<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 0-9653
XICOR, INC.
(Exact name of registrant as specified in its charter)
California 94-2526781
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
1511 Buckeye Drive Milpitas, California 95035
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 432-8888
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
------- --------
NUMBER OF SHARES OUTSTANDING AT JUNE 30, 1996
18,705,802
Page 1 of 11 Pages
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XICOR, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 1996
PART I
FINANCIAL INFORMATION
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XICOR, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 19,441,000 $ 17,259,000
Short-term investments 19,018,000 18,136,000
Accounts receivable 13,244,000 13,430,000
Inventories 14,236,000 11,977,000
Prepaid expenses and other current assets 1,801,000 902,000
------------- -------------
Total current assets 67,740,000 61,704,000
Property, plant and equipment, at cost less
accumulated depreciation 30,662,000 17,369,000
Other assets 419,000 366,000
------------- -------------
$ 98,821,000 $ 79,439,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,520,000 $ 6,128,000
Accrued expenses 7,550,000 8,174,000
Deferred income on shipments to distributors 14,345,000 13,394,000
Current portion of long-term obligations 5,889,000 3,483,000
------------- -------------
Total current liabilities 35,304,000 31,179,000
------------- -------------
Long-term obligations 13,642,000 5,229,000
------------- -------------
Shareholders' equity:
Preferred stock; 5,000,000 shares authorized -- --
Common stock; 75,000,000 shares authorized;
18,705,802 and 18,524,202 shares outstanding 123,021,000 122,431,000
Accumulated deficit (73,146,000) (79,400,000)
------------- -------------
49,875,000 43,031,000
------------- -------------
$ 98,821,000 $ 79,439,000
============= =============
</TABLE>
See accompanying notes to consolidated financial information
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XICOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Thirteen weeks Twelve weeks Twenty-six weeks Twenty-four weeks
ended ended ended ended
June 30, 1996 June 18, 1995 June 30, 1996 June 18, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 31,306,000 $ 25,683,000 $ 59,948,000 $ 49,218,000
Cost of sales 18,947,000 15,696,000 36,718,000 30,258,000
------------ ------------ ------------ ------------
Gross profit 12,359,000 9,987,000 23,230,000 18,960,000
------------ ------------ ------------ ------------
Operating expenses:
Research and development 3,726,000 3,459,000 7,186,000 6,917,000
Selling, general and
administrative 5,252,000 4,592,000 9,903,000 8,934,000
------------ ------------ ------------ ------------
8,978,000 8,051,000 17,089,000 15,851,000
------------ ------------ ------------ ------------
Income from operations 3,381,000 1,936,000 6,141,000 3,109,000
Interest expense (348,000) (138,000) (582,000) (291,000)
Interest income 482,000 335,000 955,000 614,000
------------ ------------ ------------ ------------
Income before income taxes 3,515,000 2,133,000 6,514,000 3,432,000
Provision for income taxes 140,000 107,000 260,000 173,000
------------ ------------ ------------ ------------
Net income $ 3,375,000 $ 2,026,000 $ 6,254,000 $ 3,259,000
============ ============ ============ ============
Net income per common share $ .17 $ .11 $ .32 $ .18
============ ============ ============ ============
Average common
shares and equivalents 19,903,000 18,791,000 19,709,000 18,595,000
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial information
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XICOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Twenty-six weeks Twenty-four weeks
ended ended
June 30, 1996 June 18, 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,254,000 $ 3,259,000
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 3,662,000 3,730,000
Changes in assets and liabilities:
Accounts receivable 186,000 (2,888,000)
Inventories (2,259,000) 2,449,000
Prepaid expenses and other current assets (899,000) (153,000)
Other assets (53,000) --
Accounts payable and accrued expenses 768,000 114,000
Deferred income on shipments to distributors 951,000 1,744,000
------------ ------------
Net cash provided by operating activities 8,610,000 8,255,000
------------ ------------
Cash flows from investing activities:
Investments in plant and equipment, net (3,882,000) (1,442,000)
Purchases of short-term investments (22,387,000) (7,046,000)
Maturities of short-term investments 21,505,000 5,000,000
------------ ------------
Net cash used for investing activities (4,764,000) (3,488,000)
------------ ------------
Cash flows from financing activities:
Repayments of long-term obligations (2,254,000) (1,336,000)
Proceeds from sale of common stock to employees 590,000 414,000
------------ ------------
Net cash used for financing activities (1,664,000) (922,000)
------------ ------------
Increase in cash and cash equivalents 2,182,000 3,845,000
Cash and cash equivalents at beginning of year 17,259,000 14,754,000
------------ ------------
Cash and cash equivalents at end of quarter $ 19,441,000 $ 18,599,000
============ ============
Supplemental information:
Cash paid for:
Interest expense $ 582,000 $ 314,000
Income taxes 331,000 30,000
Equipment acquired pursuant to long-term obligations 13,073,000 170,000
</TABLE>
See accompanying notes to consolidated financial information
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<PAGE> 6
XICOR, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
Note 1 - The Company:
In the opinion of management, all adjustments necessary for a fair
statement of the results of the interim periods presented (consisting only of
normal recurring adjustments) have been included. These financial statements,
notes and analyses should be read in conjunction with Xicor's Annual Report on
Form 10-K for the year ended December 31, 1995 filed with the Securities and
Exchange Commission.
