<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______to _____
Commission file number 1-5560
------
Alpha Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 04-2302115
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 Sylvan Road, Woburn, Massachusetts 01801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (617) 935-5150
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock, $.25 par value American Stock Exchange
Rights to purchase Common Stock American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------------- --------------------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the Registrant's Common Stock held by non-
affiliates of the Registrant at May 30, 1997 was approximately $68,216,000.
The number of shares of Common Stock outstanding at May 30, 1997 was
10,000,066.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement, to be filed within 120 days of
the end of the Registrant's fiscal year are incorporated by reference into Part
III of this Report.
The Exhibit Index is located on page 38.
Page 1 of 193 pages.
<PAGE>
- ----------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ----------------------------------------
PART I
Item 1 Business
Products
The Company categorizes its product lines and core technologies as follows:
. Radio Frequency (RF), Microwave and Millimeter Wave Integrated Circuits
(ICs)
. Discrete Semiconductors and Passive Components
. Ceramic Products
The chart below identifies the major markets currently served by each of the
Company's product lines. In addition, the Company's products serve other
wireless markets.
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MARKETS PRODUCTS
- --------------------------------------------------------------------------------
Discrete
Semiconductors
& Passive Ceramic
ICs Components Products
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cellular
Personal Communications
Services (PCS)
- --------------------------------------------------------------------------------
Handset x x
- --------------------------------------------------------------------------------
Base Station x x x
- --------------------------------------------------------------------------------
Digital Radio
Links x x x
- --------------------------------------------------------------------------------
Wireless Cable TV x x x
- --------------------------------------------------------------------------------
Satellite Communications x x
- --------------------------------------------------------------------------------
Defense-Related Systems x x x
- --------------------------------------------------------------------------------
Pagers x x
- --------------------------------------------------------------------------------
Global Positioning Systems
(GPS) x x
- --------------------------------------------------------------------------------
Cordless Telephones x x
- --------------------------------------------------------------------------------
</TABLE>
RF, Microwave and Millimeter Wave ICs. The Company designs and manufactures RF,
microwave and millimeter wave ICs in Gallium Arsenide (GaAs) that integrate
numerous functions performed by discrete semiconductors. The functions of the
Company's GaAs ICs include amplification, switching and control and frequency
conversion of signals in the radio transceiver portion of wireless
communications systems. In wireless voice and data applications, the Company's
GaAs ICs are used in the handheld unit, base station transceivers and point to
point radio links between the base station and local wireline network. The
Company's millimeter wave ICs connect transmissions between base stations,
including the local wireline PBX switching office.
Discrete Semiconductors and Passive Components. The Company fabricates discrete
surface mount semiconductors in both GaAs and silicon as stand alone components
for specialized applications which are not addressed efficiently by ICs. Silicon
technology continues to be used for discrete semiconductors when circuit
integration is not possible or for certain applications for which the properties
of silicon material provide better performance. Discrete semiconductors are used
for amplification, switching and control and frequency conversion in base
stations, transmitters and receivers of cellular handsets. In addition, the
Company has recently introduced a complementary line of passive semiconductor
based components including couplers, power dividers and mixers in both GaAs and
silicon utilizing similar surface mount packaging techniques.
2
<PAGE>
----------------------------------------
Alpha Industries, Inc. and Subsidiaries
----------------------------------------
Ceramic Products. The Company's ceramic products play a critical role in the
signal selection, or filtering process, that is essential to processing
communications signals. The physical properties of ceramic materials are
suitable for power efficiency and miniaturization. The Company is a major
supplier of miniature ceramic antennas to manufacturers of GPS receivers,
particularly for compact handheld units which are gaining popularity. Ceramic
products are crucial in the frequency-determining portions of direct broadcast
satellite television (DBS TV) receivers, radar detectors and intrusion alarms.
They are also shrinking the size of cellular radio base station equipment.
The principal customers for these products are equipment manufacturers for
commercial and defense microwave systems such as cellular telephones, commercial
telecommunications, direct broadcast satellites, and military radar, missile,
and electronic warfare.
The Company's operations are within a single segment of the electronics
industry: the development, production and sale of microwave materials, devices
and components.
Markets and Distribution
During fiscal 1997, approximately 79% of the Company's sales were to
manufacturers of commercial products, primarily in the wireless communications
markets and include components for products such as wireless telephones and base
stations in addition to motion detectors and sensors. The remaining 21% of
sales were for use in a wide variety of defense-related systems.
Export sales to non-affiliates for fiscal 1997, 1996, and 1995 were $26,720,000,
$23,633,000, and $16,855,000, respectively. This compares with domestic sales
for the same period of $53,168,000, $66,081,000, and $54,974,000, respectively.
During fiscal 1997, the Company operated a sales subsidiary in the United
Kingdom and a ceramic manufacturing operation in France. At the end of fiscal
1997, the Company sold its ceramic manufacturing operation in France. During
fiscal 1996, the Company closed its sales subsidiary in Germany and replaced it
with an independent sales representative and distributor. See Note 2 to the
Consolidated Financial Statements on page 25 for financial information about the
Company's foreign and domestic operations.
The Company's sales are made through 13 independent domestic sales
representatives and 23 independent international sales representatives, as well
as through its own sales force of 34 persons. Approximately 12% of the Company's
sales are made through its own direct sales force and 88% through sales
representatives.
Research and Development
The Company's products and markets are subject to continued technological
advances. Recognizing this, the Company has maintained a high level of R&D
activities to remain competitive in certain areas and to be an industry leader
in other areas.
Company sponsored R&D expenditures for the fiscal years 1997, 1996, and 1995
were $9.5 million, $9.1 million, and $4.2 million, respectively.
Raw Materials
Raw materials for the Company's products and manufacturing processes are
generally available from several sources. It is the Company's policy not to
depend on a sole source of supply. However, there are limited situations where
the Company procures certain components and services for its products from
single or limited sources. The Company purchases these materials and services on
a purchase order basis, does not carry significant inventories and does not have
any long-term supply contracts with its source vendors. The
3
<PAGE>
- ----------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ----------------------------------------
inability of the Company to obtain these materials in required quantities would
result in significant delays or reductions in product shipments, which would
materially and adversely affect the Company's operating results.
Working Capital
The business of the Company is not seasonal, and there are no special practices
with respect to working capital for the Company or the industry in general. The
Company provides a limited warranty on its products against defects in material
and workmanship. Payment terms are 30 days in the domestic market and generally
60 days in foreign markets.
Contracts
During fiscal 1997, one customer accounted for approximately 11% of the
Company's total sales. All of the Company's sales to the United States
Government and prime contractors and subcontractors thereof are subject to
termination at the convenience of the Government, in which event the Company
would normally be reimbursed for costs incurred. While U.S. Government orders
are canceled in this manner, Alpha has seldom experienced any material
terminations for convenience.
Competitive Conditions
The Company competes on the basis of price, performance, quality, reliability,
size, ability to meet delivery requirements and customer service and support.
The Company experiences intense competition worldwide from a number of
multinational companies that offer a variety of competitive products and broader
product lines, and which have substantially greater financial resources and
production, marketing, manufacturing, engineering and other capabilities than
the Company. The Company also faces competition from a number of smaller
companies. In addition, the Company's customers, particularly its largest
customers, may have or could acquire the capability to develop or manufacture
products competitive with those that have been or may be developed or
manufactured by the Company.
Patent and Trademarks
Alpha owns a small number of patents and has other patent applications under
preparation or pending. However, the Company believes that its technological
position depends primarily on the ability to develop new innovative products
through the technical competence of its engineering personnel.
Backlog
The Company's backlog of undelivered orders on March 30, 1997 was approximately
$32,500,000 compared with $36,500,000 on March 31, 1996. The Company's policy
is to record commercial orders on a quarterly basis consistent with expected
customer short-term requirements. Management believes all orders in the
Company's backlog to be firm. Approximately 90% of the March 30, 1997 backlog is
anticipated to be shipped in fiscal 1998.
Environmental Regulations
In the Company's opinion, compliance with federal, state, and local
environmental protection regulations does not and will not have a material
effect on the capital expenditures, earnings, and competitive position of the
Company.
