<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 July 4, 1999
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 JULY 4, 1999
20,310,593
<PAGE> 2
XICOR, INC.
FORM 10-Q
QUARTER ENDED JULY 4, 1999
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at July 4, 1999 1
and December 31, 1998
Consolidated Statements of Operations for the three 2
and six months ended July 4, 1999 and June 28, 1998
Consolidated Statements of Cash Flows for the three 3
and six months ended July 4, 1999 and June 28, 1998
Notes to Consolidated Financial Information 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 5
CONDITION AND RESULTS OF OPERATIONS
PART II: OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 11
SIGNATURES 11
</TABLE>
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<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
XICOR, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
July 4, December 31,
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 13,939,000 $ 17,881,000
Accounts receivable 10,989,000 8,835,000
Inventories 10,509,000 12,770,000
Prepaid expenses and other current assets 671,000 1,016,000
------------- -------------
Total current assets 36,108,000 40,502,000
------------- -------------
Property, plant and equipment,
at cost less accumulated depreciation 32,127,000 38,074,000
Other assets 288,000 286,000
------------- -------------
$ 68,523,000 $ 78,862,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,560,000 $ 9,279,000
Accrued expenses 8,244,000 9,504,000
Deferred income on shipments to distributors 10,722,000 9,121,000
Current portion of long-term obligations 5,969,000 7,216,000
------------- -------------
Total current liabilities 33,495,000 35,120,000
------------- -------------
Long-term obligations 10,575,000 13,137,000
------------- -------------
Shareholders' equity:
Preferred stock; 5,000,000 shares authorized -- --
Common stock; 75,000,000 shares authorized;
20,310,593 and 20,134,427 shares outstanding 128,470,000 128,232,000
Accumulated deficit (104,017,000) (97,627,000)
------------- -------------
24,453,000 30,605,000
------------- -------------
$ 68,523,000 $ 78,862,000
============= =============
</TABLE>
See accompanying notes to consolidated financial information
-1-
<PAGE> 4
XICOR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------- --------------------------------
July 4, 1999 June 28, 1998 July 4, 1999 June 28, 1998
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net sales $ 28,751,000 $ 26,787,000 $ 54,407,000 $ 54,533,000
Cost of sales 21,305,000 25,521,000 42,306,000 45,413,000
------------ ------------ ------------ ------------
Gross profit 7,446,000 1,266,000 12,101,000 9,120,000
------------ ------------ ------------ ------------
Operating expenses:
Research and development 3,683,000 4,628,000 7,242,000 9,194,000
Selling, general and
administrative 5,553,000 5,620,000 10,815,000 11,118,000
------------ ------------ ------------ ------------
9,236,000 10,248,000 18,057,000 20,312,000
------------ ------------ ------------ ------------
Income (loss) from operations (1,790,000) (8,982,000) (5,956,000) (11,192,000)
Interest expense (359,000) (481,000) (751,000) (981,000)
Interest income 156,000 279,000 317,000 635,000
------------ ------------ ------------ ------------
Income (loss) before income taxes (1,993,000) (9,184,000) (6,390,000) (11,538,000)
Provision for income taxes -- -- -- --
------------ ------------ ------------ ------------
Net income (loss) $ (1,993,000) $ (9,184,000) $ (6,390,000) $(11,538,000)
============ ============ ============ ============
Net income (loss) per common share:
Basic $ (0.10) $ (0.48) $ (0.32) $ (0.60)
============ ============ ============ ============
Diluted $ (0.10) $ (0.48) $ (0.32) $ (0.60)
============ ============ ============ ============
Shares used in per share calculations:
Basic 20,257,000 19,108,000 20,215,000 19,099,000
============ ============ ============ ============
Diluted 20,257,000 19,108,000 20,215,000 19,099,000
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial information
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<PAGE> 5
XICOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------
July 4, June 28,
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (6,390,000) $(11,538,000)
Adjustments to reconcile net income (loss) to
cash provided by (used for) operating activities:
Depreciation and amortization 6,663,000 5,992,000
Changes in assets and liabilities:
Accounts receivable (2,154,000) 2,700,000
Inventories 2,261,000 3,860,000
Prepaid expenses and other current assets 345,000 42,000
Other assets (2,000) 14,000
Accounts payable and accrued expenses (1,979,000) (4,067,000)
Deferred income on shipments to distributors 1,601,000 (2,638,000)
------------ ------------
Net cash provided by (used for) operating activities 345,000 (5,635,000)
------------ ------------
Cash flows from investing activities:
Investments in plant and equipment, net (716,000) (2,787,000)
Purchases of short-term investments -- (4,292,000)
Maturities of short-term investments -- 11,512,000
------------ ------------
Net cash provided by (used for) investing activities (716,000) 4,433,000
------------ ------------
Cash flows from financing activities:
Repayments of long-term obligations (3,809,000) (3,040,000)
Net proceeds from sale of common stock 238,000 36,000
------------ ------------
Net cash used for financing activities (3,571,000) (3,004,000)
------------ ------------
Decrease in cash and cash equivalents (3,942,000) (4,206,000)
Cash and cash equivalents at beginning of year 17,881,000 21,106,000
------------ ------------
Cash and cash equivalents at end of period $ 13,939,000 $ 16,900,000
============ ============
Supplemental information:
Cash paid (refunded) for:
Interest expense $ 825,000 $ 982,000
Income taxes 24,000 (110,000)
Equipment acquired pursuant to long-term obligations -- 1,097,000
</TABLE>
See accompanying notes to consolidated financial information
-3-
<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, 1998 filed with the Securities and
Exchange Commission.
NOTE 2 - NET INCOME (LOSS) PER SHARE:
Basic net income (loss) per share is computed using the weighted
average number of common shares outstanding. Diluted net income (loss) per share
is computed using the weighted average number of common shares and all dilutive
potential common shares outstanding. Options to purchase 2,778,525 shares of
common stock were outstanding at July 4, 1999, but were excluded from the
earnings per share (EPS) computation as they were antidilutive.
