the Borrower's written instructions. Each request for an
Advance must be received not later than 11:30 a.m. (Dallas, Texas time) on the
Business Day specified for a Prime Rate Advance and 11:30 a.m. (Dallas, Texas
time) two Business Days prior to the date specified for a LIBO Rate Advance,
each of which dates shall be a Business Day. The rates for a LIBO Rate Advance
shall be set on the next succeeding Business Day if the request is received by
11:30 a.m. Any request for an Advance received after the above-specified
deadline may, at NationsBank's option, be deemed to be a request for an Advance
to be made on the next succeeding Business Day for a Prime Rate Advance and the
third succeeding Business Day for a LIBO Rate Advance. NationsBank shall not
incur any liability to the Borrower in acting upon any telephonic notice
referred to above given by someone who identifies himself or herself as a person
named on a list of persons authorized to borrow money for the Borrower given to
NationsBank from time to time by the Borrower's chief financial officer, and
upon the making of the Advance by NationsBank in accordance with any such
telephonic notice, the Borrower shall have effected an Advance hereunder.
2.03 MANDATORY REPAYMENT. On the Maturity Date, the Borrower hereby
promises and agrees to pay to NationsBank in full the aggregate unpaid principal
amount of all Advances then outstanding, together with all accrued and unpaid
interest thereon.
2.04 INTEREST ON ADVANCES. Interest shall accrue from the date of each
Advance at one of the following rates, as quoted by NationsBank and as elected
by the Borrower pursuant to this Section 2.04 or Section 2.05 of this Agreement:
(a) PRIME RATE ADVANCES. For Advances designated as Prime Rate
Advances, a fluctuating rate per annum equal to the Prime Rate in effect from
time to time. Interest shall be adjusted concurrently with any change in the
Prime Rate.
(b) LIBO RATE ADVANCES. For Advances designated as LIBO Rate
Advances, a fixed rate per annum determined by NationsBank to be one percent
(1.00%) above the LIBO Rate in effect on the first day of the LIBO Rate Interest
Period for the Advance.
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All interest on Advances shall be computed on the basis of a 360 day year,
actual days elapsed. Interest on Prime Rate Advances shall be paid in Dollars
in arrears in monthly installments commencing on the first day of the month
following the date of the first such Advance and continuing on the first day of
each month thereafter. Interest on any LIBO Rate Advance shall be paid in
arrears on the last day of the LIBO Rate Interest Period pertaining to such LIBO
Rate Advance and, if such Interest Period is greater than three months, on that
date falling three months (if the LIBO Rate Interest Period is six months),
three months and six months (if the LIBO Rate Interest Period is nine months)
and three months, six months and nine months (if the LIBO Rate Interest Period
is twelve months) after the first day of such Interest Period.
2.05 INTEREST ON OVERDUE PAYMENTS. Overdue payments of principal (and of
interest and fees to the extent permitted by law) on the Advances, and all
amounts payable on demand in accordance with the terms of this Agreement which
are not paid on demand, shall bear interest at a fluctuating rate per annum
equal to the Prime Rate plus three percent (3%) until such unpaid amount has
been paid in full (whether before or after judgment); provided, however, that
such rate of interest shall in no event be less than the interest rate in effect
at the time such payment was due. All interest provided for in this Section
2.05 shall be compounded monthly, based on a year of 360 days for actual days
elapsed, and be payable on demand. Except as provided in this Section 2.05, the
Advances will bear interest (whether before or after any breach of this
Agreement) at the rate of interest specified in Section 2.04 of this Agreement.
2.06 PROMISSORY NOTE. The Borrower's obligation to repay Advances under
the Revolving Credit Facility shall be evidenced by the Note, all the terms of
which are incorporated in this Agreement by this reference.
2.07 REDUCTION OF COMMITMENT. The Borrower may reduce the amount of the
Commitment at any time (with any such reduction to be in a minimum amount of
$100,000 and in integral multiples of $100,000) by giving NationsBank written
notice of the amount to which the Commitment is to be reduced, with such
reduction to be effective as of the close of business on the date specified in
said notice, which date must be a Business Day and must be at least two Business
Days after such notice is actually received by NationsBank; provided, however,
that (a) no such reduction may reduce the Commitment to an amount less than (i)
the total principal amount of all the Advances outstanding at such time, plus
(ii) the total undrawn amount of all Letters of Credit outstanding at such time,
plus (iii) all amounts paid by NationsBank under Letters of Credit and not yet
reimbursed by the Borrowers, (b) after giving NationsBank a notice of reduction
of the Commitment, the Borrower may not subsequently increase the amount of the
Commitment, and (c) any such reduction which reduces the Commitment below Five
Million Dollars ($5,000,000.00) shall also reduce the amount of the Letter of
Credit Commitment to the amount of the reduced Commitment.
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2.08 NOTICE OF ELECTION TO ADJUST INTEREST RATE. Before the end of any
LIBO Rate Interest Period, the Borrower may elect that interest on the LIBO Rate
Advance outstanding during such Interest Period shall continue to accrue after
the end of such Interest Period at a new LIBO Rate quoted by NationsBank for an
additional Interest Period of the same duration or any other duration permitted
under this Agreement; provided, however, that such election shall specify the
duration of the next Interest Period and be received by NationsBank no later
than 11:30 a.m. two Business Days prior to the last day of the LIBO Rate
Interest Period for a LIBO Rate Advance. Before the end of any LIBO Rate
Interest Period, the Borrower may elect that interest on the LIBO Rate Advance
outstanding during such Interest Period shall accrue at the Prime Rate after the
end of such Interest Period; provided, however, that such election shall be
received by NationsBank no later than the last day of such Interest Period. The
elections referred to above may be made by telephone if they are immediately
confirmed in writing by telecopy, with the original of such writing deposited in
the United States mail or with an air courier on the same day addressed to
NationsBank. NationsBank shall not incur any liability to the Borrower in
acting upon any telephonic notice referred to above given by someone who
identifies himself or herself as a person named on a list of persons authorized
to borrow money for the Borrower given to NationsBank from time to time by the
Borrower's Chief Financial Officer, and upon the continuation of any Advance by
NationsBank in accordance with any such telephonic notice, the Borrower shall
have effected the continuation of an Advance hereunder. If NationsBank shall
not have received notice as required by this Section 2.08 of Borrower's election
that interest on any Fixed Rate Advance shall continue to accrue at a LIBO Rate
or Prime Rate quoted by NationsBank, as the case may be, and the Borrower does
not repay the Advance in full, the Borrower shall be deemed to have elected that
interest on the Advance after the end of the current Interest Period shall be
adjusted to accrue at the Prime Rate then in effect.
2.09 PREPAYMENT.
(a) The Borrower may prepay any Advance in whole or in part, at any
time and without penalty; provided, however, that (i) any partial prepayment
shall first be applied, at NationsBank's option, to accrued and unpaid interest
and next to the outstanding principal balance; and (ii) during any period of
time in which interest is accruing on any Advance on the basis of the LIBO Rate,
no prepayment shall be made except on a day which is the last day of the
Interest Period pertaining thereto; provided, however, if the whole or any part
of any Fixed Rate Advance is prepaid by reason of acceleration or otherwise, the
Borrower shall, upon NationsBank's request, promptly pay to and indemnify
NationsBank for all costs and losses actually incurred by NationsBank as a
consequence of such prepayment, and provided further, that any prepayment under
this Agreement shall not be deemed to be an Event of Default.
(b) If, on the last day of any Interest Period, the aggregate
principal amount of all LIBO Rate Advances then outstanding, when combined with
the
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aggregate principal amount of all Prime Rate Advances then outstanding and the
aggregate amount of all Letters of Credit then outstanding and (without
duplication) the aggregate amount of all drawings paid by NationsBank under
Letters of Credit and not then reimbursed by the Borrower, exceeds the
Commitment, the Borrower shall on such last day prepay to NationsBank an
aggregate principal amount of such Advances at least equal to such excess
together with accrued interest on the principal amount prepaid to the date of
such prepayment.
2.10 APPLICATION OF PREPAYMENTS. Unless otherwise directed by Borrower,
NationsBank shall apply all prepayments not designated by Borrower to apply to
any Advance or Advances first to all the Prime Rate Advances outstanding at the
time of such prepayment and second to any outstanding LIBO Rate Advances in the
chronological order of the respective maturities of such LIBO Rate Advances.