4
<PAGE>
----------------------------------------
Alpha Industries, Inc. and Subsidiaries
----------------------------------------
Executive Officers
The following table sets forth certain information with respect to the executive
officers of the Company at May 31, 1997.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
George S. Kariotis 74 Chairman of the Board of Directors
Thomas C. Leonard 62 Director, President and Chief Executive
Officer
Paul E. Vincent 49 Vice President, Chief Financial Officer
and Treasurer
David J. Aldrich 40 Vice President
Jean Pierre Gillard 53 Vice President
Richard Langman 50 Vice President, President of Trans-Tech, Inc.
James C. Nemiah 43 Secretary Corporate Counsel
</TABLE>
All officers serve until the next Board of Directors meeting following the
Annual Meeting of Stockholders scheduled for September 8, 1997, or until their
successors are elected and qualified. No officer was elected pursuant to any
arrangement or understanding.
Mr. Kariotis was Chairman of the Board and Chief Executive Officer from 1962
(when the Company was founded) until 1978, and, from 1974 to 1978, he was also
Treasurer of the Company. From 1979 to 1983, Mr. Kariotis was the Secretary of
Manpower Development and Economic Affairs for the Commonwealth of Massachusetts.
He was re-elected Chairman of the Board of the Company in 1983 and Chief
Executive Officer in 1985. Mr. Kariotis resigned as Chief Executive Officer in
July 1986 while he campaigned for public office. He resumed his position as
Chief Executive Officer in November 1986, and served in that capacity until
1991.
Mr. Leonard joined the Company in 1992 as General Manager of the Components and
Systems Division. He became the General Manager of Operations for the Alpha
Microwave Division effective January 1994 and was elected Vice President in
1994. Mr. Leonard was elected President, Chief Executive Officer and Director in
July 1996. Mr. Leonard has over 30 years experience in the microwave industry,
having held a series of general managerial and marketing positions at M/A-COM,
Inc., from 1972 to 1992 and prior to 1972 at Varian Associates and Sylvania.
Mr. Vincent joined the Company in 1979 and was the Controller from 1979 to 1997.
In January 1997, Mr. Vincent was appointed Vice President, Chief Financial
Officer and Treasurer. Mr. Vincent is a Certified Public Accountant.
Mr. Aldrich joined the Company in 1995 as Vice President, Chief Financial
Officer and Treasurer. In May 1996 Mr. Aldrich was also appointed General
Manager of Alpha Microwave. In January 1997, he relinquished his positions as
Chief Financial Officer and Treasurer. From 1989 to 1995, Mr. Aldrich held
several positions at M/A-COM, Inc., including Manager Integrated Circuits Active
Products, Corporate Vice President Strategic Planning, Director of Finance and
Administration, and Director of Strategic Initiatives with the Microelectronics
Division. Prior to joining M/A-COM, Inc., Mr. Aldrich was Controller with Adams
Russell Electronics Company from 1984 to 1989 and a project leader for a NASA
satellite communications program with Space Communications Company (a Fairchild
Industries and Contel Inc.
5
<PAGE>
- ----------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ----------------------------------------
Partnership) from 1981 to 1983. Mr. Aldrich is a Director of Microwave Power
Devices, Inc., a wireless high-power amplifier company.
Mr. Gillard joined the Company in November 1990 as Director of GaAs IC Products.
In June 1996, he was named as the Company's Vice President of Business
Development. Before joining Alpha, Mr. Gillard held a number of Vice President
positions at M/A-COM, Inc. in Sales, Marketing and Business Development. Mr.
Gillard received his engineering education at Ecole Central d'Electronique,
Paris, France and his business training at the Massachusetts Institute of
Technology's Sloan School.
Mr. Langman joined the Company in January 1997, as Vice President of Alpha
Industries, Inc., and President and General Manager of Trans-Tech, Inc. Prior
to joining Alpha and Trans-Tech, Mr. Langman worked for Coors Ceramics Company
for twenty-three years, holding senior executive positions in operations and
sales. Mr. Langman received his B.S. in Ceramic Engineering from Alfred
University and his M.S. in Metallurgy and Material Science from Lehigh
University.
Mr. Nemiah joined the Company in November 1995 as Corporate Counsel and
Assistant Secretary. He was named Secretary in September 1996. Prior to
joining the Company, Mr. Nemiah was at American Science and Engineering from
1987 to 1995, holding the positions of Vice President, General Counsel and
Clerk.
Employees
As of March 30, 1997, the Company and its subsidiaries employed approximately
800 persons, compared with 990 persons as of March 31, 1996.
Item 2 Properties
The following information describes the major facilities owned and leased by the
Company. The Company believes it has adequate production capacity to meet its
current business needs for the next 12 to 18 months. As described in Note 4 to
the Consolidated Financial Statements on pages 27 and 28, several properties
secure debt of the Company.
a) The Company owns a 158,000 square foot plant plus eight acres of land at 20
Sylvan Road, Woburn, Massachusetts. This plant is occupied by the
semiconductor and component manufacturing operations and corporate
headquarters.
b) The Company owns a 92,000 square foot facility in Adamstown, Maryland. This
plant is occupied by the Company's wholly owned subsidiary, Trans-Tech,
Inc., and is utilized as the Company's primary ceramic products
manufacturing facility.
c) The Company leases a 33,000 square foot facility in Frederick, Maryland.
This plant is used by the Company's wholly owned subsidiary, Trans-Tech,
Inc., to manufacture ceramic filters.
d) The Company leases 60,000 square feet of space in Frederick, Maryland. This
facility is currently substantially unoccupied and the Company is seeking a
sub-tenant for the entire facility.
6
<PAGE>
----------------------------------------
Alpha Industries, Inc. and Subsidiaries
----------------------------------------
Item 3 Legal Proceedings
The Company does not have any material pending legal proceedings other than
routine litigation incidental to its business.
The Company has been notified by federal and state environmental agencies of its
potential liability with respect to the Spectron, Inc. Superfund site in Elkton,
Maryland. Several hundred other companies have also been notified about their
potential liability regarding this site. The Company continues to deny that it
has any responsibility with respect to this site other than as a de minimis
-- -------
party. Management is of the opinion that the outcome of the aforementioned
environmental matter will not have a material effect on the Company's
operations.
See also Note 9 to the Consolidated Financial Statements on page 35.
Item 4 Submission Of Matters To A Vote Of Security Holders
There were no matters submitted to a vote of security holders during the fiscal
quarter ended March 30, 1997.
PART II
Item 5 Market For The Registrant's Common Stock And Related Stockholder Matters
See the section entitled "Quarterly Financial Data" appearing on page 22 for
information regarding Common Stock market prices. Dividends have not been paid
in either of the past two fiscal years. See Note 4 to the Consolidated Financial
Statements appearing on pages 27 and 28 for information regarding dividend
restrictions.
7
<PAGE>
- ----------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ----------------------------------------
Item 6 Selected Financial Data
Five Year Financial Summary
(In thousands, except per share amounts and financial ratios)
<TABLE>
<CAPTION>
Fiscal Year
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Results of Operations
Sales.............................. $ 85,253 $ 96,894 $78,254 $ 70,147 $69,543
Net income (loss).................. (15,572) 3,794 2,847 (11,466) (2,987)
Per share data
Net income (loss).............. $ (1.58) $ .43 $ .36 $ (1.53) $ (.40)
Weighted average common
shares........................ 9,848 8,755 7,882 7,502 7,464
Financial Ratios
Return (based on net
income-net loss)
On sales....................... (18.3%) 3.9% 3.6% (16.3%) (4.3%)
On average assets.............. (22.1%) 6.0% 6.0% (23.4%) (5.6%)
On average equity.............. (30.9%) 8.9% 11.0% (38.3%) (8.1%)
Current Ratio...................... 2.10 3.35 1.68 1.64 2.26
Debt to Equity..................... 8.3% 4.5% 17.1% 19.9% 11.8%
Financial Position
Working Capital.................... $ 18,409 $ 32,647 $10,983 $ 8,981 $15,767
Additions to property, plant
and equipment.................... 7,951 12,297 5,248 2,939 4,112
Total assets....................... 65,253 75,423 50,167 44,430 53,777
Long-term debt..................... 3,606 2,565 4,744 4,826 4,191
Long-term capital lease
obligations...................... 8 565 754 892 1,032
Stockholders' equity............... 43,386 57,533 27,674 24,261 35,565
Other Statistics
New orders (net of cancellations).. 81,300 103,200 84,900 66,700 70,500
Backlog at year end................ $ 32,500 $ 36,500 $30,200 $ 23,500 $26,900
- ---------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
----------------------------------------
Alpha Industries, Inc. and Subsidiaries
----------------------------------------
Item 7 Management's Discussion And Analysis Of Financial Condition And Results
Of Operations
Fiscal 1997 Compared to Fiscal 1996
General
Despite a difficult 1997 fiscal year, in which the Company lost $15.6 million,
changes and improvements completed by the end of the year have strengthened the
Company and positioned it for profitability in the first quarter (ending June
1997) of the 1998 fiscal year.