NOTE 3 - COMPREHENSIVE INCOME (LOSS):
The net loss for the periods reported also approximated the
comprehensive loss for such periods.
NOTE 4 - BALANCE SHEET DETAIL:
<TABLE>
<CAPTION>
July 4, December 31,
1999 1998
------------- -------------
<S> <C> <C>
Inventories:
Raw materials and supplies $ 1,085,000 $ 1,450,000
Work in process 5,993,000 7,036,000
Finished goods 3,431,000 4,284,000
------------- -------------
$ 10,509,000 $ 12,770,000
============= =============
Property, plant and equipment:
Leasehold improvements $ 17,439,000 $ 17,674,000
Equipment 121,623,000 124,371,000
Furniture and fixtures 1,891,000 1,881,000
Construction in progress 603,000 1,501,000
------------- -------------
141,556,000 145,427,000
Less accumulated depreciation (109,429,000) (107,353,000)
------------- -------------
$ 32,127,000 $ 38,074,000
============= =============
Accrued expenses:
Accrued wages and employee benefits $ 4,159,000 $ 4,038,000
Other accrued expenses 4,085,000 5,466,000
------------- -------------
$ 8,244,000 $ 9,504,000
============= =============
</TABLE>
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<PAGE> 7
Accounts receivable:
Accounts receivable at July 4, 1999 and December 31, 1998 are presented
net of an allowance for doubtful accounts of $500,000.
Accrued restructuring costs:
During 1998 Xicor announced and began to implement a restructuring plan
to revise its manufacturing and procurement strategies to significantly increase
outsourcing of wafer fabrication and product testing to overseas subcontractors
and to streamline operations. Estimated restructuring costs of $1.4 million were
accrued at December 31, 1998. During the first half of 1999, $0.4 million of
severance costs were paid, with the $1.0 million balance of accrued
restructuring costs expected to be paid by 2000.
ITEM 2. 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, 1998. The results of
operations for the three and six months ended July 4, 1999 are not necessarily
indicative of results to be expected in future periods.
RESULTS OF OPERATIONS
Sales for the first half of 1999 were relatively level compared to the
prior year. First quarter 1999 sales of $25.7 million were lower than the $27.7
million reported in the prior year primarily due to lower average selling
prices. Second quarter 1999 sales of $28.8 million increased 12% compared to
first quarter 1999 sales, driven by increased unit shipments into wireless
communications and networking applications. Sales for the second quarter of 1999
were 7% higher than second quarter 1998 sales of $26.8 million primarily due to
increased sales to Asian customers, including sales into wireless communications
applications.
Gross profit as a percentage of sales was 26% and 22% for the three and
six months ended July 4, 1999 compared to 5% and 17% for the comparable 1998
periods. The 1998 gross profit percentage was impacted by lower average selling
prices as a result of competitive price pressures, Xicor's increased
manufacturing cost level associated with increased production capacity and
upgrading of the wafer fabrication operations during 1996 and 1997 and decreased
factory utilization. After the first quarter of 1998 Xicor substantially reduced
the production volume in its factory in response to declining business
conditions. Unfavorable overhead variances that resulted from the fixed nature
of certain manufacturing costs and the smaller number of units in production
were expensed. Additionally, in the second quarter of 1998, Xicor
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<PAGE> 8
wrote down inventories by $2.2 million to cover declining sales prices and
inventories of certain devices that were discontinued as Xicor streamlines its
product portfolio. To control wafer fabrication costs, Xicor has continued to
limit 1999 wafer output at its in-house plant by operating at about one-third of
its full capacity. Although the income statement was burdened by the related
factory underutilization, the gross profit percentage improved in the second
quarter of 1999 compared to the first quarter of 1999 primarily due to product
mix and increased production outsourcing.
Research and development expenses were 13% of sales in the three and
six months ended July 4, 1999 compared to 17% in the comparable prior year
periods. Research and development expenses decreased as a percentage of sales
primarily due to lower personnel and depreciation costs and higher sales.
Selling, general and administrative expenses were 19% and 20% of sales,
respectively, for the three and six months ended July 4, 1999 compared to 21%
and 20% for the comparable prior year periods. Selling, general and
administrative expenses declined as a percentage of sales in the second quarter
of 1999 primarily due to higher sales.
Interest expense decreased in the second quarter and the first half of
1999 compared to the second quarter and first half of 1998 due to normal
principal payments of outstanding lease debt.
Interest income decreased in the second quarter and first half of 1999
compared to the comparable prior year periods due to a decrease in the average
balance invested caused primarily by Xicor's use of such funds for operating
activities during 1998 and the first quarter of 1999, ongoing debt repayments
and 1998 and 1999 capital asset purchases.
No taxes were provided in 1999 or 1998 due to the net loss. Net
deferred tax assets of $44.7 million at December 31, 1998 remain fully reserved
because of the uncertainty regarding the ultimate realization of these assets.
During 1998 Xicor announced and began to implement a restructuring plan
to change its manufacturing and procurement strategies to significantly increase
outsourcing of wafer fabrication and product testing to overseas subcontractors
and to streamline operations. In the second quarter of 1999 Xicor entered into
agreements with ZMD GmbH of Germany and Sanyo Electric Co., Ltd. of Japan to
fabricate wafers for Xicor. These foundry relationships are intended to
supplement Xicor's foundry activities with Yamaha Corporation of Japan, which
currently produces about one-third of Xicor's wafer requirements. With this
additional foundry capability, Xicor has set a goal to outsource all wafer
fabrication operations in the long-term.