2.11 INTEREST PERIOD BREAKAGE COSTS. If any Fixed Rate Advance shall
become due and payable prior to the last day of its Interest Period by
acceleration or otherwise, or if the Borrower shall fail to borrow a Fixed Rate
Advance on the date specified by the Borrower for such Advance (other than as a
result of NationsBank's failure to make funds available for such Advance), the
Borrower shall, with respect to any prepayment of all or any portion of a Fixed
Rate Advance or the failure to borrow all or any portion of a Fixed Rate
Advance, on the date specified for such Advance, pay to NationsBank immediately
upon demand a fee which is the sum of the discounted monthly differences for
each month from the month in which the prepayment or failure to borrow occurs
through the month in which the final day of the Interest Period for such prepaid
or non-borrowed Fixed Rate Advance occurs, with the discounted monthly
differences being calculated as follows:
(a) DETERMINE the amount of interest which would have accrued each
month on the amount prepaid or not borrowed at the LIBO Rate, in the case of a
LIBO Rate Advance, applicable to such amount had it remained outstanding or been
borrowed and outstanding until the last day of the applicable Interest Period.
(b) SUBTRACT from the amount determined in subsection (a) above the
amount of interest which would accrue for the same month on the amount prepaid
or not borrowed for the remaining term of the Interest Period in which such
prepayment occurs or such borrowing was to be made at the LIBO Rate, in the case
of a LIBO Rate Advance, as determined by NationsBank in its sole discretion, in
effect on the date of prepayment for new Fixed Rate Advances of the type prepaid
or not borrowed made for such term and in a principal amount equal to the amount
prepaid or not borrowed.
(c) If the result obtained in (b) for any month is greater than zero,
discount that difference by the LIBO Rate used in (b) above.
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The Borrower acknowledges that prepayments of LIBO Rate Advances before the end
of their Interest Periods and failure to borrow a Fixed Rate Advance after it is
requested Will result in NationsBank incurring additional costs, expenses and/or
liabilities, and that it is extremely difficult to ascertain the full extent of
such costs, expenses and/or liabilities. NationsBank will send the Borrower in
writing NationsBank's calculation of the above-described tee, and the Borrower
agrees that the amount of such fee determined by such calculation represents a
reasonable estimate of the prepayment and non-borrowing costs, expenses and/or
liabilities of NationsBank, and that the Borrower will pay such fee as so
calculated absent manifest error. If the Borrower fails to pay any fee for any
prepayment or failure to borrow when due, the amount of such fee shall
thereafter bear interest until paid at a fluctuating rate per annum equal to the
Prime Rate in effect from time to time (computed on the basis of a 360-day year,
actual days elapsed) plus three percent (3%).
2.12 INDEMNIFICATION FOR LIBO RATE COSTS. Notwithstanding anything
provided in the definition of LIBO Rate in Section 1.01 of this Agreement,
during any period of time after the date of this Agreement in which interest on
any Advance is accruing on the basis of the LIBO Rate, the Borrower shall, upon
NationsBank's written request, which request shall explain in reasonable detail
the reason for such costs or payments and shall be conclusive and binding on the
Borrower absent manifest error, promptly pay to, and reimburse NationsBank for,
any increase in the cost to NationsBank of, or any reduction in the amount of
any sum receivable by NationsBank in respect of, making, continuing or
maintaining (or of NationsBank's obligation to make, continue or maintain) any
Advance as, or of converting (or of NationsBank's obligation to convert) any
Advance into, Fixed Rate Advances (including, but not limited to, any imposition
or effectiveness of reserve requirements, assessments, deposits or similar
requirements) that arise after the date of this Agreement in connection with any
change in, or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any law, regulation, directive, guideline,
decision or request (whether or not having the force of law) of any court,
central bank, regulator or other governmental authority.
2.13 INABILITY TO DETERMINE THE LIBO RATE. In the event that NationsBank
shall at any time decide that the accrual of interest on the basis of the LIBO
Rate (i) cannot be determined at the time of any borrowing or the continuation
of any borrowing because Dollar deposits, contracts or time deposits in an
amount approximately equal to the amount of the relevant Fixed Rate Advance and
for a period of time approximately equal to relevant Interest Period are not
available, or (ii) is or has become unlawful or impossible by reason of
NationsBank's compliance with any new law, rule, regulation, guideline or order,
or any new interpretation of any present law, rule, regulation, guideline or
order, then NationsBank shall give telephonic notice thereof (confirmed in
writing) to the Borrower, in which event such Fixed Rate Advance shall not be
made or, at the election of the Borrower, be made as a Prime Rate Advance or, if
already made,
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shall be immediately prepaid, but then may be converted into a Prime Rate
Advance at the election of the Borrower. In the event that NationsBank shall at
any time decide that the accrual of interest on the basis of the LIBO Rate for a
LIBO Rate Advance does not accurately reflect the cost to NationsBank of making
or continuing such Fixed Rate Advance, then NationsBank shall give telephonic
notice thereof (confirmed in writing) to the Borrower and such Fixed Rate
Advance shall not be made or, at the election of the Borrower, be made as a
Prime Rate Advance, if such Fixed Rate Advance has not been made without the
Borrower paying any interest breakage costs referred to in Section 2.11 of this
Agreement, or, if such Fixed Rate Advance has already been made, such Fixed Rate
Advance will be paid on the last day of the Interest Period in which the
Borrower receives such notice.
2.14 PAYMENTS. Payment of all sums due from the Borrower under this
Agreement with respect to Advances and reimbursement of Letter of Credit
payments made by NationsBank shall be made by the Borrower to NationsBank in
immediately available funds. Each such payment by the Borrower shall be made
without setoff or counterclaim on the day such payment is due. All sums
received after such time shall be deemed received on the next Business Day.
Whenever any payment under this Agreement shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest; provided, however, if such extension would
cause payment of interest on, or principal of, LIBO Rate Advances to be made in
the next following calendar month, such payment shall be made on the immediately
preceding Business Day.
2.15 TAXES.
(a) Any and all payments by the Borrower shall be made hereunder free
and clear of, and without deduction for, any and all taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
existing on or arising after the date of this Agreement, excluding taxes imposed
on NationsBank's income, and franchise taxes imposed on it by the jurisdiction
under the laws of which NationsBank is organized or any political subdivision
thereof (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as Taxes"). If
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder (i) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.15) NationsBank receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
Borrower shall make such deductions, and (iii) Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
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(b) In addition, Borrower agrees to pay any stamp or documentary
taxes, or any other excise or property taxes, charges or similar levies,
existing on or arising after the date of this Agreement, which arise from any
payment or registration of, or otherwise with respect to, this Agreement
(hereinafter referred to as "Other Taxes").
(c) Borrower will indemnify NationsBank for the full amount of Taxes
or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed
by any jurisdiction on amounts payable under this Section 2.15) paid by
NationsBank and any liability (including, without limitation, penalties,
interest and expenses) arising therefrom or with respect thereto, except to the
extent that such liabilities arise directly from NationsBank's gross negligence
or willful misconduct, whether or not such Taxes or Other Taxes were correctly
or legally asserted. This indemnification shall be made within 30 days from the
date NationsBank makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes. the
Borrower will furnish to NationsBank at its address referred to in Section 9.03
of this Agreement. the original or a certified copy of a receipt evidencing
payment thereof. If no taxes are payable in respect of any payment hereunder,
Borrower will furnish to NationsBank at such address a certificate from each
appropriate taxing authority, or an opinion of counsel acceptable to
NationsBank, in either case stating that such payment is exempt from, or not
subject to, Taxes.
(e) To the extent that any Taxes were not lawfully payable, any
recovery ultimately received by NationsBank in respect of any such Taxes shall
be refunded to the Borrower to the extent of the Borrower's applicable
indemnification payment.
(f) NationsBank agrees that, upon receiving written notice from the
Borrower, NationsBank shall take all such actions as are reasonably necessary to
enable the Borrower to pay all Taxes in a timely manner and to claim such
exemptions as NationsBank may be entitled to claim in respect of all or any
portion of any Taxes which are otherwise required to be paid or deducted or
withheld pursuant to this Section 2.15 in respect of any payments under this
Agreement.
(g) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.15 shall survive the payment in full of principal and interest
hereunder.
2.16 REVOLVING CREDIT ACCOUNT.
(a) NationsBank shall maintain on its books a record of account in
which NationsBank shall make entries for each Advance and such other debits and
credits as shall be appropriate in connection with the Revolving Credit Facility
(the
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"Revolving Credit Account"). NationsBank shall provide the Borrower with a
monthly statement of the Borrower's Revolving Credit Account, which statement
shall be considered to be correct and conclusively binding on the Borrower
unless the Borrower notifies NationsBank to the contrary within 30 days after
the Borrower's receipt of any such statement which it deems to be incorrect.
