<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
-----------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
-------------------- ---------------------
COMMISSION FILE NUMBER 1-7935
------------------------------------------------------
INTERNATIONAL RECTIFIER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-1528961
-------------------------------- -----------------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
-------------------------------- -----------------------------
233 KANSAS STREET
EL SEGUNDO, CALIFORNIA 90245
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 322-3331
NO CHANGE
- --------------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT
WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
------ ------
THERE WERE 50,808,827 SHARES OF THE REGISTRANT'S COMMON STOCK, PAR VALUE $1.00
PER SHARE, OUTSTANDING ON MAY 13, 1996.
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PAGE
REFERENCE
---------
ITEM 1. FINANCIAL STATEMENTS
Unaudited Consolidated Statement of
Income for the Three and Nine Month Periods
Ended March 31, 1996 and 1995 2
Consolidated Balance Sheet as of
March 31, 1996 (unaudited) and
June 30, 1995 3
Unaudited Consolidated Statement of
Cash Flows for the Nine Month
Periods Ended March 31, 1996
and 1995 4
Notes to Unaudited Consolidated
Financial Statements 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 7
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS 11
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
----------------------- -----------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $154,070 $111,867 $421,193 $306,934
Cost of sales 93,976 72,361 259,899 200,122
-------- -------- -------- --------
Gross profit 60,094 39,506 161,294 106,812
Selling and administrative expense 26,634 21,247 74,980 59,680
Research and development expense 7,185 5,538 19,197 14,593
-------- -------- -------- --------
Operating profit 26,275 12,721 67,117 32,539
Other income (expense):
Interest, net (560) 301 (279) (1,133)
Other, net 283 (52) (367) (541)
-------- -------- -------- --------
Income before income taxes 25,998 12,970 66,471 30,865
Provision for income taxes 7,987 2,218 20,412 5,247
-------- -------- -------- --------
Net income $ 18,011 $ 10,752 $ 46,059 $ 25,618
-------- -------- -------- --------
-------- -------- -------- --------
Net income per share (A) $ 0.35 $ 0.21 $ 0.90 $ 0.56
-------- -------- -------- --------
-------- -------- -------- --------
Average common and common
equivalent shares outstanding (A) 51,363 50,580 51,326 45,750
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
(A) Reflects the two-for-one stock split declared on November 20, 1995.
The accompanying notes are an integral part of this statement.
2
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
MARCH 31,
1996 JUNE 30,
(UNAUDITED) 1995
----------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 36,757 $ 50,820
Short-term investments 21,680 3,000
Trade accounts receivable, net 118,436 94,095
Inventories 74,686 73,155
Deferred income taxes 7,209 10,630
Prepaid expenses 3,272 2,112
-------- --------
Total current assets 262,040 233,812
Property, plant and equipment, net 289,413 245,218
Investments and long-term notes receivable 2,289 2,362
Other assets 20,508 14,792
-------- --------
Total assets $574,250 $496,184
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans $ 12,377 $ 17,250
Long-term debt, due within one year 9,771 7,985
Accounts payable 52,918 53,771
Accrued salaries, wages and commissions 10,541 11,517
Other accrued expenses 21,420 15,538
-------- --------
Total current liabilities 107,027 106,061
Long-term debt, less current maturities 46,862 23,881
Deferred income 2,546 675
Other long-term liabilities 12,777 10,311
Deferred income taxes 10,836 10,075
Stockholders' equity:
Common stock (A) 50,684 50,360
Preferred shares - -
Capital contributed in excess of par value of
shares (A) 243,238 240,146
Retained earnings 104,957 58,898
Cumulative currency translation adjustments (4,677) (4,223)
-------- --------
Total stockholders' equity $394,202 $345,181
-------- --------
Total liabilities and stockholders' equity $574,250 $496,184
-------- --------
-------- --------
</TABLE>
(A) Reflects the two-for-one stock split declared on November 20, 1995.
The accompanying notes are an integral part of this statement.