-6-
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
During the balance of 1999 Xicor expects to use cash to fund operating
activities, repay long-term obligations and purchase equipment. In the first
half of 1999, Xicor generated $0.3 million of cash from operating activities and
used $3.8 million to repay long-term obligations and $0.7 million for equipment
purchases. Capital expenditures for 1999 are currently planned at approximately
$2 million. At July 4, 1999, Xicor had entered into commitments for equipment
purchases aggregating less than $0.5 million.
Xicor has a line of credit agreement with a financial institution that
expires March 31, 2000, provides for borrowings of up to $7.5 million against
eligible accounts receivable and is secured by all of Xicor's assets. Interest
on borrowings is charged at the prime lending rate plus 2% and is payable
monthly. At July 4, 1999, 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. Subsequent to the
second quarter of 1999, $1.7 million of the line of credit was reserved to
secure a standby letter of credit. Management believes that currently available
cash and the existing line of credit facility will be adequate to support
Xicor's operations for the next twelve months.
"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 the continuation
of underutilization of Xicor's in-house wafer fabrication plant in 1999, the
intent for the ZMD GmbH and Sanyo Electric Co., Ltd. foundry relationships to
supplement Xicor's foundry activities with Yamaha, the goal to outsource all
wafer fabrication operations in the long-term and the expectation that currently
available cash and the existing line of credit facility will be adequate to
support Xicor's operations for the next twelve months.
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 Xicor's 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 competitive cost foundry production
capacity in a timely manner, our foundry partners' timely ability to
successfully manufacture products for Xicor using Xicor's proprietary
technology, manufacturing efficiencies, the ability to continue effective cost
reductions, the timely development of new products and submicron processes, the
ability of Xicor, its customers, vendors and subcontractors to make their
systems Year 2000 compliant, and the risk factors listed from time to time in
Xicor's SEC
-7-
<PAGE> 10
reports, including but not limited to the "Factors Affecting Future Results"
section following and Part I, Item 1. of Xicor's Form 10-K for the year ended
December 31, 1998. 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. The current
business climate has and will continue to result in underutilization of Xicor's
internal wafer fabrication factory, which will adversely affect Xicor's business
and results of operations. Xicor's results of operations, including gross
margins, are affected by a 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
competitive cost internal and outsourced production capacity in a timely manner.
The sales level in any specific quarter also depends significantly on 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 capabilities.
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 during the remainder of 1999, although
these research and development efforts and new products may not be successful.
Xicor uses a significant number of computer software programs and
operating systems and intelligent hardware devices in its internal operations,
including information technology (IT) systems and non-IT systems used in the
design, manufacture and marketing of company products. These items are
considered to be Year 2000 "objects" and to the extent that these objects are
unable to correctly recognize and process date dependent information beyond the
year 1999, some level of modification or replacement is necessary.
Xicor's Year 2000 Compliance Program addresses Xicor IT and non-IT
systems, Xicor products, key suppliers and key customers. The compliance program
consists of five phases: Planning, Assessment, Renovation, Validation and
Implementation. At the end of the second quarter of 1999, 90% of all the objects
used in the internal systems of Xicor were in the
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<PAGE> 11
Validation or Implementation phase. Company actions have and continue to include
replacing certain systems, while modifying others. Xicor plans to have all
critical objects that would prevent Xicor from meeting its customer commitments
completed by the end of the third quarter of 1999. Xicor believes its products
are Year 2000 compliant. Xicor is also actively working with key suppliers of
products and services to determine that the suppliers' operations and the
products and services they provide are Year 2000 compliant. Approximately 30% of
Xicor's key suppliers are Year 2000 compliant while the majority of the
remaining suppliers have active Year 2000 programs in place. Xicor is developing
contingency plans for Year 2000 non-compliance. These plans include identifying
alternate suppliers, vendors, procedures, generating supply and equipment lists,
conducting staff training and developing communication plans. In some cases, the
contingency plan will be to get the system modified and operational as soon as
possible. Based on currently available information, the incremental costs
associated with these efforts are expected to be less than $0.5 million, a
portion of which relates to the purchase of software and hardware and will be
capitalized. Approximately 60% of these costs have been incurred to date.
Year 2000 compliance issues could have a significant impact on Xicor's
operations and its financial results if modifications cannot be completed in a
timely manner; unforeseen needs or problems arise or if the systems operated by
Xicor's customers, vendors or subcontractors are not Year 2000 compliant.
Xicor has an investment portfolio of fixed income securities that are
classified as "held to maturity securities". These securities, like all fixed
income instruments, are subject to interest rate risk and will fall in value if
market interest rates increase. Xicor attempts to limit this exposure by
investing primarily in short-term securities. In view of the nature and mix of
Xicor's total portfolio, a movement of 10% by market rates would not have a
material impact on the total value of the portfolio at July 4, 1999.
Xicor makes certain purchases denominated in foreign currencies. As a
result, Xicor's cash flows and earnings are exposed to fluctuations in interest
rates and foreign currency exchange rates. Xicor attempts to limit these
exposures through operational strategies and generally has not hedged currency
exposures.
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.
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<PAGE> 12
PART II: OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 4, 1999 the shareholders of Xicor held their annual meeting in Milpitas,
California. The holders of 18,671,929 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:
<TABLE>
<CAPTION>
Votes for Votes withheld
--------- --------------
<S> <C> <C>
Raphael Klein 17,296,756 1,375,173
Bruce Gray 17,305,716 1,366,213
Julius Blank 17,294,266 1,377,663
Andrew W. Elder 17,305,066 1,366,863
Geoffrey C. Winkler 17,304,406 1,367,523
</TABLE>
(b) The following resolutions were submitted to a vote of the shareholders
at the meeting:
(1) To approve an amendment to the Company's Bylaws to increase
the authorized number of directors to no less than four (4)
nor more than seven (7) and initially set the number of
directors at five (5). As of the annual meeting date, the
Company had not received sufficient votes to approve the
proposal. As a result, for this proposal the meeting was
adjourned to June 25, 1999 and subsequently to July 14, 1999
pursuant to Section 601(d) of the General Corporation Law of
the State of California and Article III, Section 4 of Xicor's
Bylaws. At the July 14, 1999 meeting the resolution was
passed, 10,156,243 shares voting in favor, 427,463 shares
voting against and 57,990 shares abstaining.