(b) The Borrower hereby authorizes NationsBank, if and to the extent
any payment owed to NationsBank under this Agreement is not made when due, after
giving effect to any grace period, to charge, from time to time, against any or
all of the Borrower's deposit accounts with NationsBank any amount so due.
2.17 FACILITY FEE. The Borrower shall pay to NationsBank on the date of
this Agreement a facility fee in the amount of One Dollar ($1.00).
2.18 LIMITATIONS.
(a) Notwithstanding anything to the contrary in this Agreement, the
Borrower shall not be required to make any payment or indemnification to
NationsBank pursuant to Sections 2.11, 2.12, 2.15 or 3.06 of this Agreement or
Section 10 of the Letter of Credit Agreement unless NationsBank shall have given
the Borrower notice of the occurrence of the circumstances which may or will
require such payment within thirty (30) calendar days after NationsBank becomes
aware of the occurrence of such circumstances.
(b) The Borrower shall not be responsible for any payment or
indemnification required pursuant to Sections 2.11, 2.12, 2.15 or 3.06 of this
Agreement or Section 10 of the Letter of Credit Agreement to the extent the
loss, liability or payment of NationsBank giving rise to the payment or
indemnity obligation of the Borrower directly results from NationsBank's gross
negligence or willful misconduct.
(c) NationsBank shall use its reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to take reasonable
actions which would avoid the need for, or reduce the amount of. any additional
amounts payable under Sections 2.11, 2.12, 2.15 or 3.06 of this Agreement or
Section 10 of the Letter of Credit Agreement, or would avoid the prepayment of a
Fixed Rate Advance, if such action would not, in the reasonable judgment of
NationsBank, be otherwise disadvantageous to NationsBank.
SECTION 3
LETTERS OF CREDIT
In addition to making Advances under the Revolving Credit Facility
described hereinabove, NationsBank hereby agrees to make the following credit
accommodation available to the Borrower on the following terms and conditions:
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3.01 LETTER OF CREDIT SUB-FACILITY. Nationsbank agrees to issue
commercial and standby letters of credit (each a "Letter of Credit") on behalf
of the Borrower ("Letter of Credit Sub-Facility") subject to the terms and
conditions of the Letter of Credit Agreements; provided, however, at no time
shall the total face amount of all Letters of Credit outstanding, less any
partial draws paid by NationsBank under Letters of Credit and not reimbursed by
the Borrower, exceed the sum of Five Million Dollars ($5,000,000.00).
3 02 LETTER OF CREDIT FEES. Upon NationsBank's request, the Borrower
shall promptly pay to NationsBank quarterly in advance an issuance fee of 1% per
annum of the face amount of each Letter of Credit and such negotiation fees,
other fees, commissions, costs and any out-of-pocket expenses charged or
incurred by NationsBank with respect to any Letter of Credit.
3.03 TERMINATION OF LETTER OF CREDIT COMMITMENT. The Letter of Credit
Commitment shall, unless terminated earlier in accordance with the terms of the
Agreement automatically terminate on the Maturity Date, and no Letter of Credit
shall expire on a date which is later than ninety (90) calendar days after the
Maturity Date.
3.04 FORM OF LETTERS OF CREDIT. Each Letter of Credit shall provide only
for drafts or demands payable at sight, and shall be in form and substance and
in favor of beneficiaries satisfactory to NationsBank; provided, however, that
NationsBank may refuse to issue a Letter of Credit due to the nature of the
transaction or its terms or in connection with any transaction where
NationsBank, due to the beneficiary or the nationality or residence of the
beneficiary, would be prohibited by any applicable law, regulation or order from
issuing such Letter of Credit.
3.05 APPLICATIONS. Prior to the issuance of each Letter of Credit, but in
no event later than 4:30 p.m. (Dallas, Texas time) on the Business Day
immediately preceding the day such Letter of Credit is to be issued (which shall
be a Business Day), the Borrower shall deliver to NationsBank a duly executed
Application for the type of Letter of Credit to be issued, with proper
insertions.
3.06 INCREASED COSTS. The Borrower shall, upon NationsBank's request.
which request shall explain in reasonable detail the reason for such costs or
payments and shall be conclusive and binding on the Borrower absent manifest
error, promptly pay to and reimburse NationsBank for any increase in the cost to
NationsBank of, or any reduction in the amount of any sum receivable by
NationsBank in respect of, making, continuing or maintaining (or NationBank's
obligation to make, continue or maintain) any Letter of Credit (including, but
not limited to, any imposition or effectiveness of reserve requirements,
assessments, deposits or similar requirements) that arise after the date of this
Agreement in connection with any change in, or the introduction, adoption,
effectiveness,
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interpretation, reinterpretation or phase-in of, any law, regulation, directive,
guideline, decision or request (whether or not having the force of law) of any
court, central bank, regulator or other governmental authority.
3.07 AUTOMATIC PAYMENT. Borrower agrees to pay each drawing under a
Letter of Credit to NationsBank on the same day the drawing occurs by direct
payment to NationsBank on demand or, at NationsBank's option, by NationsBank
debiting the depository account or accounts maintained by the Borrower with
NationsBank for the amount of such drawing. NationsBank will notify the
Borrower of each such debit on the date the debit occurs. In the event that the
Borrower fails to pay the amount of any drawing under any Letter of Credit on
the same day as the drawing occurs or in the event that the balances in the
depository account or accounts maintained by the Borrower with NationsBank are
not sufficient to pay any drawing when it occurs. NationsBank shall, and
Borrower hereby instructs NationsBank to, create an Advance under this Agreement
bearing interest at the Prime Rate to pay the relevant drawing.
SECTION 4
CONDITIONS OF LENDING
4.01 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE. The obligation of
NationsBank to make the initial Advance or issue the first Letter of Credit,
whichever first occurs, is subject to the conditions precedent that NationsBank
shall have received before the date of such initial Advance or the issuance of
such first Letter of Credit all of the following in form and substance
satisfactory to NationsBank:
(a) A counterpart of this Agreement duly executed by the Borrower.
(b) A Note payable to the order of NationsBank, conforming to the
requirements hereof, duly executed by the Borrower.
(c) Evidence that the execution, delivery and performance by the
Borrower of this Agreement and the other Loan Documents have been duly
authorized, including, but not limited to, (i) a copy of a resolution or
resolutions passed by the Board of Directors of Borrower, certified by the
Secretary or an Assistant Secretary of Borrower, authorizing the borrowings
provided for in this Agreement and the execution, delivery and performance of
each of the Loan Documents, and (ii) a certificate, signed by the Secretary or
an Assistant Secretary of the Borrower, as to the incumbency of, and containing
the specimen signature or signatures of, the person or persons authorized to
execute and deliver each of the Loan Documents on behalf of the Borrower.
(d) A certificate, signed by the chief executive officer or the chief
financial officer of Borrower and dated the date of such Advance or issuance,
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stating that (i) since June 30, 1994, there has been no adverse change in
Borrower's financial condition sufficient to impair Borrower's ability to pay
the Advances and reimburse the amounts paid by NationsBank under the Letters of
Credit or any other of its obligations hereunder, and (B) the representations
and warranties contained in Section 5 of this Agreement are then true and
accurate in all respects as though made on and as of the date of the
certificate.
(e) A written opinion of outside counsel for Borrower with respect to
the matters set forth in Sections 5.01, 5.02, 5.03, 5.04 and 5.06 of this
Agreement.
(f) All reasonable attorneys' fees and all out-of-pocket expenses of
NationsBank in connection with the preparation, negotiation and execution of
this Agreement.
(g) A copy of each of the loan or credit agreements existing on the
date of such Advance or issuance under which the Borrower has incurred or may
incur Domestic Debt from another bank or financial institution.
(h) Such other evidence as NationsBank may reasonably request to
establish the consummation of the transaction contemplated under the Loan
Documents and compliance with the conditions of the Loan Documents.
4.02 CONDITIONS PRECEDENT TO EACH ADVANCE. The obligation of NationsBank
to make each Advance and to issue each Letter of Credit (including the initial
Advance and the first Letter of Credit) shall be subject to the further
conditions precedent that, on the date of each Advance or the issuance of each
Letter of Credit and after making such Advance or issuing such Letter of Credit:
(a) NationsBank shall have received such approvals, opinions or
documents of a legal or financial nature supplemental to the documents delivered
by the Borrower to NationsBank pursuant to Section 4.01 as NationsBank may
reasonably request.