3
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 46,059 $ 25,618
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 21,715 16,896
Deferred income 1,871 (381)
Deferred income taxes 4,207 -
Deferred compensation 2,271 1,006
Change in working capital
Trade accounts receivable, net (27,849) (23,916)
Inventories (2,335) 158
Prepaid expenses (1,219) (454)
Accounts payable (816) 13,145
Accrued salaries, wages and commissions (1,010) (163)
Other accrued expenses 6,284 5,202
-------- ---------
Net cash provided by operating activities 49,178 37,111
-------- ---------
Cash flow from investing activities:
Additions to property, plant and equipment (66,336) (63,436)
Purchase of short-term investments (50,821) (65,523)
Proceeds from sale of short-term investments 32,141 26,942
Investment in other noncurrent assets (6,698) (1,916)
-------- ---------
Net cash used in investing activities (91,714) (103,933)
-------- ---------
Cash flow from financing activities:
Net payments on short-term bank debt (3,809) (10,906)
Proceeds from issuance of long-term debt 32,495 6,088
Payments on long-term debt and obligations
under capital leases (6,484) (9,849)
Net proceeds from issuance of common stock 3,416 99,154
Other 3,610 (2,005)
-------- ---------
Net cash provided by financing activities 29,228 82,482
-------- ---------
Effect of exchange rate changes on cash and
cash equivalents (755) 426
-------- ---------
Net increase (decrease) in cash and cash equivalents (14,063) 16,086
Cash and cash equivalents beginning of period 50,820 13,051
-------- ---------
Cash and cash equivalents end of period $ 36,757 $ 29,137
-------- ---------
-------- ---------
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
INTERNATIONAL RECTIFIER CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
1. BASIS OF PRESENTATION
The consolidated financial statements included herein are unaudited,
however, they contain all normal recurring accruals which, in the opinion
of management, are necessary to present fairly the consolidated financial
position of the Company at March 31, 1996 and the consolidated results of
operations and cash flows for the nine month periods ended March 31, 1996
and 1995. It should be understood that accounting measurements at interim
dates inherently involve greater reliance on estimates than at year end.
The results of operations for the nine month period ended March 31, 1996
are not necessarily indicative of the results to be expected for the full
year.
The accompanying consolidated financial statements do not include footnotes
and certain financial presentations normally required under generally
accepted accounting principles and, therefore, should be read in
conjunction with the Annual Report on Form 10-K for the year ended June 30,
1995.
2. 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 options of 757,400 and 503,000
shares were utilized in the computation of earnings per share for the three
month periods ended March 31, 1996 and 1995, respectively. All share and
per share amounts have been retroactively restated to reflect the common
stock split on November 20, 1995.
3. INVENTORIES
Inventories are stated at the lower of cost (principally first-in, first-
out) or market. Inventories at March 31, 1996 (unaudited) and June 30,
1995 were comprised of the following (in thousands):
MARCH 31, 1996 JUNE 30, 1995
-------------- -------------
Raw materials $20,641 $19,974
Work-in-process 37,815 32,967
Finished goods 16,230 20,214
------- -------
$74,686 $73,155
------- -------
------- -------
5
<PAGE>
4. LONG-TERM DEBT AND OTHER LOANS
A summary of the Company's long-term debt and other loans at March 31, 1996
is as follows (in thousands):
MARCH 31,
1996
---------
Capitalized lease obligations payable in varying monthly
installments primarily at rates from 6.0% to 12.6% $10,275
Domestic bank loans collateralized by equipment, payable in
varying monthly installments at rates from 6.7% to 9.0%, due
in 1996 through 2000 18,130
Domestic unsecured bank loan payable in varying monthly
installments at a current variable rate of 6.6% to 6.9%, due
in 1998 through 2001 15,700
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 5,032
Foreign unsecured bank loans payable in varying monthly
installments at rates from 2.6% to 8.4%, due in 1998
through 2006 7,496
-------
56,633
Less current portion of long-term debt 9,771
-------
$46,862
-------
-------
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE- AND NINE-MONTH PERIODS ENDED MARCH 31, 1996
COMPARED WITH THE THREE- AND NINE-MONTH PERIODS ENDED MARCH 31, 1995
The following table sets forth certain items as a percentage of revenues.