(2) To approve and ratify amendments to the Company's 1990
Incentive and Non-Incentive Stock Option Plan including an
increase of 250,000 shares of Common Stock issuable
thereunder. The resolution was passed, 15,789,522 shares
voting in favor, 2,689,237 shares voting against and 193,170
shares abstaining.
(3) To ratify the designation of PricewaterhouseCoopers LLP as
independent accountants for the period ending December 31,
1999. The resolution was passed, 18,467,340 shares voting in
favor, 144,794 shares voting against and 59,795 shares
abstaining.
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<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.8A Fourth Amendment to Loan Documents and Letter of Credit
Collateral Agreement
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 July 4, 1999.
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
Chief Executive Officer
(Principal Executive Officer)
By /s/ Geraldine N. Hench
-----------------------------------
Geraldine N. Hench
Vice President, Finance
(Principal Financial Officer)
Date: August 13, 1999
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<PAGE> 14
Index to Exhibits
Number Description
- ------ -----------
10.8A Fourth Amendment to Loan Documents and Letter of Credit Collateral
Agreement
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.8A
COAST
FOURTH AMENDMENT TO LOAN DOCUMENTS
BORROWER: XICOR, INC.
ADDRESS: 1511 BUCKEYE DRIVE
MILPITAS, CALIFORNIA 95035
DATE: JULY 1, 1999
THIS FOURTH AMENDMENT TO LOAN DOCUMENTS is entered into between Coast
Business Credit, a division of Southern Pacific Bank (successor by merger of
CoastFed Business Credit Corporation) ("Coast"), whose address is 12121 Wilshire
Blvd., Suite 1400, Los Angeles, California and the borrower named above (the
"Borrower").
The Parties agree to amend the Loan and Security Agreement between
them, dated March 10, 1993 (as amended, supplemented or otherwise modified from
time to time being referred to herein as the "Loan Agreement"), and that certain
Accounts Collateral Security Agreement between them, dated March 10, 1993 (the
"Accounts Agreement"), as follows, effective as of the date hereof. (This
Amendment, the Loan Agreement, the Accounts Agreement, any prior written
amendments to said agreements signed by Coast and the Borrower, and all other
written documents and agreements between Coast and the Borrower are referred to
herein collectively as the "Loan Documents". Capitalized terms used but not
defined in this Amendment, shall have the meanings set forth in the Loan
Agreement.)
1. LETTER OF CREDIT COLLATERAL AGREEMENT. Concurrently herewith with
respect to the establishment of a letter of credit facility by Coast in favor of
Borrower, Borrower shall execute and deliver to Coast the Letter of Credit
Collateral Agreement of even date herewith (the "LC Agreement") on Coast's
standard form.
2. COASTFED REFERENCES. All references in the Loan Documents to
"CoastFed" are hereby amended to be references to "Coast."
3. SECTION 2.1 MODIFICATION. Section 2.1 of the Accounts Agreement is
hereby amended to read as follows:
"2.1 Amount of Loans.
Provided that no Event of Default has occurred, Coast agrees to make
Loans to Borrower, repayable on demand, in amounts up to Applicable OEM
Percentage (as
<PAGE> 2
defined below) of the Net Amount of each Account, in the case of
accounts owing from original equipment manufacturers, and the
Applicable Distributor Percentage (as defined below) of the Net Amount
of each Account in the case of distributors, in each case which Coast
in its sole and absolute discretion deems eligible for borrowing. The
term "Net Amount" of an Account, as used herein, shall mean the gross
amount of the Account, minus all applicable sales, use, excise and
other similar taxes and minus all discounts, credits and allowances of
any nature at any time issued, owing, granted, outstanding, available
or claimed, except that, in determining the "Net Amount" of an Account
owing from a distributor, discounts and allowances granted in the
ordinary course of business shall not be deducted, but the same shall
be reported to Coast on a regular basis in accordance with such
reasonable practice as Coast shall specify. Further, in no event shall
Loans arising from Receivables owing from account debtors not located
in the United States ("Foreign Accounts) exceed $1,500,000 at any time
at such time that the Reduced Reporting and Collection Duties (as
defined below) are in effect.
As used herein, the term "Applicable OEM Percentage" shall mean 50% at
such times that the Reduced Reporting and Collection Duties (as defined
below) are in effect, and 80% at other times.
As used herein, the term "Applicable Distributor Percentage" shall mean
15% at such times that the Reduced Reporting and Collection Duties (as
defined below) are in effect, and 35% at other times.
As used herein, the term "Reduced Reporting and Collection Duties"
shall have the meaning set forth in the Fourth Amendment to Loan
Documents dated June 22, 1999 between Coast and Borrower (the "Fourth
Amendment"), which shall only be in effect when the Standby LC Only
Condition (as defined in the Fourth Amendment) is also satisfied.
Foreign Accounts may be considered Accounts eligible for borrowing
purposes hereunder (subject to all of the other criteria herein) if any
of the following apply: (i) the Account is due from an account debtor
which has a verifiable credit history acceptable to Coast, (ii) the
account debtor thereon is a foreign subsidiary of a large United States
company with a demonstrated credit history acceptable to Coast, (iii)
the account debtor thereon has a Dun & Bradstreet rating of 3A2 or
better, (iv) the Account is backed by a letter of credit, which letter
of credit is in form and substance acceptable to Coast and which letter
of credit may be assigned to Coast, at Coast's discretion, or (v) the
Account is insured by insurance acceptable to and assigned to Coast,
but all such Foreign Accounts deemed eligible for borrowing purposes
hereunder shall nevertheless be acceptable to Coast in its sole
discretion."