(b) The representations contained in Section 5 and in any other Loan
Document are correct.
(c) No event has occurred and is continuing which constitutes, or,
with the lapse of time or giving of notice or both, would constitute an Event of
Default.
The Borrower's acceptance of the proceeds of any Advance or the issuance of
any Letter of Credit shall be deemed to constitute the Borrower's representation
and warranty that all of the above statements are true and correct.
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SECTION 5
REPRESENTATIONS AND WARRANTIES
The Borrower hereby makes the following representations and warranties to
NationsBank, which representations and warranties shall continue in full force
and effect until the full and final payment, and satisfaction and discharge, of
all obligations of the Borrower to NationsBank under this Agreement.
5.01 STATUS. The Borrower is a corporation duly organized and validly
existing under the laws of the State of Delaware and is properly licensed and is
qualified to do business and in good standing in, and, where necessary to
maintain the Borrower's rights and privileges, has complied in all material
respects with the fictitious name statute of, every jurisdiction in which the
Borrower is doing business. Each Subsidiary is duly organized and existing
under the laws of the jurisdiction of its formation, and is properly licensed
and in good standing in, and where necessary to maintain its rights and
privileges has complied with the fictitious name statutes of, every jurisdiction
in which it is doing business where failure to qualify would have a material
adverse effect on the business operations or financial condition of the Borrower
and all the Subsidiaries taken as a whole.
5.02 AUTHORITY. The execution, delivery and performance by the Borrower of
this Agreement and each of the other Loan Documents have been duly authorized,
and do not and will not (i) violate any provision of any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award presently in
effect having application to the Borrower; (ii) result in a breach of or
constitute a default under any material indenture or loan or credit agreement or
other material agreement, lease or instrument to which the Borrower is a party
or by which it or its properties may be bound or affected; or (iii) require any
consent or approval of its stockholders or violate any provision of its articles
of incorporation or by-laws.
5.03 LEGAL EFFECT. This Agreement and the other Loan Documents
constitute, and any instrument, document or agreement required hereunder or
thereunder when delivered hereunder or thereunder will constitute, legal, valid
and binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws relating to or
limiting creditors' rights generally, and subject to the availability of
equitable remedies.
5.04 APPROVALS; CONSENTS. No approval, consent, exemption or other action
by, or notice to or filing with, any governmental authority is necessary in
connection with the execution, delivery, performance or enforcement of this
Agreement or any of the other Loan Documents, except as may have been obtained
by Borrower and delivered (duly certified) to NationsBank.
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5.05 FINANCIAL STATEMENTS. All financial statements, financial
information and other financial data which may have been or which may hereafter
be submitted by the Borrower to NationsBank are and have been or will be
prepared in accordance with GAAP consistently applied and fairly present in all
material respects, as of the date of such statements, information or data, the
financial condition of the Borrower and the Subsidiaries or, as applicable, the
other information disclosed therein. The Borrower has no contingent
obligations, liabilities for taxes or other outstanding financial obligations
which are material in the aggregate and are required to be disclosed pursuant to
this Agreement, except as disclosed in such statements, information and data or
in any written notice to NationsBank. Since the most recent submission of such
financial information or data to NationsBank, the Borrower represents and
warrants that no material adverse change in the Borrower's financial condition
or operation has occurred which has not been fully disclosed to NationsBank in
writing.
5.06 LITIGATION. Except as have been disclosed to NationsBank in writing,
there are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any Subsidiary or the
Borrower's or any Subsidiary's properties before any court or administrative
agency which could reasonably be expected, if determined adversely to the
Borrower or any Subsidiary, to have a material adverse effect on the business
operations or financial condition of the Borrower and all the Subsidiaries taken
as a whole.
5.07 TITLE TO DOMESTIC ASSETS. The Borrower has good and marketable title
to all of its Domestic assets. The Domestic assets are not subject to any
security interest, encumbrance, lien or claim of any third person except for
Permitted Domestic Liens.
5.08 ERISA. Borrower is in compliance in all material respects with all
applicable provisions of ERISA, and no Reportable Event under Section
4043(b)(5), (6) or (9) or ERISA has occurred and/or is continuing with respect
to any Plan of the Borrower, and any such Plan has been and will continue to be
funded in accordance with its terms, and otherwise complies with and continues
to comply with the requirements of ERISA, except as disclosed in writing to
NationsBank prior to the date of the Agreement.
5.09 TAXES. The Borrower has filed all tax returns required to be filed
and paid all taxes shown thereon to be due, including interest and penalties,
other than such taxes which are currently payable without penalty or interest or
those which are being duly contested in good faith.
5.10 REGULATION U. The proceeds of the Advances will not be used to
purchase or carry margin stock.
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SECTION 6
COVENANTS
The Borrower covenants and agrees that, during the term of this Agreement
and the other Loan Documents, and so long thereafter as the Borrower is
obligated to NationsBank under this Agreement or the other Loan Documents, the
Borrower will, unless NationsBank shall otherwise consent in writing:
6.01 PRESERVATION OF EXISTENCE; COMPLIANCE WITH APPLICABLE LAWS. Maintain
and preserve its existence and all rights and privileges it now enjoys; not
liquidate or dissolve, change the nature of its business, sell (whether in any
one transaction or a series of transactions) all or substantially all of its
assets, or enter into any merger, consolidation, reorganization or
recapitalization; and conduct its business and operations in accordance with all
applicable laws, rules and regulations (including, but not limited to, ERISA
with respect to each of its Plans), orders of any Governmental Authority and all
material agreements to which it is a party.
6.02 MAINTENANCE OF INSURANCE. Maintain insurance in such amounts and
covering such risks as is usually and prudently carried by companies engaged in
similar business and owning similar properties in the same general areas in
which the Borrower operates, including, but not limited to, fire, public
liability, property damage and worker's compensation.
6.03 MAINTENANCE OF PROPERTIES. Maintain and preserve all its properties
in good working order and condition in accordance with the general practice of
other businesses of similar character and size, ordinary wear and tear excepted.
6.04 PAYMENT OF OBLIGATIONS AND TAXES. Make timely payment of all
assessments and taxes and all of its liabilities and obligations unless the same
are being contested in good faith by appropriate proceedings with the
appropriate court or regulatory agency; provided, however, that Borrower may
make payment of trade payables in accordance with its customary business
practices. For purposes hereof, the Borrower's issuance of a check, draft or
similar instrument without delivery to the intended payee shall not constitute
payment.
6.05 INSPECTION RIGHTS. Borrower shall, and shall cause each Subsidiary
to, maintain adequate books and accounts in accordance with GAAP consistently
applied. At any reasonable time and from time to time, permit NationsBank or
any representative of NationsBank to examine and make copies of the records and
visit the properties of the Borrower and discuss the business and operations of
the Borrower and its Subsidiaries with any designated representative of the
Borrower, and shall furnish NationsBank with all information relating to the
business or finances of the Borrower and the Subsidiaries promptly upon
NationsBank's request. If the Borrower shall maintain any records (including,
but not limited to, computer generated records or computer programs for the
generation of such
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records) in the possession of a third party, the Borrower thereby agrees to
notify such third party to permit NationsBank free access to such records at all
reasonable times, and to provide NationsBank with copies of any records which it
may reasonably request, all at the Borrower's expense, the amount of which shall
be payable within 30 days after demand.
6.06 REPORTING AND CERTIFICATION REQUIREMENTS. Deliver or cause to be
delivered to NationsBank in form and detail satisfactory to NationsBank:
(a) Not later than 120 days after the end of each of the Borrower's
fiscal years, a copy of the annual audited financial report and Securities and
Exchange Commission Form 10-K of the Borrower for such year, all certified by
public accountants acceptable to NationsBank as having been prepared in
accordance with GAAP consistently applied, together with the following: (i)
consolidating income statements of the Borrower and the Subsidiaries for such
fiscal year, and (ii) consolidating balance sheets of the Borrower and the
Subsidiaries as of the end of such fiscal year.
(b) Not later than 60 days after the close of each fiscal quarter in
each of the Borrower's fiscal years (i) consolidating income statements of the
Borrower and the Subsidiaries for such quarterly period, and (ii) consolidating
balance sheets of the Borrower and the Subsidiaries as of the end of such
quarterly period, all in reasonable detail and subject to year-end audit
adjustments.