Note 2 - Adoption of New Quarterly Accounting Calendar:
Through 1995, Xicor's quarterly accounting periods consisted of three
12-week quarters and one 16-week fourth quarter. To make comparative analysis
easier for Xicor shareholders and other potential investors, beginning in 1996
Xicor's quarterly accounting periods were changed to four even 13-week quarters.
Xicor's fiscal year, which ends on the Sunday nearest December 31, did not
change. In 1996, Xicor's quarters end on March 31, June 30, September 29 and
December 29.
Note 3 - Balance sheet detail:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Inventories:
Raw materials and supplies $ 5,365,000 $ 3,996,000
Work in process 3,889,000 3,497,000
Finished goods 4,982,000 4,484,000
------------- -------------
$ 14,236,000 $ 11,977,000
============= =============
Property, plant and equipment:
Leased building and building improvements $ 1,602,000 $ 1,602,000
Leasehold improvements 16,756,000 16,679,000
Equipment 90,504,000 76,981,000
Furniture and fixtures 1,697,000 1,699,000
Construction in progress 8,130,000 5,245,000
------------- -------------
$ 118,689,000 $ 102,206,000
Less accumulated depreciation (88,027,000) (84,837,000)
------------- -------------
$ 30,662,000 $ 17,369,000
============= =============
Accrued expenses:
Accrued wages and employee benefits $ 3,369,000 $ 4,089,000
Other accrued expenses 4,181,000 4,085,000
------------- -------------
$ 7,550,000 $ 8,174,000
============= =============
Accounts receivable:
</TABLE>
Accounts receivable at June 30, 1996 and December 31, 1995 are
presented net of an allowance for doubtful accounts of $500,000.
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XICOR, INC.
Quarterly Period Ended June 30, 1996
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion should be read in conjunction with the
accompanying Quarterly Financial Information and Notes thereto and Xicor's
Annual Report on Form 10-K for the year ended December 31, 1995 and is qualified
in its entirety by the foregoing. The results of operations for the thirteen and
twenty-six weeks ended June 30, 1996 are not necessarily indicative of results
to be expected in future periods.
RESULTS OF OPERATIONS
All comparative comments that follow have taken into consideration the
difference in the number of weeks for the respective periods.
Sales for the 13-week second quarter of 1996 were $31.3 million
compared to $25.7 million for the 12-week second quarter of 1995. Sales for the
26-week first half of 1996 were $59.9 million compared to $49.2 million for the
24-week first half of 1995. Additional production and test equipment brought on
line in the fourth quarter of 1995 and the first half of 1996 increased capacity
and resulted in an increased sales level for each of the first two quarters of
1996 over the 1995 quarters. This capacity increase also contributed to a 9%
increase in sales from the first quarter to the second quarter of 1996. The
Company is proceeding to bring on line additional equipment during the balance
of the year to support further sales growth.
Gross profit as a percentage of sales was 39% for both the second
quarter and first half of 1996 and 1995. Maintaining or increasing the gross
profit percentage for the balance of 1996 is contingent upon increased sales,
product mix and prices and successful execution of Xicor's plans to further
increase manufacturing capacity and manufacturing efficiencies.
Research and development expenses were 12% of sales for the second
quarter and first half of 1996 compared to 13% for the second quarter of 1995
and 14% for the first half of 1995. The decrease in research and development
costs as a percentage of sales in 1996 is primarily due to the transfer to
production of certain new products which had previously been under development.