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
(UNAUDITED) (UNAUDITED)
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of sales 61.0 64.7 61.7 65.2
----- ----- ----- -----
Gross profit 39.0 35.3 38.3 34.8
Selling and administrative expense 17.3 19.0 17.8 19.4
Research and development expense 4.7 5.0 4.6 4.8
----- ----- ----- -----
Operating profit 17.0 11.3 15.9 10.6
Interest income (expense), net (0.4) 0.3 (0.1) (0.4)
Other expense, net 0.2 0.0 (0.1) (0.2)
----- ----- ----- -----
Income before income taxes 16.8 11.6 15.7 10.0
Provision for income taxes 5.1 2.0 4.8 1.7
----- ----- ----- -----
Net income 11.7% 9.6% 10.9% 8.3%
----- ----- ----- -----
----- ----- ----- -----
Revenues for the three months ended March 31, 1996 increased 37.7% to $154.1
million from $111.9 million in the prior year period. Revenues for the nine
month period ended March 31, 1996 increased 37.2% to $421.2 million from $306.9
million in the previous year. The Company's revenue increase reflected its
ability to address new applications and displace older technologies across a
broad and diverse market. Changes in foreign exchange rates decreased revenues
by approximately $0.6 million and increased revenues by approximately $2.6
million respectively in the three- and nine-month periods ended March 31, 1996.
Revenues in the current quarter included $4.3 million of net patent royalties,
versus $2.5 million in the prior year period.
Gross profit for the three- and nine-month periods ended March 31, 1996 was
39.0% and 38.3% of revenues ($60.1 million and $161.3 million), respectively,
versus 35.3% and 34.8% of revenues ($39.5 million and $106.8 million) in the
comparable prior year periods. Gross margin expansion reflected a richer mix of
new and value-added products, as well as greater manufacturing volume and
efficiencies.
7
<PAGE>
In the three- and nine-month periods ended March 31, 1996 administrative expense
was 17.3% and 17.8% of revenues ($26.6 million and $75.0 million), respectively,
versus 19.0% and 19.4% of revenues ($21.2 million and $59.7 million) in the
comparable prior year periods. This decrease as a percentage of revenues
reflected improvements in systems, procedures, and operating discipline.
In the three- and nine-month periods ended March 31, 1996, the Company's
research and development expenditures increased to $7.2 million (4.7% of
revenues) and $19.2 million (4.6% of revenues), versus $5.5 million (5.0% of
revenues) and $14.6 million (4.8% of revenues) in the comparable prior year
periods. The Company's research and development program continues to focus on
the advancement and diversification of core growth products and the development
of value-added complete solutions that address broad-based power conversion
applications in motor controls, power supplies, automotive, and lighting.
Compared to the year-ago period, net interest expense in the three months ended
March 31, 1996 increased $0.9 million due to interest incurred on a larger
debt balance. Net interest expense in the nine months ended March decreased
$0.9 million year-to-year primarily due to interest income earned on a higher
average short-term investment balance in the current fiscal year and the
capitalization of certain interest costs.
Changes in foreign-currency exchange rates negatively impacted net income by
$0.1 million in the nine month period ending March 31, 1996, but had no impact
on the current quarter's results.
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 March 31, 1996, the Company maintained cash and cash equivalent balances of
$36.8 million and short-term investments of $21.7 million. In addition, the
Company had established $70.4 million of domestic and foreign revolving lines of
credit, against which $12.4 million had been borrowed. Based on covenant and
collateral limitations, the Company had $51.7 million available for borrowing at
March 31, 1996. Additionally, the Company had at its disposal $29.0 million of
unused bank term-loan facilities and $22.5 million of unused capital equipment
credit lines. At March 31, 1996, the Company had made approximately $51.7
million of purchase commitments for capital equipment to be delivered over the
next six months.