4. RECEIVABLES REPORTING AND COLLECTION. At such times that the only
Obligations outstanding are LC Obligations (as defined in the LC Agreement)
relating to the issuance of standby letters of credit only (referred to herein
as the "Standby LC Only Condition"), and no other monetary Obligations or LC
Obligations of any other nature are outstanding: (A) the
<PAGE> 3
Borrower shall provide accounts receivable reports to Coast on a weekly basis,
i.e., by Thursday of each week relating to the status of the Borrower's Accounts
as of Sunday of such week; and (B) Borrower shall not be obligated to forward to
Coast proceeds of its accounts receivable collections and may retain such
proceeds in Borrower's own bank accounts (collectively referred to as the
"Reduced Reporting and Collection Duties"). Immediately at such time that the
Standby LC Only Condition lapses and is no longer occurring or an Event of
Default occurs (the "Reversion Condition"), the Reduced Reporting and Collection
Duties shall no longer be in effect and all terms and provisions of the Loan
Agreement and all Collateral Agreements, including, without limitation, the full
and complete terms of sections 3 and 4 of the Accounts Agreement shall be deemed
in full force and effect, without any notice to Borrower or any other party
whatsoever. Thus, by way of example only, upon the occurrence of the Reversion
Condition, Borrower shall forward to Coast the accounts receivable collections
that the Borrower receives on a daily basis or otherwise comply with
instructions from Coast in accordance with Section 4 of the Accounts Agreement
and other related provisions of the Loan Documents that may include the Coast's
direct collection of the Borrower's accounts. Further, nothing herein diminishes
or otherwise affects the security interest of Coast in the Collateral,
including, without limitation, the accounts of the Borrower.
5. SECTION 8 MODIFICATION. Section 8 of the Loan Agreement is hereby
amended to read as follows:
"This Loan Agreement and all Collateral Agreement(s) shall continue in
effect until March 31, 2000 (the "initial renewal date") and shall
thereafter automatically and continuously renew for successive
additional terms of ONE year each unless terminated as to future
transactions as hereinafter provided. (The initial renewal date and
each subsequent date on which the terms of this Loan Agreement and the
Collateral Agreement(s) automatically renew are hereinafter referred to
as "renewal dates.") This Loan Agreement and any Collateral Agreement
may be terminated, as to future transactions only, as follows: (a) By
written notice from either Coast or Borrower to the other, not less
than ninety (90) days prior to the next renewal date, in which event
termination shall be effective on the next renewal date; or (b) By
Coast at any time after the occurrence of an Event of Default, without
notice, in which event termination shall be effective immediately; or
(c) By ninety (90) days' prior written notice from Borrower to Coast,
in which event, termination shall be effective on the ninetieth day
after such notice is given; or (d) By the grant by Borrower to any
third party of a lien or encumbrance on, or security interest in, any
of the Collateral, as provided in Paragraph 3.5, in which event
termination shall be effective on the date selected by Coast pursuant
to Paragraph 3.5. On the effective date of termination, Borrower shall
pay and perform in full all Obligations, whether evidenced by
installment notes or otherwise, and whether or not all or any part of
such Obligations are otherwise then due and payable. If Borrower
attempts to terminate this Loan Agreement under subparagraph (a) or (c)
above, but does not pay and perform all Obligations in full on the
effective date of termination, then this Loan Agreement and all
Collateral Agreement(s) shall not be terminated and shall continue in
full force and effect until the next renewal date and shall
automatically renew thereafter as provided above. If termination occurs
under subparagraph (b), (c) or (d) above, Borrower shall pay to
<PAGE> 4
Coast a termination fee in an amount equal to $5,000 for each month (or
portion thereof) from the effective date of termination to the date
which would have been the next renewal date had this Loan Agreement not
been terminated. Said termination fee shall be included in the
Obligations, shall be payable on the effective date of termination, and
shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations. Notwithstanding any termination
of this Loan Agreement or any Collateral Agreement, all of Coast's
security interest in all of the Collateral and all of the terms and
provisions of this Loan Agreement and all Collateral Agreement(s) shall
continue in full force and effect until all Obligations have been paid
and performed in full, and no termination shall in any way affect or
impair any right or remedy of Coast, nor shall any such termination
relieve Borrower of any Obligation to Coast until all of the
Obligations have been paid and performed in full. Without limiting the
fact that all Loans are discretionary on the part of Coast, Coast may,
in its sole discretion, refuse to make any further Loans after
termination. Upon payment and performance in full of all the
Obligations, Coast shall promptly deliver to Borrower termination
statements, request for reconveyances and such other documents as may
be required to fully terminate any of Coast's security interests."
6. CASH COVENANT; MONTHLY REPORT. At all times that the Reduced
Reporting and Collection Duties are in effect, Borrower shall maintain
unrestricted Cash (as defined below), at all times, in an amount not less than
$7,500,000. As used herein "Cash" shall mean cash on hand or on deposit in
banks, readily marketable securities issued by the United States, readily
marketable commercial paper rated "A-1" by Standard & Poor's Corporation (or a
similar rating by a similar rating organization), certificates of deposit and
banker's acceptances. Borrower shall provide to Coast a Cash report, in such
form as is acceptable to Coast, on a monthly basis, within 30 days of the end of
each month
7. TANGIBLE NET WORTH COVENANT. At all times that the Reduced Reporting
and Collection Duties are in effect, Borrower shall maintain, at all times, a
Tangible Net Worth of not less than $15,000,000. "Tangible net worth" means the
excess of total assets over total liabilities, determined in accordance with
generally accepted accounting principles, excluding however all assets which
would be classified as intangible assets under generally accepted accounting
principles, including without limitation goodwill, licenses, patents,
trademarks, trade names, copyrights, and franchises. Coast agrees to adjust the
foregoing covenant amount by the amount of any non-cash extraordinary
adjustments, specifically including, without limitation, any restructuring
charges of the Borrower. Borrower shall supply evidence, satisfactory to Coast,
of compliance with the foregoing covenant on a monthly basis, within 30 days of
the end of each month.