The Company's losses in the year were largely the result of an industry-wide
over-supply of cellular telephones and related equipment, especially in the
North American cellular telephone market, as well as operational difficulties at
Trans-Tech, Inc. (TTI), the Company's ceramic component subsidiary. Following a
period of extremely strong demand from the Company's customers, many of the
Company's customers announced, early in the fourth quarter of the 1996 fiscal
year, that they had excessive finished goods inventory, leading them to cut back
on existing component orders to the Company and to delay future orders.
In July 1996, Thomas C. Leonard was asked by the Board of Directors to take over
as President and CEO of the Company. Mr. Leonard had been a Vice President at
Alpha for almost four years, concentrating on turning around and improving
troubled operations within Alpha Microwave.
Alpha Microwave, the Company's Gallium Arsenide (GaAs) Integrated Circuits (ICs)
and semiconductor division, operated at virtually break-even for the year, as it
continued to invest for increased capacity and market penetration. In May 1996,
David J. Aldrich became General Manager of Alpha Microwave and began to
institute a series of changes that strengthened the division and prepared it for
fast growth when the market returned. Throughout the fiscal year, plans
continued to increase capacity, and in the fourth quarter of fiscal 1997,
conversion from 3 inch to 4 inch diameter GaAs wafers and the addition of a
third shift resulted in a 2.5 to 3-fold increase in the division's capacity to
manufacture GaAs ICs. Restructuring of the sales and marketing organizations in
the division allowed a tight focus on "strategic customers", the largest
original equipment manufacturers in the wireless telephone industry. As a
result of all of these actions, Alpha Microwave was profitable in the last two
quarters of fiscal 1997.
Trans-Tech was particularly hard-hit by the slump, because of operating
inefficiencies, which had increased costs and adversely affected shipments to
customers. These problems led the Company to seek new management for Trans-Tech
- -- a process that was completed only late in January 1997, with the arrival of
Richard Langman as the new President and General Manager of Trans-Tech.
Analysis of the Trans-Tech situation first by Mr. Leonard and then by Mr.
Langman, indicated operational problems, made more painful by the loss of orders
from customers who had been disappointed by Trans-Tech's late and unpredictable
deliveries. This reduction in order volume at Trans-Tech persisted even as
order volume rose in other parts of the Company, which confirmed the decision to
divest or close higher-cost, redundant manufacturing operations in France and
California. Legal issues in France delayed the sale of the French subsidiary
until the end of the fourth quarter, but both operations were disposed of during
the fiscal year. These divestitures reduced costs and eliminated excess
capacity, without any reduction of product offerings.
Also in the fourth quarter, Trans-Tech conducted a significant reduction in
force, largely among support personnel and narrowed the focus of its development
activities, in order to bring its cost structure in line with its reduced level
of business. Also in the fourth quarter, Alpha Microwave sold a small product
line consisting of digital radio subsystems.
9
<PAGE>
- ----------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ----------------------------------------
At the beginning of the year, the Company's break-even was at approximately $25
million per quarter; by the end of the year, with the completion of all of the
actions described above, the break-even was at $21-22 million. As a result, the
Company announced that all non-recurring events were complete during fiscal 1997
and projected profitability in the first quarter of fiscal 1998.
Results of Operations
Sales for fiscal 1997 totaled $85.3 million compared to sales of $96.9 million
in fiscal 1996. The decrease in fiscal 1997 sales was primarily the result of
lower sales volumes at Trans-Tech from the factors discussed above. In
contrast, sales of semiconductors and GaAs ICs at Alpha Microwave were lower in
the first quarter than in the fourth quarter of fiscal 1996, but showed
continued modest growth throughout the year. The Company continued to increase
its focus on the commercial wireless markets as military sales declined to 21%
of fiscal 1997 sales , compared with 24% in fiscal 1996. The Company will
continue to participate in military programs with low risk and those that
provide funding for the development of technology that is transferable to
commercial wireless applications.
Gross profits for fiscal 1997 totaled $16.7 million as compared to $30.9 million
in fiscal 1996. The decrease in gross profit in fiscal 1997 was the result of:
(i) excess manufacturing capacity at Trans-Tech that was adjusted in the fourth
quarter with the divestiture of the French subsidiary and the consolidation at
Trans-Tech; (ii) carrying costs of approximately $2.7 million for the two
divested operations (incurred prior to divestiture); (iii) a $2.6 million
inventory write-down at Trans-Tech resulting from shifts in demand away from
certain ceramic products; and (iv) decisions to continue expanding capacity at
Alpha Microwave during the year in spite of lower Company-wide sales volumes for
the first half of the year. Excluding certain non-recurring costs, primarily
the carrying costs and inventory write-down identified above, the Company's
gross profit as a percentage of sales would be 27% for fiscal 1997 and 31% for
the fourth quarter of fiscal 1997.
Company sponsored research and development expenses increased in fiscal 1997 to
$9.5 million, or 11% of sales from $9.1 million, or 9% of sales in fiscal 1996.
The continued level of research and development expenses reflects the Company's
strong commitment to its investment in the GaAs IC product line. The Company
is dedicated to supporting high volume applications for wireless customers and
will continue to invest in product and process development to better serve its
targeted markets. The Company expects a reduction in quarterly R&D of
approximately $200 to $300 thousand, due to the refocusing of TTI and the
discontinued investment in the digital radio product group. However, the
Company will continue to increase investments in high volume wireless products.
Selling and administrative expenses increased to $20.4 million, or 24% of sales,
in fiscal 1997 compared to $17.2 million, or 18% of sales, in fiscal 1996. The
increase in selling and administrative expenses for fiscal 1997 reflects
expanded investments in the Company's sales activities. These investments
included the addition of dedicated account managers for key wireless OEM
manufacturers and improvements to the Company's information systems, such as
adding Electronic Data Interchange (EDI) capabilities. Also included in fiscal
1997 selling and administrative expenses are non-recurring costs of $900
thousand for severance costs related to various corporate executives and $626
thousand for recruiting and consolidation costs associated with TTI.
Interest expense decreased $189 thousand for fiscal 1997 compared to the same
period last year. Interest income increased $43 thousand for fiscal 1997
compared to fiscal 1996. During the third quarter of fiscal 1996, the Company
received funds from a secondary offering that were used to reduce debt and
increase short-term investments which resulted in decreased interest expense and
increased interest income. Other expense and income decreased $87 thousand in
fiscal 1997 compared with fiscal 1996. These fluctuations were due to currency
gains and losses.
10
<PAGE>
----------------------------------------
Alpha Industries, Inc. and Subsidiaries
----------------------------------------
The Company did not record a tax provision for fiscal 1997. No federal taxes
were due, and state and foreign taxes were offset by a state loss carryback.
The Company is expected to have a below normal tax rate due to net operating
loss carryforwards of approximately $36 million which expire beginning in fiscal
2004.
The Company reported a net loss of $15.6 million or $1.58 per share compared
with net income of $3.8 million or $0.43 per share for fiscal 1996.
Financial Position
At March 30, 1997, working capital totaled $18.4 million and included $7 million
in cash, cash equivalents, and short-term investments, compared with $32.6
million of working capital at the end of fiscal 1996. Cash decreased $5.5
million during fiscal 1997 as a result of a $15.6 million loss, further
investments in capital expenditures and a reduction in accounts payable.