(c) Contemporaneously with each quarterly and year-end financial
report required by the foregoing subsections (a) and (b), a certificate of the
president or chief financial officer of the Borrower stating that (i) the
quarterly financial report required by subsection (b) above was prepared in
accordance with GAAP consistently applied, (ii) he or she has individually
reviewed the provisions of this Agreement and that a review of the activities of
the Borrower and the Subsidiaries during such year or quarterly period, as the
case may be, has been made by him or her or under his or her supervision, with a
view to determining whether the Borrower has fulfilled all its obligations under
this Agreement, and that the Borrower has observed and performed each
undertaking contained in this Agreement, including, but not limited to, its
quantitative financial covenants set forth in Section 6.18 of this Agreement,
and is not in default in the observance or performance of any of the provisions
hereof or, if Borrower shall be so in default, specifying all such defaults and
events of which he or she may have knowledge.
(d) Not later than 60 days after the end of each fiscal quarter, the
Borrower's Securities and Exchange Commission Form 1O-Q.
(e) Promptly after they are sent, made available or filed, copies of
all reports, proxy statements and financial statements that the Borrower sends
or makes available to its stockholders and all registration statements and
reports that the Borrower files with the Securities and Exchange Commission.
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(f) Prompt written notice of any and all (i) Events of Default or
Potential Events of Default, (ii) litigation, arbitration or administrative
proceedings to which the Borrower is a party and in which the claim or liability
exceeds One Million Dollars ($1,000,000.00), and (iii) other matters, other than
matters of a general economic nature (other than those matters relating
primarily to the Borrower or the industries in which the Borrower conducts its
business), which have resulted in, or could reasonably be expected to result in,
a material adverse change in the financial condition or business operations of
the Borrower, together with, in the case of an Event of Default or a Potential
Event of Default, a statement of the chief financial officer of the Borrower
setting forth details of such Event of Default or Potential Event of Default and
the action which the Borrower proposes to take with respect thereto.
(g) As soon as possible, and in any event within thirty (30) days
after the Borrower knows or should know that any Reportable Event has occurred
with respect to any Plan, a statement from the chief financial officer of the
Borrower setting forth details as to such Reportable Event and the action which
the Borrower proposes to take with respect thereto, together with a copy of the
notice of such Reportable Event given to the Pension Benefit Guaranty
Corporation if a copy of such notice is available to the Borrower.
(h) Promptly after the filing thereof with the United States
Secretary of Labor or the Pension Benefit Guaranty Corporation, copies of each
annual report with respect to each Plan.
(i) Promptly after receipt thereof, a copy of any notice the Borrower
or any member of the Controlled Group of Corporations (as defined in Section
1563(a) of the Internal Revenue Code of 1954, as amended, determined without
regard to Sections 1563(a)(4) and 1563(e)(3)(c) of such Code) of which Borrower
is a part may receive from the Pension Benefit Guaranty Corporation or the
Internal Revenue Service with respect to any Plan; provided, however, that this
Section 6.06(i) shall not apply to notices of general application promulgated by
the Department of Labor.
(j) When prepared, but not later than ninety (90) calendar days after
the start of each of the Borrower's fiscal years, an internally prepared budget
showing the total projected capital expenditures of the Borrower for such fiscal
year broken down into the total projected Domestic capital expenditures and the
total projected foreign capital expenditures of the Borrower for such fiscal
year.
(k) Promptly after they are signed by the Borrower, a copy of each
credit or loan agreement and any other document or agreement evidencing any
Domestic extension of credit to the Borrower by Wells Fargo Bank, N.A., Sanwa
Bank California or any other bank or financial institution.
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(l) Promptly upon NationsBank's request, such other information
pertaining to the Borrower and any Subsidiary as NationsBank may reasonably
request.
6.07 PAYMENT OF DIVIDENDS. Not declare or pay any dividends on any class
of stock now or hereafter outstanding, except dividends payable solely in the
Borrower's capital stock.
6.08 REDEMPTION OR REPURCHASE OF STOCK. Not redeem or repurchase any
class of the Borrower's stock now or hereafter outstanding; provided, however,
that the Borrower may redeem or repurchase any class of the Borrower's stock in
an amount not to exceed $1,000,000.00 in any one of the Borrower's fiscal years.
6.09 ADDITIONAL DOMESTIC INDEBTEDNESS. Not, after the date hereof,
create, incur or assume, directly or indirectly any additional Domestic
Indebtedness other than (i) Indebtedness owed or to be owed to NationsBank,
Wells Fargo Bank, N.A. or Sanwa Bank California, or (ii) Indebtedness to trade
creditors incurred in the ordinary course of the Borrower's business, or (iii)
Indebtedness in an aggregate amount not exceeding $75,000,000.00 in any one of
the Borrower's fiscal years for new equipment financing, capital leases, and
financing for the Temecula Facility, (iv) Indebtedness owed to other financial
institutions under revolving lines of credit, and (v) Indebtedness of up to
$75,000,000.00 incurred in connection with business acquisitions made by
Borrower.
6.10 LOANS. Not make any loans or advances or extend credit to any third
person including, but not limited to, directors, officers, shareholders,
employees, affiliated entities and Subsidiaries of the Borrower, except for
credit extended in the ordinary course of the Borrower's business as presently
conducted; provided, however, that the Borrower may make loans or advances or
extend credit to employees of the Borrower in an aggregate amount not to exceed
$1,000,000.00 in any one fiscal year for all such employees; and provided
further that the Borrower may make loans or advances or extend credit to
Subsidiaries and affiliated entities of the Borrower in an aggregate amount to
exceed $15,000,000.00 in any one fiscal year for all such affiliated entities
and Subsidiaries.
6.11 LIENS AND ENCUMBRANCES. Not create, assume or permit to exist any
security interest, encumbrance, mortgage, deed of trust or other lien
(including, but not limited to, a lien of attachment, judgment or execution)
affecting any of the Borrower's Domestic properties, or execute or allow to be
filed any financing statement or continuation thereof affecting any of such
properties, except (i) for Permitted Domestic Liens, (ii) for purchase money
security interests or capital leases of up to $75,000,000.00 in any one of the
Borrower's fiscal years for equipment, which amount shall be calculated
including any mortgage financing for the Temecula Facility, or (iii) as
otherwise provided in this Agreement.
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6.12 TRANSFER OF ASSETS. Not, after the date hereof, sell, contract for
sale, convey, transfer, assign, lease or sublet, any of its assets except in the
ordinary course of business as presently conducted by the Borrower, which
ordinary course of business includes, but is not limited to, sale-leasebacks of
equipment at then prevailing market rates for such assets.
6.13 CHANGE IN NATURE OF BUSINESS. Not make any material change in the
fundamental nature of its business as existing or conducted as of the date
hereof.
6.14 MISREPRESENTATIONS. Not furnish NationsBank any certificate or other
document that will contain any untrue statement of material fact or that will
omit to state a material fact necessary to make it not misleading in light of
the circumstances under which it was furnished.
6.15 REGULATION U. Not directly or indirectly apply any part of the
proceeds of the Advances to the purchasing or carrying of any "margin stock"
within the meaning of Regulation U of the Federal Reserve Board or any
regulations, interpretations or rulings thereunder.
6.16 SUBSIDIARY OWNERSHIP. Not, unless required with respect to
directors' qualifying shares, directly or indirectly sell, assign, pledge or
otherwise transfer (except to a Domestic Subsidiary) any Debt of, or claim
against, a Domestic Subsidiary or any shares of stock or securities of a
Domestic Subsidiary, and not permit a Domestic Subsidiary to sell, assign,
pledge or otherwise transfer (except to the Borrower or another Domestic
Subsidiary) any Debt of, or claim against, the Borrower or any other Domestic
Subsidiary, or any shares of stock or securities of any other Domestic
Subsidiary.
6.17 GUARANTEES. Borrower shall not become liable, directly or indirectly,
as guarantor or otherwise, for any Indebtedness of any other person or entity,
except for a Subsidiary.
6.18 FINANCIAL CONDITION. Maintain at all times:
(a) A minimum consolidated Effective Tangible Net Worth of at least
$175,000,000.00, plus 50% of annual net income, 100% of the proceeds of any
equity issuance, 100% of the conversion of debt into equity, and 100% of any
grant of rights to subscribe for shares of the Borrower, commencing with the
fiscal year end June 30, 1994.
(b) A ratio of consolidated Debt to consolidated Effective Tangible
Net Worth of not more than .90 to 1.