Research and development activities are requiring an increasing degree of
complexity of design and manufacturing process and consequently a larger amount
of funds is expected to be invested in research and development in 1996 than was
invested in 1995.
The level of selling, general and administrative expenses increased
slightly in absolute dollars, but decreased as a percentage of sales in the
second quarter and first half of 1996 compared to the second quarter and first
half of 1995 due to ongoing cost control measures and the increased sales
levels.
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<PAGE> 8
The level of interest expense increased in the second quarter and first
half of 1996 compared to the second quarter and first half of 1995 due to the
financing of $4.7 million of capital equipment acquisitions during the latter
part of 1995 and $13.1 million in the first half of 1996. Interest expense for
the remaining 1996 quarters is expected to increase over the second quarter
level due to the financing of the 1996 first half additions and the planned
financing of additional capital equipment acquisitions during the balance of
1996.
The level of interest income increased in the second quarter and first
half of 1996 compared to the second quarter and first half of 1995 due to an
increase in the average balance invested caused primarily by funds generated
from operations in 1995 and the first half of 1996.
The provision for income taxes for the second quarter and first half of
1996 and 1995 consisted primarily of federal and state minimum taxes, which
result from limitations on the use of net operating loss carryforwards, and
foreign taxes. Net deferred tax assets of $34 million at December 31, 1995
remain fully reserved because of the uncertainty regarding the ultimate
realization of these assets.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
This quarterly report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including statements regarding increased
capacity, improved manufacturing efficiencies and sales growth. Except for
historical information, the matters discussed in this quarterly report are
forward-looking statements that are subject to certain risks and uncertainties
that could cause the actual results to differ materially from those projected.
Factors that could cause actual results to differ materially include the
following: general economic conditions and conditions specific to the
semiconductor industry, fluctuations in customer demand, competitive factors
such as pricing pressures on existing products and the timing and market
acceptance of new product introductions, Xicor's ability to have available an
appropriate amount of production capacity in a timely manner, improvements in
manufacturing efficiencies, the timely development of new products and
processes, and the risk factors listed from time to time in Xicor's SEC reports,
including but not limited to the "Factors Affecting Future Results" section
below and Part I, Item 1. of the Form 10-K. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date hereof. Xicor undertakes no obligation to publicly release or otherwise
disclose the result of any revision to these forward-looking statements which
may be made as a result of events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
FACTORS AFFECTING FUTURE RESULTS
The semiconductor industry is highly competitive and characterized by
rapidly changing technology and steadily declining product prices. Xicor's
results of operations are affected by a
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<PAGE> 9
wide variety of factors, including general economic conditions and conditions
specific to the semiconductor industry, decreases in average selling price over
the life of any particular product, the timing of new product introductions
(both by Xicor and competitors), availability of new manufacturing technologies,
the ability to secure intellectual property rights in a rapidly evolving market
and the ability to have an appropriate amount of production capacity in a timely
manner. The sales level in any specific quarter is also a function of orders
received during that quarter, as customers continue to shorten lead times for
purchase commitments. Consistent with industry practice, customer orders are
generally subject to cancellation by the customer without penalty. Xicor may be
at a disadvantage in competing with major domestic and foreign concerns that
have significant financial resources, established and diverse product lines,
worldwide vertically integrated production facilities and extensive research and
development staffs.
The semiconductor industry is also characterized by substantial capital
and research and development investment for products and processes. The rapid
rate of technological change within the industry requires Xicor to continually
develop new and improved products and processes to maintain its competitive
position. Xicor expects to continue to invest in the research and development of
new products and manufacturing processes in 1996 and beyond, although there can
be no assurances that such research and development efforts or new products will
be successful.
Due to the foregoing and other factors, past results are a much less
reliable predictor of the future than is the case in many older, more stable and
less dynamic industries. In addition, the securities of many high technology
companies, including Xicor, have historically been subject to extensive price
and volume fluctuations that may adversely affect the market price of their
common stock.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, Xicor had $38.5 million in cash, cash equivalents and
short-term investments compared to $35.4 million at December 31, 1995. During
the first half of 1996, Xicor generated $8.6 million of cash from operating
activities which was partially offset by equipment purchases of $3.9 million and
long-term debt repayments of $2.3 million. Xicor used long-term financing to
acquire additional capital assets of $13.1 million during the first half of
1996.