In March 1996, the Company amended its existing $30 million unsecured credit
facility with Sanwa Bank California. The amended facility was increased to
$49.7 million, consisting of a $5 million revolving line of credit and a $44.7
million term loan. As part of the amended credit facility, prior to December
31, 1996, the Company may borrow up to $25 million. Principal repayments on
loans under this part of the facility are required to be made in equal quarterly
installments from March 31, 1999 through December 31, 2002. The
8
<PAGE>
expiration date of the revolving line of credit was extended to October 31,
1997. Interest rates under the amended facility are now at prime, the bank's
cost of funds plus 0.75%, or LIBOR plus 0.75%, at the Company's option.
The Company believes that it has adequate liquidity through cash and cash
equivalents on hand, short-term investments, anticipated cash flow from
operations and funds from existing credit facilities to meet its cash
requirements for the foreseeable future. However, 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.
9
<PAGE>
SIGNATURES
Pursuant to the requirements 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
DATE: May 13, 1996 MICHAEL P. MCGEE
--------------------------------------------
Michael P. McGee
Vice President,
Chief Financial Officer and
Principal Accounting Officer
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
10(a) Amendment to Term Loan Agreement between International Rectifier and
Sanwa Bank California dated as of December 29, 1995.
10(b) Amendment to Term Loan Agreement between International Rectifier and
Sanwa Bank California dated as of February 29, 1996.
10(c) Amendment to Line of Credit between International Rectifier and Sanwa
Bank California dated as of February 29, 1996.
10(d) Term Loan Agreement between International Rectifier and Sanwa Bank
California dated as of March 26, 1996.
11
<PAGE>
AMENDMENT TO TERM LOAN AGREEMENT
This First Amendment to Term Loan Agreement (the "Amendment") is made and
entered as of December 29, 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 Term Loan Agreement dated as of February 28, 1995, 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 modify the
Agreement.
NOW THEREFORE, for value received and hereby acknowledged, the Borrower
and the Bank agree as follows:
1. CHANGE IN TERM LOAN. The first paragraph of Section 2.01 of the
Agreement is deleted in its entirety and the following is substituted in lieu
thereof:
"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 March 31, 1996, (the "Drawdown
Period") up to the maximum amount of $25,000,000 (the "Term
Loan")".
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/ David Carr By: /s/ Michael P. McGee
---------------------------------- -------------------------------------
DAVID CARR, VICE PRESIDENT Michael P. McGee/Vice President - CFO
- -------------------------------------- ----------------------------------------
(Name/Title) (Name/Title)
By:
-------------------------------------
----------------------------------------
(Name/Title)
<PAGE>
AMENDMENT TO TERM LOAN AGREEMENT
This Second Amendment to Term Loan Agreement (the "Amendment") is made and
entered into this 29th day of February, 1996, 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
Term Loan Agreement dated as of February 28, 1995, 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 modify the Agreement.
NOW THEREFORE, for value received and hereby acknowledged, the Borrower and
the Bank agree as follows:
1. CHANGE IN TERM LOAN. The first paragraph of Section 2.01 of the
Agreement is deleted in its entirety and the following is substituted in lieu
thereof:
"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 March 31, 1996, (the "Drawdown Period") up to the maximum
amount of $19,700,000 (the "Term Loan")".
2. CHANGE IN INTEREST. Section 2.01 C. (c) of the Agreement is
deleted in its entirety and the following is substituted in lieu thereof:
"(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 .75% 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".
3. FINANCIAL CONDITION. Section 5.14(d) of the Agreement is deleted
in its entirety and the following is substituted in lieu thereof:
"(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 4th immediately preceding fiscal quarter, plus net
interest expense for the immediately preceding 4 fiscal quarters of not
less than 2 to 1".
4. 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.
[PAGE 1 ENDS HERE. SIGNATURES APPEAR ON PAGE 2]
<PAGE>
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/ David Carr By: /s/ Michael P. McGee
------------------- -------------------------
DAVID CARR, VICE PRESIDENT Michael P. McGee/Vice President - CFO
-------------------------- -----------------------------------
(Name/Title) (Name/Title)
By:
-----------------------
------------------------
(Name/Title)
<PAGE>
AMENDMENT TO LINE OF CREDIT AGREEMENT
This Sixth Amendment to Line of Credit Agreement (the "Amendment")is made
and entered into this 29th day of February, 1996, 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 here, 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 containned 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. EXTENSION OF EXPIRATION DATE. Section 1.01(d) of the Agreement is
deleted in its entirety and the following is substituted in lieu thereof:
"(k) "EXPIRATION DATE": shall mean October 31, 1997 or the date
of termination of the Bank's commitment to lend under this
Agreement pursuant to Section 8, whichever shall occur first".