Capital expenditures of approximately $8 million were used primarily for
continued automation of the semiconductor wafer fab operations and the IC and
discrete semiconductor assembly and test areas, as well as for improved
manufacturing capabilities at the ceramics manufacturing facility. During
fiscal 1997, the Company was successful in converting its existing 3 inch GaAs
wafer line to 4 inch wafers. A portion of the capital expenditures during the
year was funded by a $5 million equipment line of credit, which was subsequently
converted to a term note. The Company remains committed to adding the required
capacity needed to service the wireless markets as demand continues to grow.
The Company currently anticipates investing approximately $10 million in capital
expenditures during fiscal 1998.
With cash, cash equivalents, and short-term investments of $7 million and a $7.5
million working capital line of credit available until October 1, 1997, the
Company believes it has adequate funds to support its current operating and
capital investment needs. At March 30, 1997, $1 million was borrowed under the
line of credit. As in the past, the Company intends to renew the line of credit
when it matures. Also, the Company will continue to evaluate other available
sources of financing, such as sale leasebacks or borrowing against its debt-free
Massachusetts facility.
Other Matters
Inflation did not have a significant impact upon the results of operations of
the Company during the three year period ended March 30, 1997.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS
128 establishes a different method of computing net income per share than is
currently required under the provisions of Accounting Principles Board Opinion
No. 15. Under SFAS 128, the Company will be required to present both basic net
income per share and diluted net income per share. The impact on diluted net
income per share is not expected to be material. The Company plans to adopt
SFAS 128 in its fiscal quarter ending December 1997 and at that time all
historical net income per share data will be restated to conform to the
provisions of SFAS No. 128.
11
<PAGE>
- ----------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ----------------------------------------
Fiscal 1996 Compared to Fiscal 1995
General
The Company set record levels for sales and orders for fiscal 1996, and earnings
increased 33% in fiscal 1996 as compared with the prior year. In fiscal 1996,
the Company doubled its investments in product development mainly for the
Gallium Arsenide Monolithic Integrated Circuits (GaAs MMICs) and ceramic
products aimed at the wireless communication markets. At the same time, the
Company increased unit output by 64% due to improved manufacturing efficiencies
and added capacity for both semiconductor and ceramic products. These actions
positioned the Company to support higher demands, particularly for wireless
communication products. Unfortunately, an overall softness in the North
American cellular market and the delayed roll-out of the Personal Communications
System (PCS) was expected to result in lower demand throughout the summer of
1996.
Results Of Operations
Sales for fiscal 1996 increased 23.8% to $96.9 million as compared to sales of
$78.3 million in fiscal 1995. The increase in sales was attributable to
increased unit volume in the Company's GaAs MMIC, ceramic and discrete
semiconductor product lines primarily into the commercial wireless markets.
These unit volume increases were partially offset by a decline in average
selling prices because of the Company's shift to high volume business in the
commercial sector. As the Company continued to gain strength in the commercial
wireless markets, direct sales to the United States Defense Department continued
to decline, with 24% of fiscal 1996 sales related to military subcontracts for
ultimate sale to the Defense Department or foreign governments, compared with
29% in fiscal 1995. The decrease in defense related business was attributable
to the decline in traditional military products and reduced funding for certain
weapons systems.
Gross profit increased 29.4% in fiscal 1996 to $30.9 million, or 31.9% of sales,
as compared to $23.9 million, or 30.5% of sales in fiscal 1995. The improvement
in gross profit was the result of: (a) increased sales volumes, (b) higher
capacity utilization at the Company's Woburn, Massachusetts manufacturing
facility and (c) greater efficiencies due to the consolidation of facilities
that took place in fiscal 1994 when the Company moved several product lines to
its Woburn, Massachusetts plant. The Company recorded lower margins in the
fourth quarter of fiscal 1996 as a result of flattening sales and rising costs
due to added manufacturing capacity.
Research and development expenses increased 120.2% in fiscal 1996 to $9.1
million, or 9.4% of sales, from $4.2 million, or 5.3% of sales in fiscal 1995.
This increase reflects the continued investment by the Company in the GaAs MMIC
and ceramic product lines. The Company will continue to invest in product and
process development in order to address the demands of its targeted wireless
markets. Customer sponsored R&D decreased $3.4 million in fiscal 1996 and $1.9
million in fiscal 1995. As customer sponsored R&D continued to decrease, the
Company sponsored R&D will continue to increase since the Company is strongly
committed to developing new wireless communications products. However, whenever
possible the Company will try to fund its R&D through collaborative
developmental contracts.
Selling and administrative expenses increased to $17.2 million, or 17.8% of
sales, in fiscal 1996. The increase in selling and administrative expenses was
primarily a result of training and other costs related to the early phases of
implementation of a new manufacturing and management information system, as well
as increased commissions related to higher sales volume.
Interest expense remained relatively constant for fiscal 1996 and 1995.
Interest income increased $315 thousand largely due to interest earned on funds
received from a stock offering that was completed during the third quarter of
fiscal 1996. The Company successfully completed a secondary public offering
which raised $25.3 million, net of expenses, on the sale of 1,840,000 shares of
12
<PAGE>
----------------------------------------
Alpha Industries, Inc. and Subsidiaries
----------------------------------------
common stock. Other expense and income increased by $43 thousand in fiscal 1996
compared with fiscal 1995. This fluctuation was due to currency gains and
losses.
The Company's effective tax rate for fiscal 1996 was 15% compared to the current
combined federal, state and foreign rate of approximately 40%. This rate
differed from statutory rates primarily as a result of the utilization of net
operating loss carryforwards. At March 31, 1996, the Company had available net
operating loss carryforwards of approximately $25 million which will expire
commencing in 2004.
Net income for fiscal 1996 was $3.8 million or $0.43 per share versus $2.8
million or $0.36 per share for fiscal 1995. The first quarter of fiscal 1996
included a repositioning credit of $320 thousand or $0.03 per share which
resulted from the reversal of certain accruals for estimated carrying costs as a
result of an earlier than expected disposition of the Methuen, Massachusetts
facility. Per share data reflected the stock offering completed in the third
quarter of fiscal 1996.
Financial Position
At March 31, 1996, working capital totaled $32.6 million and included $15.5
million in cash, cash equivalents, and short-term investments, compared with
$11.0 million of working capital at the end of fiscal 1995. Cash increased $7.8
million during fiscal 1996 mainly as a result of proceeds received from the
secondary public offering. During fiscal 1996, the Company had $12.3 million of
capital expenditures primarily for the expansion of its ceramic manufacturing
facilities, further automation of its semiconductor wafer fab operations, and
various information technology equipment. In addition to the proceeds received
from the offering, the Company also had two lines of credit available for a
total of $12.5 million. The Company entered into a $7.5 million working capital
line of credit agreement which was to expire on August 1, 1997, and a $5 million
equipment line of credit which was to expire on July 31, 1996. At March 31,
1996 there was $1 million outstanding under the equipment line of credit.
In July 1995, the Company sold its Methuen, Massachusetts plant and received net
proceeds of $2.5 million. In connection with the sale, using the net proceeds
and $1 million borrowed under its line of credit, the Company retired $3.5
million of related debt.
Forward-Looking Statements
Except for the historical information contained herein, the discussion in this
Report contains certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Report
should be read as being applicable to all forward-looking statements wherever
they appear in this Report. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences are discussed below.
Recent Market Softness. During the fiscal year, a glut of finished goods
inventory, overall softness in the North American cellular market and the
delayed roll-out of the Personal Communications System (PCS) significantly
impacted the Company's orders and shipments. Although the Company believes that
the market is currently strong and that the market problems that affected fiscal
1997 have been resolved, there can be no assurance that such inventory
imbalance, market softness and delays attendant upon the introduction of new
technologies will not occur in the future. Any such events could have a
material and adverse effect on the Company's business, financial condition and
operating results.
Repositioning of Company's Business. The Company has in recent years worked to
reposition its business, away from military sales and into commercial sales.