8. PATENT AND TRADEMARK SECURITY AGREEMENT. Within 45 days of the date
hereof, Borrower shall execute and deliver to Coast a patent and trademark
security agreement on Coast's standard form, subject to agreed upon changes
thereto, as Borrower requests, as are reasonably acceptable to Coast, together
with complete and accurate information concerning the composition of the
Borrower's patent, trademark and other intellectual property assets. Failure to
comply with the foregoing covenant shall constitute an Event of Default under
the Loan Agreement.
<PAGE> 5
9. SECTION 12 MODIFICATION. That portion of section 12 of the Loan
Agreement that now reads as:
"Without limiting the generality of the foregoing, Borrower shall
reimburse CoastFed for its out of pocket costs in connection with CoastFed's
regular quarterly audits of Borrower and shall Borrower shall pay CoastFed an
audit fee of $1,250 for each such quarterly audit"
IS HEREBY AMENDED TO READ AS FOLLOWS:
"Without limiting the generality of the foregoing, the regularly
quarterly audits of Borrower shall be at Borrower's expense and the charge
therefor shall be $750 per person per day (or such higher amount as shall
represent Coast's then current standard charge for the same) (which charge is
generally not to exceed $2,500 per quarter, provided no such general
understanding shall apply upon the occurrence and during the continuance of an
Event of Default), plus reasonable out of pocket expenses."
10. REPRESENTATIONS TRUE. Borrower represents and warrants to Coast
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct, other than with respect to the locations
of Collateral and liens with respect thereto relating to which Borrower agrees
to provide current information to Coast within 45 days of the date hereof.
11. GENERAL PROVISIONS. This Amendment, the Loan Agreement, and the
other Loan Documents set forth in full all of the representations and agreements
of the parties with respect to the subject matter hereof and supersede all prior
discussions, representations, agreements and understandings between the parties
with respect to the subject hereof. Except as herein expressly amended, all of
the terms and provisions of the Loan Agreement and the other Loan Documents
shall continue in full force and effect and the same are hereby ratified and
confirmed.
Borrower: Coast:
XICOR, INC. COAST BUSINESS CREDIT,
a division of Southern Pacific Bank
By /s/ Klaus G. Hendig By /s/ Phillip Goessler
------------------------------ ----------------------------
Vice President Title Vice President
<PAGE> 6
[COAST LOGO]
LETTER OF CREDIT COLLATERAL AGREEMENT
BORROWER: XICOR, INC.
ADDRESS: 1511 BUCKEYE DRIVE
MILPITAS, CALIFORNIA 95035
DATE: JULY 1, 1999
THIS LETTER OF CREDIT COLLATERAL AGREEMENT ("LC Agreement"), dated the above
date, is entered into between COAST BUSINESS CREDIT, a division of Southern
Pacific Bank ("Coast") and the borrower named above ("Borrower"), and is one of
the Collateral Agreements referred to in that certain Loan and Security
Agreement between Coast and Borrower dated March 10, 1993, as amended,
supplemented and otherwise modified from time to time ("Loan Agreement"). This
LC Agreement is an integral part of the Loan Agreement, and all of the terms and
provisions of the Loan Agreement are incorporated herein by this reference.
(Capitalized terms used in this Agreement, which are not defined in this
Agreement, shall have the meanings set forth in the Loan Agreement. This
Agreement, the Loan Agreement and all other present and future documents
instruments and agreements between Coast and the Borrower are referred to herein
collectively as the "Loan Documents.")
1. LETTERS OF CREDIT. From time to time, in order to assist Borrower in
establishing or opening Letters of Credit (the "LCs") with a bank, trust company
or other issuer ("Bank") to cover the purchase of goods or for other purposes,
Borrower may request that Coast join in the applications for the LCs, and/or
provide guarantees of, and/or indemnities with respect to, payment or
performance of the LCs and/or any drafts or acceptances thereunder and/or
Borrower's obligations in connection therewith (collectively, "Guarantees"). The
decision to do so shall be a matter of Coast's sole discretion. In the event
Coast joins in such applications and/or provides Guarantees, the transactions
shall be subject to the terms and conditions of this Agreement. The amount,
extent, terms and conditions of the LCs and any drafts or acceptance relating
thereto, shall in all respects be determined solely by Coast and shall be
subject to change, modification and revision by Coast at any time and from time
to time, in its discretion. LCs shall have a maturity date of February 28, 2000
or sooner, provided that such LCs may contain a provision that permits the
automatic renewal thereof if, and only if, notices of non-renewal by the issuer
thereof, account party thereon or beneficiary thereof is provided no later than
60 days prior the then effective maturity date or contains other notice and
renewal provisions that are acceptable to Coast in its sole discretion.