(c) A ratio of consolidated current assets to consolidated current
liabilities (including, but not limited to, amounts outstanding under this
Agreement
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and all amounts outstanding under other revolving lines of credit, whether with
another bank or a third party), of not less than 1.75 to 1.
(d) A ratio of the sum of net income, plus depreciation expense, plus
amortization expense, plus net interest expense, each for the immediately
preceding four fiscal quarters to the sum of the current portion of long-term
Debt then due for the fourth preceding fiscal quarter, plus net interest expense
for the immediately preceding four fiscal quarters of not less than 1.5 to 1.
6.19 CONSOLIDATED OPERATING LOSS. Not incur for any two consecutive
quarters a cumulative Consolidated Operating Loss in excess of $5,000,000.00.
6.20 ACQUISITIONS. Borrower may acquire any other businesses for an amount
equal to or less than $100,000,000.00 in the aggregate.
SECTION 7
EVENTS OF DEFAULT
Any one or more of the following described events shall constitute an event
of default (an "Event of Default") under this Agreement:
7.01 NON-PAYMENT. The Borrower shall fail to pay the principal of any
Advance within one calendar day after it is due or the Borrower shall fail to
pay interest on any Advance within five calendar days after it is due, or the
Borrower shall fail to reimburse any drawing under a Letter of Credit or pay any
other amount owing to NationsBank when due.
7.02 PERFORMANCE UNDER THIS AND OTHER AGREEMENTS. The occurrence and
continuance of any Event of Default under the Letter of Credit Agreements or any
of the other Loan Documents, or the failure of the Borrower in any material
respect to perform or observe any term, covenant or agreement contained in this
Agreement or in any other Loan Document or in any document, instrument or
agreement evidencing or relating to any Indebtedness of the Borrower, other than
immaterial Indebtedness described in clause (ii) of Section 1.01(r) (if such
Indebtedness is owed to a third person and such failure would permit such third
person to accelerate the Indebtedness), and any such failure (exclusive of the
payment of money to NationsBank under this Agreement or under any Loan Document
or under any other instrument, document or agreement with NationsBank, which
failure shall constitute and be an immediate Event of Default if not paid when
due or when demanded to be due, but after giving effect to any grace period
therefor) shall continue for more than 30 days after written notice from
NationsBank to the Borrower of the existence and character of such Event of
Default.
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7.03 REPRESENTATIONS AND WARRANTIES; FINANCIAL STATEMENTS. Any
representation or warranty made by the Borrower under or in connection with this
Agreement, the Letter of Credit Agreements or any of the other Loan Documents,
or any financial statement given by the Borrower shall prove to have been
incorrect in any material respect when made or given or when deemed to have been
made or given.
7.04 INSOLVENCY. The Borrower shall (i) become insolvent or be unable to
pay its debts as they mature; (ii) make an assignment for the benefit or
creditors or to an agent authorized to liquidate any substantial amount of its
properties and assets; (iii) file a voluntary petition in bankruptcy or seeking
reorganization or to effect a plan or other arrangement with creditors or any
other relief under the Bankruptcy Code or under any state or federal law
granting relief to debtors, whether now or hereafter in effect; (iv) file an
answer admitting the material allegations of an involuntary petition relating to
bankruptcy or reorganization or join in any such petition; (v) become or be
adjudicated a bankrupt or become subject to an order for relief entered by any
court of competent jurisdiction under the Bankruptcy Code or under any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors; (vi) apply for or consent to the appointment of, or consent
that an order be made, appointing any receiver, custodian or trustee, for itself
or any of its properties, assets or businesses; or (vii) become subject to any
involuntary petition or proceeding filed or commenced against the Borrower
pursuant to the Bankruptcy Code or any other applicable state or federal law
relating to bankruptcy, reorganization or other relief for debtors, and such
petition or proceeding is not discharged within 60 days after it is filed or
commenced; or (viii) any receiver, custodian or trustee is appointed to take
possession, custody or control of all or substantial part of its properties,
assets or businesses and such petition or appointment shall not be discharged
within 60 days after the date of such appointment.
7.05 ATTACHMENT; JUDGMENT LIEN. Any writ of execution or attachment or
any judgment lien which individually exceeds $2,000,000 or which, in the
aggregate, exceeds $5,000,000.00 shall be issued against the Borrower or any
property of the Borrower and shall not be discharged or bonded against or
released within 60 days after the issuance or attachment of such writ or lien.
7.06 DISSOLUTION; LIQUIDATION. The Borrower shall dissolve or liquidate
or voluntarily suspend the transaction of business or allow to be suspended,
terminated, revoked or expired any permit, license or approval of any
governmental body materially necessary to conduct the Borrower's business as now
conducted.
7.07 CHANGE IN OWNERSHIP. There shall occur a sale, transfer, disposition
or encumbrance (whether voluntary or involuntary to), or an agreement shall be
entered into to do so with, any Person or group of Persons (as such terms are
defined pursuant to Federal securities laws) with respect to more than 20% of
the issued and outstanding capital stock of the Borrower and, as a result
thereof, such
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Person or group of Persons has the ability to direct or cause the direction of
the management and policies of the Borrower.
7.08 ERISA. The termination of, or any full or partial withdrawal from, a
Plan or Plans shall occur which could result in liability of the Borrower to the
Pension Benefit Guaranty Corporation or to the Plan or Plans in the aggregate
amount of $1,000,000 or more, or the actuarial present value of unfunded vested
benefits under all Plans shall exceed one percent (1%) of Borrower's Effective
Tangible Net Worth determined on a consolidated basis.
SECTION 8
REMEDIES ON DEFAULT
Upon the occurrence and during the continuation of any Event of Default,
NationsBank may, at its sole absolute election, without demand and only upon
such notice as may be required by law:
8.01 ACCELERATION. Declare any or all of the Borrower's Indebtedness owing
to NationsBank, whether under this Agreement or under any other Loan Document or
under any other document, instrument or agreement, immediately due and payable,
whether or not otherwise due and payable.
8.02 CEASE EXTENDING CREDIT. Cease making Advances or otherwise extending
credit to or for the account of the Borrower under this Agreement or under any
other Loan Document or under any other agreement now existing or hereafter
entered into between the Borrower and NationsBank.
8.03 TERMINATION. Terminate this Agreement as to any future obligation of
NationsBank without affecting the Borrower's obligations to NationsBank or
NationsBank's rights and remedies under this Agreement or under any other Loan
Document or under any other document, instrument or agreement.
8.04 NON-EXCLUSIVITY OF REMEDIES. Exercise one or more of NationsBank's
rights set forth in this Agreement or in any other Loan Document or seek such
other rights or pursue such other remedies as may be provided by law, in equity
or in any other agreement now existing or hereafter entered into between the
Borrower and NationsBank, or otherwise.
8.05 LETTERS OF CREDIT. NationsBank may, at its sole and absolute
discretion and in addition to any other remedies available to it under this
Agreement and the Letter of Credit Agreements, require the Borrower to pay
immediately to NationsBank the undrawn principal amount of each outstanding
Letter of Credit for prompt application against drawings under any such Letters
of Credit. Any such amount so paid to NationsBank which is not promptly applied
to
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satisfy drawings under any such Letters of Credit or to any other obligations of
the Borrower to NationsBank shall be repaid to the Borrower without interest.
SECTION 9
MISCELLANEOUS
9.01 RELIANCE BY NATIONSBANK. Each warranty, representation, covenant,
obligation and agreement contained in this Agreement shall be conclusively
presumed to have been relied upon by NationsBank regardless of any investigation
made or information possessed by NationsBank and shall be cumulative and in
addition to any other warranties, representations, covenants and agreements
implied under this Agreement and any other warranties, representations,
covenants and agreements which the Borrower now or hereafter shall give, or
cause to be given, to NationsBank in writing.
9.02 COSTS, EXPENSES AND ATTORNEYS' FEES. In the event any legal action is
taken in relation to this Agreement or any other Loan Document, the prevailing
party, in addition to all other sums to which it may be entitled, shall be
entitled to its reasonable costs, expenses and attorneys' fees in connection
with such action. The Borrower agrees to pay to NationsBank within ten (10)
calendar days after demand, the full amount of all costs and expenses,
including, but not limited to, reasonable attorneys' fees (including allocated
costs for in-house legal services), incurred by NationsBank in connection with
any refinancing or restructuring of the Revolving Credit Facility, or any other
obligations of Borrower under this Agreement or any other Loan Document, in the
nature of a "work-out" or otherwise.