Military sales have been declining, and the Company anticipates that revenues
from military sales will continue to decline. There can be no assurance that the
Company's effort to reposition itself as a supplier of advanced products to
wireless communications markets will be successful. If revenues from commercial
wireless customers do not grow, or grow less rapidly than
13
<PAGE>
- ---------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ---------------------------------------
expected, or if in the near term revenues from military sales decline more
rapidly than expected, the Company's operating results could be materially and
adversely affected.
Variability of Operating Results. The Company's quarterly and annual results
have varied in the past and may vary significantly in the future due to a number
of factors, including: cancellation or delay of customer orders; market
acceptance of the Company's or its customers' products; variations in
manufacturing yields; timing of announcement and introduction of new products by
the Company and its competitors; changes in revenue and product mix;
competition; changes in manufacturing capacity and variations in the utilization
of this capacity; variations in average selling prices; variations in operating
expenses; the long sales cycles associated with the Company's customer specific
products; the timing and level of product and process development costs;
cyclicality of the semiconductor and ceramic industries; the timing and level of
non-recurring engineering revenues and expenses relating to customer specific
products; and changes in inventory levels. Any unfavorable changes in these or
other factors could have a material adverse effect on the Company's operating
results. The Company's expense levels are based, in part, on its expectations as
to future revenue, and certain of these expenses, particularly those relating to
the Company's capital equipment and manufacturing overhead, are relatively fixed
in nature. For example, the Company is investing in GaAs and silicon process
development technology in anticipation of increased revenues from related
markets. As a result of the relatively fixed nature of certain of the Company's
expenses, operating results would be disproportionately and adversely affected
by a reduction in revenue. The Company expects that its operating results will
continue to fluctuate in the future as a result of these and other factors.
Customer Concentration. Historically, a significant portion of the Company's
sales in each fiscal period has been concentrated among a limited number of
customers. This trend is accelerating, and in recent periods sales to the
Company's major customers as a percentage of total sales have increased. The
Company does not generally enter into long-term contracts with its customers,
and when it does, the contract is generally terminable for the convenience of
the customer. If the Company were to lose one of these major customers, or if
orders by a major customer otherwise were to decrease, or if major orders were
to be canceled or deferred, the Company's business, financial condition and
operating results would be materially and adversely affected.
Dependence on Customer Specific Products. Most of the Company's products are
designed to be incorporated into specific end-user products. In light of short
product life cycles in the wireless communications industry, the Company's
future success depends upon its ability to select customer specific development
projects which will result in sufficient production volume to enable the Company
to recover its development costs and realize a profit on the project. There can
be no assurance that the Company will be able to select such customer specific
projects, or that the Company's products will be designed into such projects. In
addition, OEMs require that their suppliers design and manufacture components
very quickly. There can be no assurance that the Company will be able to design,
manufacture in large volumes and deliver to its customers high quality, reliable
products within the required time periods. The Company has experienced delays in
the production of ICs, ceramic products and discrete semiconductors under major
contracts with major OEM customers. There can be no assurance similar problems
will not recur in the future. Any such problems could have a material and
adverse effect on the Company's operating results.
Product And Process Development And Technological Change. The wireless
communications industry is characterized by frequent new product introductions,
evolving industry standards and rapid changes in product and process
technologies. The Company believes that its future success will depend upon its
ability to continue to improve its product and process technologies and develop
new technologies. The success of the Company's new products is dependent upon
many factors, including factors that are outside the Company's control. These
factors include: the Company's ability to anticipate market requirements in its
product development efforts; market acceptance and continued commercial success
of OEM products for which the Company's products have been designed; the ability
to adapt to technological changes and to support established and emerging
industry standards; successful and timely completion of product
14
<PAGE>
----------------------------------------
Alpha Industries, Inc. and Subsidiaries
----------------------------------------
development and commercialization; achievement of acceptable wafer fabrication
and ceramic process yields and manufacturing yields generally; and the ability
to offer new products at competitive prices. No assurance can be given that the
Company's product and process development efforts will be successful or that the
Company's new products or those of its customers will achieve or sustain market
acceptance. In addition, the wireless communications industry is characterized
by end-user demands for increased functionality at ever lower prices. To remain
competitive, the Company must obtain yield and productivity improvements and
cost reductions and must introduce new products which incorporate advanced
features and which therefore can be sold at higher average selling prices. To
the extent that such cost reductions and new product introductions do not occur
in a timely manner or the Company's or its customers' products do not achieve
market acceptance, the Company's operating results could be materially and
adversely affected.
Manufacturing Risks. The manufacturing processes for the Company's products,
in particular its GaAs ICs, are highly complex and precise, requiring advanced
and costly equipment, and are being modified continually in an effort to improve
yields and product performance. The Company expects that its customers will
continue to establish demanding specifications for quality, performance and
reliability that must be met by the Company's products. The Company has limited
experience in high volume manufacturing of certain GaAs ICs and ceramic products
for the high volume commercial applications on which its current product
development, sales and marketing efforts are focused. The Company has
encountered and may in the future encounter development and manufacturing
delays, has from time to time failed and may in the future fail to meet its
customers' contractual specifications, and one or more of its products have
contained and may in the future contain undetected defects or failures when
first introduced or after commencement of commercial shipments. If such delays,
defects or failures occur, the Company could experience lost revenue, resulting
from delays in or cancellations or rescheduling of orders or shipments, product
returns or discounts, or could experience increased costs, including product or
process redesign, warranty expense or costs associated with customer support,
any of which could have a material adverse effect on the Company's operating
results. There can be no assurance that the Company will not in the future
experience significant product quality, performance or reliability problems.
Management of Growth. The growth in the Company's business, and its continuing
transition from military to commercial sales, has placed, and is expected to
continue to place, a significant strain on the Company's personnel, management
and other resources. In order to manage any future growth effectively, the
Company will, among other things, be required to upgrade and expand certain
manufacturing facilities; attract, train, motivate and manage employees
successfully; and continue to improve its operational and financial systems.
There can be no assurance that the Company will be successful in these respects.
The Company is currently in the process of implementing a new management
information system. There can be no assurance that the Company will not
encounter problems or increased expense levels in connection with implementing
its new management information system. In addition, the Company anticipates that
any future growth of its business will require increased utilization of the
Company's manufacturing capacity, including increasing the number of shifts
during which its manufacturing facilities are operational. Further, any such
future growth could require improvement or expansion of the Company's existing
manufacturing facilities. Expansion or upgrade of the Company's manufacturing
facilities will entail substantial capital expenditures. Lead times for certain
capital equipment are long, and modification of the Company's facilities and
installation of such equipment is a complex process which could disrupt the
Company's ongoing manufacturing operations. Delays in completion of a planned
expansion or upgrade could limit the ability of the Company to respond to the
rapid design and production cycles required by its customers. Moreover, there
can be no assurance that the Company will be able to secure sources of capital
adequate to fund the necessary expenditures. The Company could experience
product quality, performance or reliability problems and development and
manufacturing delays in connection with any such increase in utilization or such
expansion or upgrade of the Company's manufacturing capacity. The occurrence of
any such problems or the inability of the Company otherwise to manage any future
growth effectively could materially and adversely affect the Company's operating
results.
15
<PAGE>
- ----------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ----------------------------------------
Dependence on Key Personnel. The Company's future success depends in large part
on the continued service of its key technical, marketing and management
personnel, and on its ability to identify, attract and retain qualified
technical personnel, particularly highly skilled design, process and test
engineers involved in the manufacture of existing products and the development
of new products and processes. The competition for such personnel is intense,
and the loss of key employees could have a material adverse effect on the
Company.
Cyclicality of the Company's Markets. While the semiconductor and ceramic
markets have in the past experienced overall growth, they have historically been
characterized by wide fluctuations in product supply and demand. From time to
time, these industries have also experienced significant downturns, often in
connection with, or in anticipation of, maturing product cycles and declines in
general economic conditions. These downturns have been characterized by
diminished product demand, production overcapacity and subsequent accelerated
price erosion, and in some cases have lasted for extended periods of time. The
Company's business may in the future be materially and adversely affected by
industry-wide fluctuations. The Company's continued success will depend in large
part on the continued growth of the wireless communications industry. No
assurance can be given that the Company will not be adversely affected in the
future by cyclical conditions in the wireless communications industry.