Capital expenditures for the balance of 1996 are presently planned at
approximately $9 million consisting principally of production and test equipment
to support sales growth. Xicor is presently investigating additional equipment
financing for the majority of the planned acquisitions. At June 30, 1996, Xicor
had entered into commitments for equipment purchases and leasehold improvements
aggregating approximately $5 million.
Xicor has a line of credit agreement with a financial institution that
expires March 31, 1997, provides for borrowings of up to $7.5 million against
eligible accounts receivable and is
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<PAGE> 10
secured by all of Xicor's assets. Interest on borrowings is charged at the prime
lending rate plus 2% and is payable monthly. At June 30, 1996, the entire $7.5
million was available to Xicor based on the eligible accounts receivable
balances and the borrowing formulas. To date, no amounts have been borrowed
under this line of credit. Management believes that currently available cash,
expected cash flow from operations and equipment financing will be adequate to
support Xicor's operations for the next twelve months.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
On June 17, 1996 the shareholders of Xicor held their annual
meeting in Milpitas, California. The holders of 17,796,435
shares of Common Stock were present or represented by proxy,
and accordingly, a quorum was present and matters were voted
upon as follows:
(a) The following persons were elected directors:
Votes for Votes withheld
---------- --------------
Raphael Klein 16,987,770 808,665
Julius Blank 16,657,770 1,138,665
Hans G. Dill 16,771,570 1,024,865
Andrew W. Elder 16,784,270 1,012,165
S. Allan Kline 16,770,170 1,026,265
(b) The following resolutions were submitted to a vote of
the shareholders at the meeting:
(1) To approve and ratify amendments to the
Amended and Restated Xicor, Inc. 1990
Incentive and Non-Incentive Stock Option
Plan including an increase in the number of
shares of Common Stock issuable thereunder
from 1,500,000 to 3,200,000.
The resolution was passed 6,844,770 shares
voting in favor, 2,423,355 shares voting
against, 152,390 shares abstaining and
8,375,920 broker non-votes.
(2) To ratify the designation of Price
Waterhouse LLP as independent accountants
for the period ending December 31, 1996. The
resolution was passed, 17,007,568 shares
voting in favor, 670,758 shares voting
against and 118,109 shares abstaining.
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<PAGE> 11
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.6A Amended form of Indemnification Agreements
entered into between Xicor, Inc. and each of
its officers and directors
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed with the Securities
and Exchange Commission during the quarter ended June
30, 1996.
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.
XICOR, INC., a
California Corporation
By /s/ Raphael Klein
---------------------------
Raphael Klein
President
(Principal Executive Officer)
By /s/ Klaus G. Hendig
---------------------------
Klaus G. Hendig
Vice President, Finance
and Administration
(Principal Financial Officer)
Date: August 2, 1996
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<PAGE> 1
EXHIBIT 10.6A
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of this _____
day of _____, 199__ by and between XICOR, INC., a California corporation (the
"Corporation") and ____________________ ("Indemnitee"), a director, officer,
and/or other agent of the Corporation.
WHEREAS, Corporation and Indemnitee recognize the substantial increase
in corporate litigation subjecting officers and directors to expensive
litigation risks; and
WHEREAS, Corporation desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve as officers and
directors of Corporation and to indemnify its officers and directors so as to
provide them with the maximum protection permitted by law.
NOW, THEREFORE, Corporation and Indemnitee hereby agree as follows:
1. DEFINITION. For the purposes of this Agreement, "agent" means any
person who is or was a director, officer, employee, or any other agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, or other enterprise, or was a director,
officer, employee or agent of a foreign or domestic corporation which was a
predecessor corporation of the Corporation or of another enterprise at the
request of such predecessor corporation; "proceeding" means any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative; and "expenses" includes without limitation
attorney's fees and any expenses of establishing a right to indemnification
under Section 2(c) or Section 2(d)(3) of this Agreement.