9.03 NOTICES. All notices, payments, requests, information and demands
which NationsBank or the Borrower may desire, or may be required to give or make
to the other party hereto, shall be given or made to such party by hand delivery
or through deposit in the United States mail, first class and postage prepaid,
or by telecopier addressed as set forth below or to such other address or
telecopy number as may be specified from time to time in writing by either party
to the other. Any such notice, payment, request, information or demand sent by
mail shall be deemed given or made two days after it is deposited in the U.S.
mail.
TO THE BORROWER: TO NATIONSBANK:
INTERNATIONAL RECTIFIER NATIONSBANK OF TEXAS, N.A.
CORPORATION
233 Kansas Street 901 Main Street, 14th Floor
El Segundo, CA 90245 Dallas, TX 75202
Attn: Treasury Department Attn: Karen Puente
Telecopier No. (310) 640-6575 Telecopier No. (214) 508-0944
-28-
<PAGE>
9.04 WAIVERS. Neither any failure nor any delay by NationsBank in
exercising any right, power or remedy under this Agreement or under any other
Loan Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or remedy hereunder or thereunder preclude other or
further exercise thereof or the exercise of any other right, power or remedy;
nor shall any waiver of any right, power or remedy or Event of Default under
this Agreement or any other Loan Document constitute a waiver of any other
right, power or remedy or Event of Default or constitute a waiver of any other
default of the same, or any other, term or provision. Any waiver, permit,
consent or approval of any kind by NationsBank of any breach of, or Event of
Default under, this Agreement or any other Loan Document must be in writing and
shall be effective only to the extent set forth in such writing.
9.05 CONFLICTING PROVISIONS. To the extent the provisions contained in
this Agreement are inconsistent with those contained in any other Loan Document,
the terms and provisions contained in this Agreement shall control. If they are
not inconsistent, such provisions shall be considered cumulative.
9.06 IMMATERIALITY. Notwithstanding anything in this Agreement to the
contrary, any breach of a representation and warranty contained in Sections
5.01, 5.02, 5.04, 5.05, 5.06, 5.07 or 5.09 of this Agreement or any inaccuracy
in any such representation and warranty, and any violation of a covenant in
Sections 6.01, 6.03, 6.04, 6.11 or 6.12 of this Agreement, shall not be deemed
to be an Event of Default or a Potential Event of Default under this Agreement
or to prohibit any extension of credit by NationsBank to the Borrower under this
Agreement if such breach or inaccuracy or violation when combined with all other
breaches, inaccuracies and violations of such sections existing at such time and
all other Events of Default and Potential Events of Default existing at such
time does not have, or cannot reasonably be expected to have, a material adverse
effect on the Borrower's financial condition, business operations or assets.
9.07 BINDING EFFECT; ASSIGNMENT; PARTICIPATIONS. This Agreement shall be
binding upon and inure to the benefit of the Borrower and NationsBank and their
respective successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of NationsBank. NationsBank may sell, assign or grant
participations in all or any portion of its rights and benefits under this
Agreement and the other Loan Documents; provided, however, that, in the case of
any such sale or assignment, (a) the amount of the Commitment being sold or
assigned shall not be less than $5,000,000.00, (b) after giving effect thereto,
NationsBank's Commitment shall not be less than $5,000,000.00, and (c) the
purchaser or assignee shall be a single financial institution that is not in the
semi-conductor industry. On or prior to the date any such assignment is to
become effective, the Borrower at its own expense shall execute and deliver to
NationsBank, in exchange for the surrendered Note of NationsBank, a new Note to
the order of the assignee thereunder (with each new Note to be in an amount
equal to the Commitment or the Advances assumed by
-29-
<PAGE>
such assignee), and if NationsBank has retained any Commitment or any Advance
outstanding under this Agreement, a new Note to the order of NationsBank (with
the new Note to be in an amount equal to the Commitment or any Advance retained
by NationsBank). Each such new Note shall be dated the date the assignment is
to be effective by its terms and otherwise be in the form of the Note it
replaces. In the event NationsBank grants a participation in all or part of its
rights and benefits under this Agreement and the other Loan Documents, the
Borrower agrees that NationsBank shall, notwithstanding any such transfer, be
entitled to the full benefits accorded NationsBank under this Agreement and the
other Loan Documents as if NationsBank had not made such transfer; and the
Borrower hereby authorizes NationsBank and each such participant, in case of
default by the Borrower under this Agreement, to proceed directly by right of
setoff, banker's lien or otherwise against any assets of the Borrower which may
at the time of such default be in the hands of NationsBank or such participant
to the same extent, in the case of the participant, as if its participating
interest were owing directly to it. The Borrower agrees that, in connection
with any such sale, grant, assignment or participation, NationsBank may deliver
to the prospective buyer or assignee or participant financial statements and
other relevant information relating to the Borrower if such third party agrees
in writing to abide by the confidentiality provisions of Section 9.08 of this
Agreement.
9.08 CONFIDENTIALITY. NationsBank shall, and shall cause its Affiliates,
officers, employees, directors, agents, legal counsel and other professional
advisors to, hold all confidential information obtained pursuant to this
Agreement and the other Loan Documents in accordance with its customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices; provided, however, that
disclosure of such confidential information may be made (a) if such information
is or becomes generally available to the public, or (b) if such information is
or becomes available to NationsBank on a non-confidential basis from a person or
entity, other than the Borrower, who is not prohibited from disclosing the
information to any person or entity, or (c) if such disclosure is made (i) to
the affiliates of NationsBank, (ii) to prospective transferees or purchasers of
an interest in NationsBank's Advances or Commitment or a portion of the
outstanding Letters of Credit; provided, however, that such prospective
transferee or purchaser has agreed in writing to abide by the confidentiality
provisions of this Section 9.08, (iii) as required by law, regulation, rule,
order, subpoena, judicial order or similar order, and (iv) as may be required in
connection with the examination, audit or similar investigation of NationsBank.
NationsBank shall use its best efforts to notify the Borrower prior to any
disclosure of any such confidential information unless prohibited by applicable
law, rule, regulation or order.
9.09 JURISDICTION. This Agreement and the other Loan Documents shall be
governed by and construed according to the laws of the State of Texas, and
NationsBank and the Borrower hereby submit to the jurisdiction of the Federal
and state courts in California.
-30-
<PAGE>
9.10 SEVERABILITY OF PROVISIONS. The illegality or unenforceability of
any provision of this Agreement or any other Loan Document shall not in any way
affect or impair the legality or enforceability of the remaining provisions of
this Agreement or such other Loan Document or the provisions of any other Loan
Document.
9.11 WAIVER OF JURY TRIAL. THE BORROWER AND NATIONSBANK EACH HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
9.12 HEADINGS. The headings set forth in this Agreement are solely for
the purpose of identification and have no legal significance.
9.13 ENTIRE AGREEMENT. This Agreement and the other Loan Documents
constitute the entire and complete understanding of the Borrower and NationsBank
with respect to the transactions contemplated under this Agreement. All
previous conversations, memoranda and writings between the Borrower and
NationsBank pertaining to the transactions contemplated under this Agreement or
the other Loan Documents which are not incorporated or referenced in this
Agreement or in such other Loan Documents are superseded by this Agreement and
the other Loan Documents. This Agreement may be amended only in a writing
signed by NationsBank and the Borrower.
NATIONSBANK OF TEXAS, N.A. INTERNATIONAL RECTIFIER
CORPORATION
By:/s/ William C. Collins By:/s/ Michael P. McGee
------------------------------------- ----------------------------
Name: William C. Collins Name: Michael P. McGee
----------------------------------- --------------------------
Title: Senior Vice President Title: Vice President & CFO
---------------------------------- -------------------------
-31-
<PAGE>
REVOLVING CREDIT FACILITY NOTE
$10,000,000 Dallas, Texas June 15, 1995
FOR VALUE RECEIVED, the undersigned, INTERNATIONAL RECTIFIER CORPORATION
("Borrower"), promises to pay to the order of NATIONSBANK OF TEXAS, N.A.
("NationsBank") at NationsBank's office at 901 Main Street, Dallas, Texas 75202,
or at such other place in the State of Texas as NationsBank may designate, in
lawful money of the United States of America and in immediately available funds,
the principal sum of Ten Million Dollars ($10,000,000), or so much thereof as
may be advanced and be outstanding.