Competition. Wireless communications markets are intensely competitive and are
characterized by rapid technological change, rapid product obsolescence and
price erosion. Currently, the Company competes primarily with manufacturers of
high performance GaAs ICs, discrete silicon semiconductors, passive components,
ceramic filters and other ceramic products and microwave and millimeter wave
components. The Company expects increased competition both from existing
competitors and others which may enter these markets, as well as potential
future competition from companies which may offer new or emerging technologies,
such as surface acoustic wave filters, silicon germanium and other silicon
technologies. In addition, many of the Company's customers, particularly its
largest customers, have or could acquire the capability to develop or
manufacture products competitive with those that have been or may be developed
or manufactured by the Company. The Company's future operating results may
depend in part upon the extent to which these customers elect to purchase from
outside sources rather than develop and manufacture their own systems. A number
of the Company's competitors have significantly greater financial, technical,
manufacturing and marketing resources than the Company. The ability of the
Company to compete successfully depends in part upon the ability of the Company
to develop price competitive, high quality solutions for OEMs and the extent to
which customers select the Company's products over competitors' products for
their systems. There can be no assurance that the Company will be able to
compete successfully in the future.
16
<PAGE>
----------------------------------------
Alpha Industries, Inc. and Subsidiaries
----------------------------------------
Item 8 Financial Statements And Supplementary Data
Index To Financial Statements
<TABLE>
<CAPTION>
Page
- ------------------------------------------------------------------------------------
<S> <C>
Consolidated Balance Sheets - March 30, 1997 and March 31, 1996............... 18
Consolidated Statements of Operations - Years ended March 30, 1997,
March 31, 1996, and April 2, 1995............................................. 19
Consolidated Statements of Cash Flows - Years ended March 30, 1997,
March 31, 1996, and April 2, 1995............................................. 20
Consolidated Statements of Stockholders' Equity - Years ended March 30, 1997,
March 31, 1996, and April 2, 1995............................................. 21
Quarterly Financial Data (unaudited) - Fiscal 1997 and Fiscal 1996............ 22
Notes to Consolidated Financial Statements.................................... 23
Independent Auditors' Report.................................................. 36
- ------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
- ---------------------------------------
Alpha Industries Inc. and Subsidiaries
- ---------------------------------------
Consolidated Balance Sheets
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
March 30, March 31,
1997 1996
- -------------------------------------------------------------------------------
Assets (Note 4)
<S> <C> <C>
Current assets
Cash and cash equivalents........................... $ 5,815 $ 11,326
Short-term investments.............................. 1,218 4,143
Accounts receivable, trade, less allowance
for doubtful accounts of $521 and $634............. 17,019 17,688
Inventories (Note 3)................................ 10,267 12,015
Prepayments and other current assets................ 857 1,379
-------- --------
Total current assets.............................. 35,176 46,551
-------- --------
Property, plant and equipment
Land................................................ 437 462
Building and improvements........................... 22,659 22,788
Machinery and equipment............................. 59,962 54,794
-------- --------
83,058 78,044
Less-accumulated depreciation and amortization...... 54,450 49,908
-------- --------
28,608 28,136
-------- --------
Other assets.......................................... 1,469 736
-------- --------
Total Assets.................................... $ 65,253 $ 75,423
======== ========
Liabilities And Stockholders' Equity
Current liabilities
Notes payable, bank (Note 4)........................ $ 1,000 $ ---
Current maturities of long-term debt (Note 4)....... 1,939 332
Current maturities of capital lease obligations
(Note 4)........................................... 230 443
Accounts payable.................................... 5,620 7,075
Repositioning reserve (Note 5)...................... 1,106 ---
Accrued liabilities
Payroll, commissions and related expenses......... 5,359 4,898
Other............................................. 1,513 1,156
-------- --------
Total current liabilities....................... 16,767 13,904
-------- --------
Long-term debt (Note 4)............................... 3,606 2,565
Long-term capital lease obligations (Note 4).......... 8 565
Other long-term liabilities........................... 1,486 856
-------- --------
Commitments and contingencies (Note 9)
Stockholders' equity (Notes 4 and 7)
Common stock par value $.25 per share: authorized
30,000,000 shares; issued 10,126,413 and
9,938,587 shares................................... 2,531 2,484
Additional paid-in capital.......................... 54,640 53,468
Retained earnings (accumulated deficit)............. (13,516) 2,056
-------- --------
43,655 58,008
Less - Treasury shares 161,139 and 249,052 at cost.. 195 321
Unearned compensation-restricted stock............ 74 154
-------- --------
Total stockholders' equity...................... 43,386 57,533
-------- --------
Total Liabilities and Stockholders' Equity...... $ 65,253 $ 75,423
======== ========
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
----------------------------------------
Alpha Industries, Inc. and Subsidiaries
----------------------------------------
Consolidated Statements Of Operations
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended
March 30, March 31, April 2,
1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales..................................... $ 85,253 $96,894 $78,254
-------- ------- -------
Cost of sales............................. 68,519 65,986 54,376
Research and development expenses......... 9,545 9,148 4,154
Selling and administrative expenses....... 20,441 17,226 15,727
Repositioning expenses (credit) (Note 5).. 2,074 (320) ---
-------- ------- -------
100,579 92,040 74,257
Operating income (loss)................... (15,326) 4,854 3,997
-------- ------- -------
Other income (expense)
Interest expense.......................... (554) (743) (728)
Interest income........................... 415 372 57
Other (expense) income, net............... (107) (20) 23
-------- ------- -------
(246) (391) (648)
-------- ------- -------
Income (loss) before income taxes......... (15,572) 4,463 3,349
Provision for income taxes (Note 6)....... --- 669 502
-------- ------- -------
Net income (loss)......................... $(15,572) $ 3,794 $ 2,847
======== ======= =======
Net income (loss) per share............... $(1.58) $.43 $.36
======== ======= =======
Weighted average common shares and
common share equivalents.................. 9,848 8,755 7,882
======== ======= =======
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
- ----------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ----------------------------------------
<TABLE>
<CAPTION>
Consolidated Statements Of Cash Flows
(In thousands) Year Ended
March 30, March 31, April 2,
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash (used in) provided by operations:
Net income (loss)........................................ $ (15,572) $ 3,794 $ 2,847
Adjustments to reconcile net income (loss) to
net cash (used in) provided by operations:
Depreciation and amortization of property, plant,
and equipment....................................... 5,886 4,628 4,106
Amortization of unearned compensation - restricted
stock............................................... 35 61 64
Unearned compensation................................ (11) --- ---
(Gain) loss on sales and retirements of property,
plant, and equipment................................ --- (9) 26
Noncash portion of repositioning charges............. 660 --- ---
(Gain) loss on property, plant and equipment due
to repositioning.................................... --- (320) ---
Increase in other assets............................. (262) (395) (536)
Increase (decrease) in other liabilities and
long-term benefits.................................. 630 62 399
Issuance of treasury stock to 401(k)................. 831 220 12
Change in assets and liabilities
Accounts receivable................................. 771 (4,140) (305)
Inventories......................................... 770 (2,645) (1,757)
Prepayments and other current assets................ 318 (623) (266)
Accounts payable.................................... (1,455) 1,869 141
Accrued liabilities................................. 818 (241) 1,237
Repositioning reserve............................... 1,106 (991) (967)
--------- -------- ---------
Net cash (used in) provided by operations............ (5,475) 1,270 5,001
--------- -------- ---------
Cash used in investments:
Additions to property, plant and equipment
excluding capital leases............................... (7,951) (11,972) (4,971)
Purchases of short-term investments...................... (4,030) (12,113) ---
Maturities of short-term investments..................... 6,955 7,970 ---
Net proceeds from sale of divestitures................... 1,191 --- ---
Proceeds from sale of property, plant and equipment...... --- 31 68
Proceeds from sale of property held for resale........... --- 2,465 ---
--------- -------- ---------
Net cash used in investments......................... (3,835) (13,619) (4,903)
--------- -------- ---------
Cash provided by financing:
Proceeds from notes payable.............................. 4,952 621 1,983
Payments on notes payable................................ (1,304) (5,807) (330)
Payments on capital lease obligations.................... (437) (441) (416)
Deferred charges related to long-term debt............... 18 8 (6)
Exercise of stock options................................ 462 392 391
Proceeds from sale of stock.............................. 108 25,392 99
--------- -------- ---------
Net cash provided by financing....................... 3,799 20,165 1,721
--------- -------- ---------
Net decrease (increase) in cash and cash equivalents..... (5,511) 7,816 1,819
Cash and cash equivalents, beginning of year............. 11,326 3,510 1,691
--------- -------- ---------
Cash and cash equivalents, end of year................... $ 5,815 $ 11,326 $ 3,510
========= ======== =========
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Supplemental disclosures:
Capital lease obligations of $325 thousand and $277 thousand were incurred
during the years ended March 31, 1996, and April 2, 1995, respectively, when the
Company entered into leases for new equipment. No new leases were entered into
during the year ended March 30, 1997.