2. INDEMNIFICATION.
(a) Third Party Proceedings. The Corporation shall indemnify
Indemnitee to the greatest extent possible under applicable law if Indemnitee is
or was a party or is threatened to be made a party to any action, suit or
proceeding (other than an action by or in the right of the Corporation to
procure a judgment in its favor) by reason of the fact that Indemnitee is or was
an agent of the Corporation, against expenses, judgments, fines, settlements and
other amounts actually and reasonably incurred in connection with such
proceeding, if the Indemnitee acted in good faith and in a manner the Indemnitee
reasonably believed to be in the best interest of the Corporation, and, in the
case of a criminal proceeding, had no reasonable cause to believe the conduct of
the Indemnitee was unlawful. The termination of any proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the Indemnitee did
not act in good faith and in a manner which the Indemnitee reasonably believed
to be in the best interests of the Corporation or that the Indemnitee had
reasonable cause to believe that the Indemnitee's conduct was unlawful.
(b) Proceedings by or in the Right of the Corporation. The
Corporation shall indemnify Indemnitee to the greatest extent possible under
applicable law if Indemnitee is or was a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding by or
in the right of the Corporation to procure a judgment in its favor by reason of
the fact that the Indemnitee is or was an agent of the Corporation, against
expenses actually and reasonably incurred by the Indemnitee in connection with
the defense or settlement of such action if the Indemnitee acted in good faith,
in a manner the Indemnitee believed to be in the best interests of the
Corporation and its shareholders.
Provided, however, that no indemnification shall be made for any of the
following:
(1) In respect of any claim, issue or matter as to which the
Indemnitee shall have been adjudged to be liable to the Corporation in the
performance of the Indemnitee's duty to the Corporation and its shareholders,
unless and only to the extent that the court in which such proceeding is or was
pending shall determine upon application that, in view of all the circumstances
of the case, the Indemnitee is fairly and reasonably entitled to indemnity for
expenses and then only to the extent the court shall determine;
<PAGE> 2
(2) Of amounts paid in settling or otherwise disposing of a
pending action without court approval; or
(3) Of expenses incurred in defending a pending action which
is settled or otherwise disposed of without court approval.
(c) Mandatory Payment of Expenses. To the extent that
Indemnitee has been successful on the merits in defense of any proceeding
referred to in Subsections (a) and (b) of this Section 2 or in the defense of
any claim, issue or matter therein, the Indemnitee shall be indemnified against
expenses actually and reasonably incurred by the Indemnitee in connection
therewith.
(d) Determination of Conduct. Except as provided in Subsection
(c) of this Section 2, any indemnification under this Agreement shall be made by
the Corporation only if authorized in the specific case, upon a determination
that indemnification of the Indemnitee is proper in the circumstances because
the Indemnitee has met the applicable standard of conduct set forth in
Subsections (a) and (b) of this Section 2, by any of the following:
(1) A majority vote of a quorum consisting of directors who
are not parties to such proceeding;
(2) If such quorum of directors is not obtainable, by
independent legal counsel in a written opinion;
(3) Approval by the shareholders with the shares owned by the
Indemnitee not being entitled to vote thereon; or
(4) The court in which such proceeding is or was pending upon
application made by the Corporation or the Indemnitee or the attorney or other
person rendering services in connection with the defense, whether or not such
application by the Indemnitee, attorney, or other person is opposed by the
Corporation.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) Advancement of Expenses. The Corporation shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any proceeding referenced in Section 2(a) or (b) hereof
(but not amounts actually paid in settlement of any such proceeding). Indemnitee
hereby undertakes to repay such amounts advanced only if, and to the extent
that, it shall ultimately be determined that Indemnitee is not entitled to be
indemnified by the Corporation as authorized hereby. The advances to be made
hereunder shall be paid by the Corporation to Indemnitee within twenty (20) days
following delivery of a written request therefor by Indemnitee to the
Corporation.
(b) Notice/Cooperation by Indemnitee. The Indemnitee shall, as
a condition precedent to his right to be indemnified under this Agreement, give
the Corporation notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Corporation shall be directed to XICOR, INC. at 1511
Buckeye Drive, Milpitas, California (Attention: Raphael Klein) (or such other
address as the Corporation shall designate in writing to Indemnitee). Notice
shall be deemed received on the third business day after the date postmarked if
sent by domestic certified or registered mail, properly addressed; otherwise
notice shall be deemed received when such notice shall actually be received by
the Corporation. In addition, Indemnitee shall give the Corporation such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power.