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 lien
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 .75% 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 .75% 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".
3. CHANGE IN FOREIGN EXCHANGE. The third paragraph of Section 3.01
is deleted in its entirely and the following is substituted in lieu thereof:
<PAGE>
"At no time, however, shall 10% of the aggregate of the
settlement prices of all Foreign Exchange Contracts outstanding
(net of designated offsets) exceed $5,000,000 as determined by
Bank at the time of purchase or sale of each Foreign Exchange
Contract, and provided further, that all Advances and 10% of the
aggregate of the settlement prices of all Foreign Exchange
Contracts outstanding and the total undrawn amount of all Letters
of Credit outstanding (net of designated offsets) plus any
partial draws paid by the Bank and not reimbursed by the Borrower
may not exceed the Line of Credit."
4. MODIFICATION OF FINANCIAL CONDITION. Section 7.14(d) of the
Agreement is deleted in its entirety and the following is substituted in lieu
thereof:
"(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 4th
immediately preceding fiscal quarter, plus set interest expense
for the immediately preceding 4 fiscal quarters of not less than
2 to 1".
5. 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: David Carr By: Michael P. McGee
---------------------------------------
---------------------------- Michael P. McGee / Vice President - CFO
DAVID CARR, VICE PRESIDENT ---------------------------------------
---------------------------- (Name/Title)
(Name/Title)
By: ---------------------------------------
-------------------------------------------
(Name/Title)
<PAGE>
TERM LOAN AGREEMENT
This Term Loan Agreement (the "Agreement") is made and entered into as
of March 26, 1996, 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 OPERATION 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, 1996, (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
.75% 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) That 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, 1996, in 15 equal
installments of 1/16th of the outstanding principal balance of the Term Loan
as of December 31, 1996, commencing on March 31, 1999, and continuing on the
last day of each calendar quarter thereafter up to and including September
30, 2002. On December 31, 2002, 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 $49,250.00 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 any 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 $1,000,000.00 in any one fiscal year.
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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 4th immediately preceding fiscal quarter,
plus net interest expense for the immediately preceding 4 fiscal quarters of
not less than 2 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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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 as 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 PROVISIONS 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.
<TABLE>
<S> <C>
BANK: BORROWER:
SANWA BANK CALIFORNIA INTERNATIONAL RECTIFIER CORPORATION
By: /s/ David Carr By: /s/ Michael P. McGee
---------------------------------- ---------------------------------------------------
Name: David Carr Name: Michael P. McGee
-------------------------------- -------------------------------------------------
Title: Vice President Title: Vice President - Chief Financial Officer
------------------------------- ------------------------------------------------
Attest: By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
------------------------------------------------
</TABLE>
-11-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 36,757
<SECURITIES> 21,680
<RECEIVABLES> 119,376
<ALLOWANCES> 940
<INVENTORY> 74,686
<CURRENT-ASSETS> 262,040
<PP&E> 439,494
<DEPRECIATION> 150,081
<TOTAL-ASSETS> 574,250
<CURRENT-LIABILITIES> 107,027
<BONDS> 46,862
0
0
<COMMON> 50,684
<OTHER-SE> 343,518
<TOTAL-LIABILITY-AND-EQUITY> 574,250
<SALES> 421,193
<TOTAL-REVENUES> 421,193
<CGS> 259,899
<TOTAL-COSTS> 259,899
<OTHER-EXPENSES> 94,177
<LOSS-PROVISION> 39
<INTEREST-EXPENSE> 279
<INCOME-PRETAX> 66,471
<INCOME-TAX> 20,412
<INCOME-CONTINUING> 46,059
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,059
<EPS-PRIMARY> 0.90
<EPS-DILUTED> 0.90
</TABLE>