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
----------------------------------------
Alpha Industries, Inc. and Subsidiaries
----------------------------------------
<TABLE>
<CAPTION>
Consolidated Statements Of Stockholders' Equity
(In thousands)
Retained Unearned
Additional earnings compensation
Common stock paid-in (Accumulated) Treasury restricted
Shares Par value capital (deficit) stock stock
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance April 3, 1994................... 7,787 $ 1,947 $ 27,325 $ (4,585) $ (331) $ (95)
Net income.............................. --- --- --- 2,847 --- ---
Employee Stock Purchase Plan............ 29 7 92 --- --- ---
Issuance of restricted stock ........... 31 8 139 --- --- (147)
Amortization of unearned
compensation restricted stock........ --- --- --- --- --- 64
Issuance 1,110 treasury shares
to ESOP.............................. --- --- 11 --- 1 ---
Exercise of stock options............... 147 37 354 --- --- ---
------ ------- -------- --------- -------- --------
Balance April 2, 1995................... 7,994 1,999 27,921 (1,738) (330) (178)
Net income.............................. --- --- --- 3,794 --- ---
Stock offering net of expenses.......... 1,840 460 24,802 --- --- ---
Employee Stock Purchase Plan............ 17 4 126 --- --- ---
Issuance of restricted stock............ 9 2 49 --- --- (51)
Amortization of unearned
compensation restricted stock....... --- --- --- --- --- 61
Issuance 18,334 treasury shares
to ESOP............................. --- --- 197 --- 23 ---
Repurchase 4,500 shares of
restricted stock.................... --- --- --- --- (14) 14
Exercise of stock options............... 79 19 373 --- --- ---
------ ------- -------- --------- -------- --------
Balance March 31, 1996.................. 9,939 2,484 53,468 2,056 (321) (154)
Net loss................................ --- --- --- (15,572) --- ---
Employee Stock Purchase Plan............ 15 4 104 --- --- ---
Amortization of unearned
compensation restricted stock........ --- --- --- --- --- 35
Issuance 100,580 treasury shares
to 401(k)............................ --- --- 702 --- 129 ---
Repurchase 12,667 shares of
restricted stock...................... --- --- (53) --- (3) 45
Exercise of stock options............... 172 43 419 --- --- ---
------ ------- -------- --------- -------- --------
Balance March 30, 1997.................. 10,126 $ 2,531 $ 54,640 $ (13,516) $ (195) $ (74)
====== ======= ======== ========= ======== ========
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
=======================================
Alpha Industries, Inc. and Subsidiaries
=======================================
Quarterly Financial Data
(unaudited)
(In thousands except share data)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
===============================================================================================
Fiscal 1997
<S> <C> <C> <C> <C> <C>
Sales........................ $ 20,066 $ 20,137 $ 22,287 $ 22,763 $ 85,253
Gross profit................. 3,792 2,819 5,241 4,882 16,734
Net income (loss)............ (3,424) (4,728) (2,075) (5,345) (15,572)
Per share data
Net income (loss)........ (.35) (.48) (.21) (.54) (1.58)
Market price range:
High....................... 11 3/4 9 3/8 9 3/4 9 11 3/4
Low........................ 7 7/8 6 7/8 5 3/4 5 7/8 5 3/4
Fiscal 1996
Sales........................ $ 22,434 $ 23,733 $ 25,237 $ 25,490 $ 96,894
Gross profit................. 7,382 7,897 8,553 7,076 30,908
Net income................... 1,114 1,081 1,437 162 3,794
Per share data
Net income(1)............ .14 .13 .16 .02 .43
Market price range:
High....................... 15-1/4 19-5/8 17-7/8 13-7/8 19-5/8
Low........................ 10-5/8 14-1/8 10-1/2 7 7
=============================================================================================
</TABLE>
The Company's common stock is traded on the American Stock Exchange, symbol AHA.
The number of stockholders of record as of May 30, 1997 was approximately 1,100.
(1) Earnings per share calculations for each of the quarters are based on the
weighted average number of shares outstanding and included common stock
equivalents in each period. Therefore, the sum of the quarters does not
necessarily equal the full year earnings per share.
22
<PAGE>
=======================================
Alpha Industries, Inc. and Subsidiaries
=======================================
Notes To Consolidated Financial Statements
Note 1 Summary of Significant Accounting Policies
Principles of Consolidation:
The financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation. The Company's fiscal year ends on the
Sunday closest to March 31. There were 52 weeks in fiscal 1997, 1996 and
1995.
Use of Estimates:
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses. Actual results could differ from those estimates.
Revenue Recognition:
Revenue is recognized when a product is shipped and services are performed.
Contract revenue is recognized on the percentage-of-completion method, which
is primarily measured on the ratio of units shipped to the total contract
number of units. Provisions for estimated losses, if any, on uncompleted
contracts are made in the period in which such losses are determined.
Foreign Currency Translation:
The accounts of foreign subsidiaries are translated in accordance with the
Financial Accounting Standards Board Statement No. 52. Foreign operations are
remeasured as if the functional currency were the U.S. dollar. Monetary
assets and liabilities are translated at the year end rates of exchange.
Revenues and expenses (except cost of sales and depreciation) are translated
at the average rate for the period. Non-monetary assets, equity, cost of
sales and depreciation are remeasured at historical rates. Remeasurement
gains and losses are reflected currently in operations and are not material.
Research and Development Expenditures:
Research and development expenditures are charged to income as incurred
unless they are reimbursed under specific contracts.
Cash, Cash Equivalents and Short-term Investments:
Cash and cash equivalents include cash deposited in demand deposits at banks
and highly liquid investments with original maturities of 90 days or less.
During fiscal year 1996, the Company adopted Statement of Financial
Accounting Standard No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." Accordingly, the Company's short-term investments are
classified as held-to-maturity. These investments consist primarily of
commercial paper and bonds with original maturities of more than 90 days.
Such short-term investments are carried at amortized cost, which approximates
fair value, due to the short period of time to maturity. Gains and losses are
included in investment income in the period they are realized.
Inventories:
Inventories are stated at the lower of cost, determined on a first-in, first-
out basis, or market.
23
<PAGE>
=======================================
Alpha Industries, Inc. and Subsidiaries
=======================================
Notes To Consolidated Financial Statements (continued)
Note 1 Summary of Significant Accounting Policies (continued)
Property, Plant and Equipment:
Property, plant and equipment are carried at cost. Depreciation is provided
on the straight-line method for financial reporting and accelerated methods
for tax purposes.
Estimated useful lives used for depreciation purposes are 5 to 30 years for
buildings and improvements and 3 to 10 years for machinery and equipment.
During fiscal 1996, the Company removed $7.7 million of fully depreciated
fixed assets from the related property and accumulated depreciation accounts.
Fair Value of Financial Instruments:
Financial instruments of the Company consist of cash, cash equivalents,
accounts receivable, accounts payable and accrued liabilities. The carrying
value of these financial instruments approximates their fair value because of
the short maturity of these instruments. Based upon borrowing rates currently
available to the Company for issuance of similar debt with similar terms and
remaining maturities, the estimated fair value of long-term debt approximates
their carrying amounts. The Company does not use derivative instruments.