(c) Procedure. Any indemnification and advances provided for
in Section 2 and this Section 3 shall be made no later than twenty (20) days
after receipt of the written request of the Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Corporation's
Articles of Incorporation or Bylaws providing for indemnification, is not paid
in full by the Corporation within twenty (20) days after written request for
payment thereof has first been received by the Corporation, Indemnitee may, but
need not, at any time thereafter bring an action against the Corporation to
recover the unpaid amount of the claim and, subject to Section 13 of this
Agreement, Indemnitee shall also be entitled to be paid for the expenses
(including attorney's fees) of bringing such action. It shall be a defense to
any such action (other than an action brought to enforce a claim for
<PAGE> 3
expenses incurred in connection with any action, suit or proceeding in advance
of its final disposition) that the Indemnitee has not met the standard of
conduct which makes it permissible under applicable law for the Corporation to
indemnify Indemnitee for the amount claimed. It is the parties' intention that
if the Corporation contests Indemnitee's right to indemnification, the question
of Indemnitee's right to indemnification shall be for the court to decide, and
neither the failure of the Corporation (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its shareholders) to have made a determination that indemnification of
Indemnitee is proper in the circumstances because Indemnitee has met the
applicable standard of conduct required by applicable law, or an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel or its shareholders) that Indemnitee has not met such applicable
standard of conduct shall create a presumption that Indemnitee has or has not
met the applicable standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a
notice of a claim pursuant to Section 3(b) hereof, the Corporation has
directors' and officers' liability insurance in effect, the Corporation shall
give prompt notice of the commencement of such proceeding to the insurers in
accordance with the procedures set forth in the respective policies. The
Corporation shall thereafter take all necessary or desirable action to cause
such insurers to pay on behalf of the Indemnitee, all amounts payable as a
result of such proceeding in accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Corporation shall
be obligated under Section 3(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Corporation shall be entitled to assume the defense of
such proceeding, with counsel approved by Indemnitee, upon delivery to
Indemnitee of written notice of its election to do so. After delivery of such
notice, approval of such counsel by Indemnitee and the retention of such counsel
by the Corporation, the Corporation will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same proceeding, provided that (i) Indemnitee shall have the
right to employ his counsel in any such proceeding at Indemnitee's expense; (ii)
if (A) the employment of counsel by Indemnitee has been previously authorized by
the Corporation, or (B) Indemnitee shall have reasonably concluded that there
may be a conflict of interest between the Corporation and Indemnitee in the
conduct of any such defense, or (C) the Corporation shall not, in fact, have
employed counsel to assume the defense of such proceeding, then the fees and
expenses of Indemnitee's counsel shall be at the expense of the Corporation.
However, in no event will the Company be obligated to pay the fees or expenses
of more than one firm of attorneys representing Indemnitee and any other agents
of the Company in connection with any one claim or separate but substantially
similar or related claims in the same jurisdiction arising out of the same
general allegations or circumstances.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NON-EXCLUSIVITY.
(a) Scope. Notwithstanding any other provision of this
Agreement, the Corporation hereby agrees to indemnify Indemnitee to the fullest
extent permitted by law, notwithstanding that such indemnification is not
specifically authorized by the other provisions of this Agreement, the
Corporation's Articles of Incorporation, Bylaws or by statute. In the event of
any change in any applicable law, statute or rule which narrows the right of a
California corporation to indemnify a member of its board of directors or an
officer, such changes, to the extent not otherwise required by such law, statute
or rule to be applied to this Agreement shall have no effect on this Agreement
or the parties' rights and obligations hereunder.
(b) Non-exclusivity. The indemnification provided by this
Agreement shall not be deemed exclusive of any of the rights to which an
Indemnitee may be entitled under the Corporation's Articles of Incorporation,
its Bylaws, any agreement, any vote of shareholders or disinterested directors,
the California Corporations Code or otherwise, both as to action in Indemnitee's
official capacity and as to action in another capacity while holding such office
to the extent such additional rights to indemnification are authorized in the
Articles of Incorporation of the Corporation. The rights to indemnity hereunder
shall continue as to an Indemnitee who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of the Indemnitee.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Corporation for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any civil
or criminal action, suit
<PAGE> 4
or proceeding, but not, however, for the total amount thereof, the Corporation
shall nevertheless indemnify Indemnitee for the portion of such expenses,
judgments, fines or penalties to which Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGMENT. Both the Corporation and Indemnitee
acknowledge that in certain instances, Federal law or public policy may override
applicable state law and prohibit the Corporation from indemnifying its
directors and officers under this Agreement or otherwise. For example, the
Corporation and Indemnitee acknowledge that the Securities and Exchange
Commission (the "SEC") has taken the position that indemnification is not
permissible for liabilities arising under certain federal securities laws, and
federal legislation prohibits indemnification for certain ERISA violations.