Borrower further agrees to pay interest (whether before or after any breach
of this Note) at said office, in like funds and currency, on the unpaid
principal amount owing hereunder from time to time from the date hereof until
such amount shall have become due and payable (whether at the stated maturity,
by acceleration or otherwise) at either (a) a fluctuating rate per annum at all
times equal to the Prime Rate in effect from time to time, or (b) a fixed rate
per annum determined by NationsBank to be one percent (1.00%) above the LIBO
Rate in effect on the first day of any LIBO Rate Interest Period for a LIBO Rate
Advance. When interest is determined in relation to the Prime Rate, each change
in the rate of interest hereunder shall become effective on the date each Prime
Rate change is announced within NationsBank. Interest shall also be payable on
any overdue payment of principal and (to the extent permitted by law) interest
as set forth in the Credit Agreement (as defined below).
With respect to each interest rate selection by Borrower, the date,
principal amount, rate of interest, term of the applicable Interest Period for a
LIBO Rate Advance, and any payments applicable thereto, shall be set forth by
NationsBank on the reverse of this Note or on such schedules as NationsBank
shall maintain for such purposes. Absent manifest error, such notations on this
Note or on such schedules, and all endorsements by NationsBank thereon, shall be
conclusive evidence of all such items.
This Note is the Revolving Credit Facility Note defined in and made
pursuant to that certain Revolving Credit Agreement dated as of June 15, 1995,
between Borrower and NationsBank, as amended from time to time, (the "Credit
Agreement"). All terms defined in the Credit Agreement shall have the same
meanings when used in this Note, and the rate of interest applicable under this
Note shall change from time to time in accordance with the terms of the Credit
Agreement.
The unpaid principal balance of this obligation at any time shall be the
total of all amounts advanced under this Note by the holder of this Note less
the amount
<PAGE>
of all principal payments made on this Note by or for Borrower, which balance
may be endorsed on this Note from time to time by NationsBank. Notwithstanding
anything in this Note to the contrary, the outstanding principal balance of this
Note, together with the aggregate amount of all outstanding Letters of Credit
(as defined in the Credit Agreement), shall not at any time exceed the maximum
principal amount set forth above, or such lesser amount as is then available
under this Note if the maximum principal amount of this Note is reduced pursuant
to the provisions of the Credit Agreement.
Interest accrued on this Note shall be due and payable as provided in the
Credit Agreement. The outstanding principal balance of this Note, together with
all accrued and unpaid interest thereon, shall also be due and payable on the
Maturity Date (as defined in the Credit Agreement).
Borrower may prepay principal on this Note solely in accordance with the
terms of the Credit Agreement. Each payment of principal on this Note shall be
credited to the portions of this Note which bear interest determined in relation
to the Prime Rate and the LIBO Rate in accordance with the application of
payment provisions of the Credit Agreement.
Upon the occurrence of any Event of Default (as defined in the Credit
Agreement) NationsBank, at NationsBank's option, may declare all sums of
principal and interest outstanding under this Note to be immediately due and
payable, without presentment, demand, protest or notice of dishonor, all of
which are expressly waived by Borrower, and NationsBank shall have all rights,
powers and remedies set forth in the Credit Agreement.
Borrower agrees to pay, immediately upon demand, the full amount of all
costs and expenses, including reasonable attorneys' fees (including, but not
limited to, allocated costs for in-house legal services), incurred by
NationsBank in connection with the enforcement of any rights of NationsBank
and/or the collection of any amounts which become due to NationsBank under this
Note, and the prosecution or defense of any action in any way related to this
Note, including, but not limited to, any action for declaratory relief.
This Note shall be governed by and be construed in accordance with the laws
of the State of California.
INTERNATIONAL RECTIFIER CORPORATION
By: /s/ Michael P. McGee
----------------------------------------
Name: Michael P. McGee
--------------------------------------
Title: Vice President & CFO
-------------------------------------
2
<PAGE>
EXHIBIT 10(r)
April 12, 1995
Mr. Eric Lidow
454 Cuesta Way
Los Angeles, CA 90077
Dear Eric:
In accordance with the decision of the Compensation and Stock Option
Committee of the Board of Directors of International Rectifier Corporation
on March 6, 1995, it is proposed to amend the Executive Employment Agreement
between you and the Company, dated May 15, 1991, as follows. Paragraph
3(a)(iii) will be rewritten to read, in its entirety, as follows:
Upon the Corporation's termination of Executive's employment for any
reason whatsoever other than cause, and upon Executive's resignation
following a change of control of the Corporation (as cause and change of
control are defined in subparagraph (b) below), the Corporation shall pay
Executive a founder's retirement pension for the remainder of his life
equal to ninety percent (90%) of his then annual salary at the time of such
termination, plus the average of the three prior years' cash bonuses, if
any, such pension to be adjusted annually by an amount equal to any
percentage increase in the Consumer Price Index of the Department of Labor
for Urban Wage Earners and Clerical Workers (Los Angeles-Long Beach-Anaheim
area), over the prior year's index, or by any equivalent successor index.
Following Executive's death (either during or after his period of
employment), the Company shall pay survivorship benefits to his wife, if she
be then living, for the remainder of her life equal to sixty six and
two-thirds percent (66 2/3%) of the pension payable to Executive,
payable in the manner prescribed in subparagraph 3(a)(i) above.
Except as hereinabove stated, the subject agreement shall remain in full
force and effect.
If the foregoing is acceptable to you, please so indicate by signing and
returning one copy of this letter to me.
The Company, its Board of Directors and its Officers are very pleased to
provide for your continued services as Chairman of the Board.
Sincerely,
/s/ MICHAEL P. MCGEE
------------------------
Michael P. McGee
Chief Financial Officer
Accepted and Agreed to:
/s/ ERIC LIDOW
----------------------- Date: April 12, 1995
Eric Lidow
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
As of June 30, 1995
INTERNATIONAL RECTIFIER COMPANY (GREAT BRITAIN) LIMITED
Hurst Green Oxted,
Surrey RH8 9BB, England
INTERNATIONAL RECTIFIER CORPORATION ITALIANA S.P.A.
Via Liguria 49,
10071 Borgaro, Turin, Italy
INTERNATIONAL RECTIFIER GMBH
Saalburgstrasse 157,
D-61350 Bad Homburg, Germany
INTERNATIONAL RECTIFIER CANADA LIMITED
7321 Victoria Park Avenue, Suite 201
Markham, Ontario, Canada L3R 3Ll
RECTIFICADORES INTERNACIONALES, S.A.
Durazno No. 30, Centro Industrial,
La Mesa, Tijuana, Baja California, Mexico
INTERNATIONAL RECTIFIER FAR EAST COMPANY, LTD
K&H Building 3, 30-4 Nishi Ikebukuro
Toshima-ku, Tokyo, Japan 171
INTERNATIONAL RECTIFIER SOUTHEAST ASIA PRIVATE, LTD
315 Outram Road
#10-02 Tan Boon Liat Building
Singapore 0316
IR INTERNATIONAL HOLDINGS, INC.
233 Kansas Street
El Segundo, California 90245
SEMICONDUCTOR ELECTRONICS LTD.
SPF Unit 23, SEEPZ Post Office
Anderi East
Bombay 400 096 India
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of International Rectifier Corporation on Form S-8 (File No. 33-40208,
File No. 33-63958 and File No. 33-53589) of our report dated July 27, 1995
on our audits of the consolidated financial statements and financial
statement schedule of International Rectifier Corporation as of June 30, 1995
and 1994, and for the fiscal years ended June 30, 1995, 1994 and 1993, which
report is included in this Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
-----------------------
Coopers & Lybrand L.L.P.
Los Angeles, California
August 24, 1995
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<MULTIPLIER> 1,000
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 50,820
<SECURITIES> 3,000
<RECEIVABLES> 94,996
<ALLOWANCES> 901
<INVENTORY> 73,155
<CURRENT-ASSETS> 233,812
<PP&E> 375,698
<DEPRECIATION> 130,480
<TOTAL-ASSETS> 496,184
<CURRENT-LIABILITIES> 106,061
<BONDS> 0
<COMMON> 25,180
0
0
<OTHER-SE> 320,001
<TOTAL-LIABILITY-AND-EQUITY> 496,184
<SALES> 429,026
<TOTAL-REVENUES> 429,026
<CGS> 278,202
<TOTAL-COSTS> 278,202
<OTHER-EXPENSES> 102,436
<LOSS-PROVISION> 703
<INTEREST-EXPENSE> 377
<INCOME-PRETAX> 47,467
<INCOME-TAX> 8,069
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