2. INDEMNITY. Borrower unconditionally agrees to indemnify, defend and
hold Coast harmless from any and all indebtedness, liabilities, obligations,
losses and claims, of every sort whatsoever, however arising, whether present or
future, fixed or contingent, due or to become due, paid or incurred, arising,
incurred in connection with, or relating to, any LCs, applications for LCs,
Guarantees, drafts or acceptances thereunder or LC Collateral (as defined
below), including without limitation (i) any and all losses and claims due to
any action or omission by any Bank, any errors or omissions of Coast or any
Bank, or otherwise, other than arising from any gross negligence, (ii) all
amounts due or which may become due under LCs, or any drafts or acceptances
thereunder, (iii) all liabilities and obligations under any steamship or airway
guarantees or releases or any Guarantees, (iv) all amounts charged or chargeable
to Borrower or to
-1-
<PAGE> 7
COAST LETTER OF CREDIT AGREEMENT
- --------------------------------------------------------------------------------
Coast by any Bank, any other financial institution or any correspondent bank
which opens, issues or is involved with the LCs, (v) all other bank charges, and
(vi) all fees, commissions, duties, taxes, costs of insurance, and all such
other charges and expenses which may pertain either directly or indirectly to
any LC, draft, acceptance, or Guarantee or to the goods or documents relating
thereto. Borrower's obligation to indemnify Coast under this Agreement and
Borrower's other obligations under this Agreement are referred to herein as the
"LC Obligations" (which shall include, without limitation, the aggregate face
amounts of all LCs and Guarantees). Borrower's LC Obligations shall not be
modified or diminished for any reason or in any manner whatsoever, shall be
included in the "Obligations" (as defined in the Loan Agreement), and shall
survive termination of the Loan Agreement and any other Loan Document. Without
limiting the generality of the foregoing, Borrower agrees that any charges made
to Coast by any Bank for Borrower's account or relating to any LC shall be
conclusive on Borrower and may be charged to any of Borrower's Loan accounts
with Coast. Coast shall have the right, at any time and without notice to
Borrower, to charge any of Borrower's Loan accounts with Coast with the amount
of any and all sums due from Borrower to Coast under this Agreement, and the
same shall constitute Loans for all purposes of the Loan Documents and shall
bear interest at the rate provided in the Loan Agreement. All sums payable by
Borrower to Coast under this Agreement shall be paid solely in United States
dollars.
3. LC LIMITS. Without limiting the fact that Coast's decisions to join
in an application for an LC or issue a Guarantee are a matter of its sole
discretion, the total amount of all outstanding LC Obligations shall not at any
time exceed $2,500,000 in the aggregate, and if for any reason they do, Borrower
shall provide cash collateral to Coast in an amount equal to the excess, to
secure all of the Obligations, and Borrower shall execute and deliver to Coast a
pledge agreement with respect thereto on Coast's standard form. In addition, the
total amount of all LC Obligations and all outstanding "Loans" and other
"Obligations" (as defined in the Loan Agreement) shall not at any time exceed
the maximum amount of all Loans and other Obligations specified in Section 1.1
of the Loan Agreement, and if for any reason they do, Borrower shall immediately
pay the excess to Coast to be applied to the Obligations in such order and
manner as Coast shall determine in its sole discretion.
4. LOAN AVAILABILITY RESERVE. Without limiting the fact that Loans
under the Loan Documents are discretionary on the part of Coast, the amount of
Loans which would otherwise be available to Borrower from time to time under the
lending formulas set forth in the Loan Agreement and the other Loan Documents
shall be reduced by 100% of the total amount of all LC Obligations from time to
time outstanding.
5. CHARGES. In addition to any charges, fees or expenses of any Bank or
other person in connection with any LC (all of which shall be charged to
Borrower's Loan account), Coast shall be entitled to charge Borrower's Loan
account with a monthly fee in an amount equal to .25% of the amount of all LC
Obligations from time to time outstanding, calculated on the basis of a 30-day
month for the actual number of days elapsed, payable in arrears on the first day
of each month.
6. SECURITY. Without limiting the security interests granted in the
Loan Documents, Borrower hereby grants Coast a security interest in the
following (the "LC Collateral"), whether now owned or hereafter acquired by
Borrower, wherever located, whether in transit or not, to secure all of the
Obligations: all bills of lading, shipping documents, documents of title,
chattel paper, invoices, cash, checks, drafts, notes, documents, warehouse,
shipping and dock receipts, and other title, payment, or other instruments, and
instruments, whether negotiable or not, relating to any LC, and all goods and
inventory relating thereto in all stages of manufacture, process or production,
and all cash and non-cash proceeds and insurance proceeds thereof of whatever
sort and however arising. All references in the Loan Agreement to "Collateral"
shall, for all purposes, include without limitation the LC Collateral, and all
terms and provisions of the Loan Agreement applicable to Collateral shall also
apply to the LC Collateral.
7. NON-RESPONSIBILITY. Coast shall not be responsible for: the
existence, character, quality, quantity, condition, packing, value or delivery
of the goods purporting to be represented by any documents; any difference or
variation in the character, quality, quantity, condition, packing, value or
delivery of the goods from that expressed in the documents; the validity,
sufficiency or genuineness of any documents or of any endorsements thereon, even
if such documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; the time, place, manner or order in which
shipment is made;
-2-
<PAGE> 8
COAST LETTER OF CREDIT AGREEMENT
- --------------------------------------------------------------------------------
partial or incomplete shipment, or failure or omission to ship any or all of the
goods referred to in the LCs or documents; any deviation from instructions,
delay, default, or fraud by the shipper and/or anyone else in connection with
the LC Collateral or the shipping thereof; or any breach of contract between the
shipper or vendors and Borrower. Furthermore, without being limited by the
foregoing, Coast shall not be responsible for any act or omission with respect
to or in connection with any LC Collateral.
8. COAST'S AUTHORITY. Borrower agrees that any action taken by Coast,
if taken in good faith, or any action taken by any Bank, under or in connection
with the LCs, the Guarantees, the drafts or acceptances, or the LC Collateral,
shall be binding on Borrower and shall not result in any liability of Coast to
Borrower. In furtherance thereof, Coast shall have the full right and authority
to clear and resolve any questions of non-compliance of documents; to give any
instructions as to acceptance or rejection of any documents or goods; to execute
any and all applications for steamship or airway guarantees, indemnities or
delivery orders; to grant any extensions of the maturity of, time or payment
for, or time of presentation of, any drafts, acceptances, or documents; and to
agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications, LCs,
drafts or acceptances; all in Coast's sole name, and the Bank shall be entitled
to comply with and honor any and all such documents or instruments executed by
or received solely from Coast, all without any notice to or any consent from
Borrower.