Indemnitee understands and acknowledges that the Corporation has undertaken or
may be required in the future to undertake with the SEC to submit the question
of indemnification to a court in certain circumstances for a determination of
the Corporation's right under public policy to indemnify Indemnitee.
7. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. As of the date of this
Agreement, the Corporation does not maintain any policy of directors' or
officers' liability insurance. The Corporation shall, from time to time, make
the good faith determination whether or not it is practicable for the
Corporation to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the directors and officers with coverage
for losses from wrongful acts, or to ensure the Corporation's performance of its
indemnification obligations under this Agreement. Among other considerations,
the Corporation will weigh the costs of obtaining such insurance coverage
against the protection afforded by such coverage. In all policies of directors'
and officers' liability insurance, Indemnitee shall be named as an insured in
such a manner as to provide Indemnitee the same rights and benefits as are
accorded to the most favorably insured of the Corporation's directors, if
Indemnitee is a director; or of the Corporation's officers, if Indemnitee is not
a director of the Corporation but is an officer. Notwithstanding, the foregoing,
the Corporation shall have no obligation to obtain or maintain such insurance if
the Corporation determines in good faith such insurance is not reasonably
available, if the premium costs for such insurance are disproportionate to the
amount of coverage provided, if the coverage provided by such insurance is
limited by exclusions so as to provide an insufficient benefit, or if Indemnitee
is covered by similar insurance maintained by a parent or subsidiary of the
Corporation.
8. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Corporation to do or fail to do any act in
violation of applicable law. The Corporation's inability, pursuant to court
order, to perform its obligations under this Agreement shall not constitute a
breach of this Agreement. The provisions of this Agreement shall be severable as
provided in this Section 8. If this Agreement or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify Indemnitee to the full extent permitted
by any applicable portion of this Agreement that shall not have been
invalidated, and the balance of this Agreement not so invalidated shall be
enforceable in accordance with its terms.
9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Corporation shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Prohibited by Law. To indemnify or advance expenses
to Indemnitee for any acts or omissions or transactions for which the
Corporation may not provide indemnification under any applicable law;
(b) Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except with respect
to proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise, but such
indemnification or advancement of expenses may be provided by the Corporation in
specific cases if the Board of Directors finds it to be appropriate;
(c) Lack of Good Faith. To indemnify Indemnitee for any
expenses incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
<PAGE> 5
(d) Insured Claims. To indemnify Indemnitee for expenses or
liabilities or any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Corporation.
(e) Claims Under Section 16(b). To indemnify Indemnitee for
expenses or the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger so that if Indemnitee is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, Indemnitee shall stand in the same position under the provisions of
this Agreement with respect to the resulting or surviving corporation as
Indemnitee would have with respect to such constituent corporation if its
separate existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and if Indemnitee acted in good faith and in a
manner Indemnitee reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation" as
referred to in this Agreement.
11. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall constitute an original.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Corporation and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. ATTORNEY'S FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Corporation under this Agreement or to
enforce or interpret any of the terms of this Agreement, Indemnitee shall be
entitled to be paid all court costs and expenses, including attorneys' fees,
incurred by Indemnitee in defense of such action (including with respect to
Indemnitee's counterclaims and cross-claims made in such action), unless as a
part of such action the court determines that each of Indemnitee's material
defenses to such action were made in bad faith or were frivolous.
14. NOTICE. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressed on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.
15. CONSENT TO JURISDICTION. The Corporation and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of California
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of California.
<PAGE> 6
16. CHOICE OF LAW. This Agreement shall be governed by and its
provisions construed in accordance with the laws of the State of California as
applied to contracts between California residents entered into and to be
performed entirely within California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
XICOR, INC.
1511 BUCKEYE DRIVE
MILPITAS, CA 95035
By:____________________________
Raphael Klein
President
AGREED TO AND ACCEPTED:
INDEMNITEE:
______________________________
(Signature)
______________________________
______________________________
(Address)
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