9. COAST'S RIGHTS. Any rights, remedies, duties or obligations granted
or undertaken by Borrower to any Bank in any application for LCs, or any
standing agreement relating to LCs or otherwise, shall be deemed to have been
granted to Coast and apply in all respects to Coast and shall be in addition to
any rights, remedies, duties or obligations contained herein. Borrower hereby
agrees that prior to the payment of all Obligations to Coast, Coast may be
deemed to be the absolute owner of, with unqualified rights to possession and
disposition of, all LC Collateral, all of which may be held by Coast as security
as herein provided. Should possession of any LC Collateral be transferred to
Borrower, said LC Collateral shall continue to serve as security as herein
provided, and any goods or inventory covered hereby may be sold, transferred or
disposed of only as permitted by the Loan Documents.
10. NEGATIVE COVENANTS. Without Coast's prior written approval,
Borrower agrees not to clear or resolve any questions of non-compliance of
documents; not to give any instructions as to acceptance or rejection of any
documents or goods; not to execute any applications for steamship or airway
guarantees, indemnities or delivery orders; not to grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents; and not to agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, LCs, drafts or acceptances.
11. AFFIRMATIVE COVENANTS. Borrower shall cause: all necessary import,
export or other licenses or certificates for the import or handling of the LC
Collateral to be promptly procured; all foreign and domestic governmental laws
and regulations in regard to the shipment and importation of the LC Collateral,
or the financing thereof to be promptly and fully complied with; and any
certificates in that regard that Coast may at any time request to be promptly
furnished. In this connection, Borrower warrants and represents to Coast that
all shipments made under the LCs are and shall be in accordance with the
governmental laws and regulations of the countries in which the shipments
originate and terminate, and shall not be prohibited by any such laws or
regulations. Borrower assumes all risk, liability and responsibility for, and
agrees to pay and discharge, all present and future local, state, federal or
foreign taxes, duties, and levies. Any embargo, restriction, laws, customs or
regulations of any country, state, city, or other political subdivision, where
the Collateral is or may be located, or wherein payments are to be made, or
wherein drafts may be drawn, negotiated, accepted, or paid, shall be solely
Borrower's risk, liability and responsibility.
12. TERMINATION. Without limiting any of the terms of the Loan
Agreement, on the effective date of termination of the Loan Agreement, in
addition to paying and performing in full all other Obligations, Borrower shall
provide cash collateral to Coast in an amount equal to 100% of the amount of all
LC Obligations, to secure all of the Obligations, and Borrower shall execute and
deliver to Coast a pledge agreement with respect thereto on Coast's standard
form.
13. DEFAULT. On any failure to pay or perform any Obligation when due,
or the occurrence of any other "Event of Default" (as
-3-
<PAGE> 9
COAST LETTER OF CREDIT AGREEMENT
- --------------------------------------------------------------------------------
defined in the Loan Agreement), Coast shall have all of the rights and remedies
set forth in the Loan Documents and which it otherwise has under applicable law,
and without limiting the generality of the foregoing, Coast shall have the right
to require Borrower to deposit cash collateral with Coast in an amount equal to
110% of the amount of all LC Obligations, to secure all of the Obligations, and
Borrower shall execute and deliver to Coast a pledge agreement with respect
thereto on Coast's standard form.
14. POWER OF ATTORNEY. Without limiting the terms of any of the Loan
Documents, Borrower hereby appoints each employee, attorney or agent of Coast as
Borrower's attorney-in-fact, with full power and authority in each of them, at
Coast's option, but without obligation, with or without notice to Borrower, in
connection with any LC and any purchase agreement or other document or agreement
entered into, or goods delivered, in connection therewith, at Borrower's
expense, to do any or all of the following in Borrower's name or otherwise: (i)
to sign or endorse all warehouse, shipping, dock or other receipts, letters of
credit, notes, acceptances, checks, drafts, money orders and all other evidence
of indebtedness, and all financing statements, invoices, trust receipts, bills
of lading and other title documents; (ii) to complete any transaction in
connection with, arising out of, or which is the subject of any LC or Guarantee,
to obtain, execute and deliver all necessary or proper documents in connection
therewith and to collect the proceeds thereof; (iii) upon any Event of Default
under the Loan Agreement, or this Agreement, to cancel, rescind, terminate,
modify, amend, or adjust, in any other way, in whole or in part, any transaction
in connection with, arising out of, or which is the subject of any LC or
Guarantee; and (iv) to do any and all other acts and things which may be
necessary or appropriate in connection with this Agreement or any LC, or any
transaction relating thereto, or to enable Coast to obtain payment of any
Obligations. The power of attorney granted hereunder is coupled with an interest
and shall be irrevocable until all Obligations have been paid in full.
15. GENERAL. Without limiting any of the other provisions of this
Agreement, all of the General Provisions of the Loan Agreement, as well as all
other provisions of the Loan Agreement, are hereby incorporated herein by this
reference.
[Text continues on the following page]
-4-
<PAGE> 10
COAST LETTER OF CREDIT AGREEMENT
- --------------------------------------------------------------------------------
16. MUTUAL WAIVER OF JURY TRIAL. BORROWER AND COAST EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF COAST OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH COAST OR BORROWER, IN ALL
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWER:
XICOR, INC.
BY /s/ Klaus G. Hendig
-----------------------------
Vice President
COAST:
COAST BUSINESS CREDIT,
A DIVISION OF SOUTHERN PACIFIC BANK
BY /s/ Phillip Goessler
--------------------------
TITLE Vice President
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<PERIOD-START> JAN-04-1999
<PERIOD-END> JUL-04-1999
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<RECEIVABLES> 11,489,000
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<PP&E> 141,556,000
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0
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<COMMON> 128,470,000
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<TOTAL-LIABILITY-AND-EQUITY> 68,523,000
<SALES> 54,407,000
<TOTAL-REVENUES> 54,407,000
<CGS> 42,306,000
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