Income Taxes:
The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. This
method also requires the recognition of future tax benefits such as net
operating loss carryforwards, to the extent that realization of such benefits
is more likely than not. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Net Income Per Share:
In fiscal 1997, 1996, and 1995, the computation of both primary and fully
diluted earnings per share was based on the weighted average number of
outstanding common shares. Fiscal 1997 does not include common stock
equivalents since the effect would have been antidilutive. In fiscal 1996 and
1995 the computation was based on the weighted average shares of common stock
outstanding plus common equivalent shares arising from the effect of dilutive
stock options and warrants, using the treasury stock method. The weighted
average number of shares of common stock and common equivalent shares
outstanding, if applicable, for the calculation of primary earnings per share
was 9,848,000 in fiscal 1997, 8,755,000 in fiscal 1996, and 7,882,000 in
fiscal 1995.
24
<PAGE>
=======================================
Alpha Industries, Inc. and Subsidiaries
=======================================
Notes To Consolidated Financial Statements (continued)
Note 1 Summary of Significant Accounting Policies (continued)
New Accounting Standards:
During fiscal 1997, the Company adopted Financial Accounting Standards Board
Statements No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" and No. 123, "Accounting for Stock-
Based Compensation" (FAS 123). The adoption of these standards had no
material impact on the financial position or the results of operations of the
Company in fiscal 1997. Under FAS 123, the Company has elected not to adopt
the new accounting method and will continue to account for its stock-based
compensation under the existing provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and
related interpretations. Accordingly, the Company has provided pro-forma
disclosures of net earnings and earnings per share assuming FAS 123 had been
adopted. (See Note 7 for the additional disclosures required by FAS 123.)
Note 2 Company Operations
The Company operates in one industry segment: the development, production and
sale of microwave materials, devices and components. Sales include export sales
primarily to Europe and to a lesser extent Southeast Asia of $26,720,000,
$23,633,000, and $16,855,000, in fiscal 1997, 1996, and 1995, respectively.
During fiscal year 1997, one customer accounted for 11% of the Company's total
sales whereas, during fiscal years 1996 and 1995, no one customer accounted for
10% or more of the Company's total sales. The Company is focused on four major
OEMs and six other customers that the Company believes are principal suppliers
to these OEMs in the wireless communications market. For fiscal 1997 sales to
the four major OEMs and their suppliers represented approximately 26% of the
Company's sales. In fiscal 1995 and 1994 sales to these OEMs and their suppliers
represented approximately 29% and 17% of the Company's sales, respectively.
While the Company believes that these emerging wireless markets afford great
opportunities, such customer concentration could have an adverse affect on the
business.
25
<PAGE>
=======================================
Alpha Industries, Inc. and Subsidiaries
=======================================
Notes To Consolidated Financial Statements (continued)
Note 2 Company Operations (continued)
During fiscal 1997, the Company operated a sales subsidiary in the United
Kingdom and a ceramic manufacturing operation in France. At the end of fiscal
1997, the Company sold its ceramic manufacturing operation in France. During
fiscal 1996, the Company closed its sales subsidiary in Germany and replaced it
with an independent sales representative and distributor. The following table
shows certain financial information relating to the Company's operations in
various geographic areas (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
================================================================================
<S> <C> <C> <C>
Sales
United States
Customers.................. $ 76,004 $ 83,078 $ 67,495
Intercompany............... 6,472 8,526 6,665
Europe
Customers.................. 9,249 13,816 10,759
Eliminations.................. (6,472) (8,526) (6,665)
--------- --------- ---------
Net Sales........................ 85,253 96,894 78,254
--------- --------- ---------
Income (loss) before taxes
United States................. (13,520) 3,553 2,723
Europe........................ (2,052) 910 626
--------- --------- ---------
Income (loss) before taxes....... (15,572) 4,463 3,349
--------- --------- ---------
Assets
United States................. 61,547 69,201 44,896
Europe........................ 3,706 6,222 5,271
--------- --------- ---------
Total Assets..................... $ 65,253 $ 75,423 $ 50,167
========= ========= =========
</TABLE>
================================================================================
Transfers between geographic areas are made at terms that allow for a reasonable
profit to the seller.
Note 3 Inventories
<TABLE>
<CAPTION>
March 30, March 31,
Inventories consisted of the following (in thousands): 1997 1996
================================================================================
<S> <C> <C>
Raw materials......................................... $ 4,886 $ 4,878
Work-in-process....................................... 3,439 5,830
Finished goods........................................ 1,942 1,307
--------- ---------
$ 10,267 $ 12,015
========= =========
</TABLE>
================================================================================
During fiscal 1997, the Company recorded a $2.6 million write-down of inventory
resulting from shifts in demand away from ceramic products.
26
<PAGE>
=======================================
Alpha Industries, Inc. and Subsidiaries
=======================================
Notes To Consolidated Financial Statements (continued)
Note 4 Borrowing Arrangements and Commitments
Line Of Credit
The Company has a $7.5 million Working Capital Line of Credit Agreement which
expires in October 1997. This line of credit is collateralized by the assets of
the Company, excluding real property, not otherwise collateralized. A
commitment fee of 1/2% per year is due quarterly under the Agreement. At March
30, 1997, there was $1.0 million outstanding under the Agreement. At March 31,
1996, there was no outstanding balance under this Agreement.
Long-Term Debt
<TABLE>
<CAPTION>
March 30, March 31,
Long-term debt consisted of the following (in thousands): 1997 1996
================================================================================
<S> <C> <C>
Equipment Term Note (a)............................. $ 3,998 $ 1,011
9-1/2% Mortgage Note Payable (b).................... --- 40
Industrial Revenue Bond (c)......................... 558 667
French Government Sponsored and Start-up Loans (d).. 170 251
CDBG Grant (e)...................................... 819 928
-------- --------
5,545 2,897
Less - current maturities........................... 1,939 332
-------- --------
$ 3,606 $ 2,565
======== ========
</TABLE>
================================================================================
a. The equipment term note is at LIBOR (5.4375% at March 30, 1997 and March 31,
1996) plus 3% and 2%, respectively. This note is collateralized by the assets
of the Company, excluding real property, not otherwise collateralized.
Principal payments of $137,871 plus interest are due monthly until August
1999.
b. The mortgage note payable was paid in full during fiscal 1997.
c. An industrial revenue bond is held by the Farmers and Mechanics National
Bank. The interest rate on this bond is prime (8.5% at March 30, 1997) and
quarterly principal payments of $27,777 are due until March 2002. The bond is
secured by various property, plant and equipment with a net book value of
$2,697,000 at March 30, 1997.
d. The Company has three unsecured government sponsored and start-up business
loans. The first loan has an interest rate of 8.75% and requires annual
payments of $36,000 through December 1998. The second loan has an interest
rate of 5% and requires quarterly principal and interest payments of $8,300
through February 2000. The third loan has an interest rate of 9.0% and
requires principal and interest payments of $3,500 through January 1998.
e. The Company obtained a ten year $960,000 loan from the State of Maryland
under the Community Development Block Grant program. Quarterly payments are
due through December 2003 and represent principal plus interest at 5% of the
unamortized balance.
27
<PAGE>
- ---------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ---------------------------------------
Notes To Consolidated Financial Statements (continued)
Note 4 Borrowing Arrangements and Commitments (continued)
Aggregate annual maturities of long-term debt are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year
================================================================================
<S> <C>
1999................................................ $ 1,950
2000................................................ 944
2001................................................ 234
2002................................................ 240
Thereafter.......................................... 238
--------
$ 3,606
========
</TABLE>
================================================================================
Capital Lease Obligations
<TABLE>
<CAPTION>
At March 30, 1997 included in property, plant and equipment are the following
capitalized leases (in thousands):
<S> <C>
Property, plant and equipment....................... $ 1,798
Accumulated depreciation and amortization........... 1,433
--------
$ 365
========
</TABLE>
Future minimum lease payments under the capitalized lease obligations at March
30, 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year
================================================================================
<S> <C>
1998................................................ $ 236
1999................................................ 9
--------
Total minimum lease payments........................ 245
Less: Amount representing interest................. 7
--------
Present value of net minimum lease payments......... 238
Less: Current maturities........................... 230
--------
Long-term maturities................................ $ 8
========
</TABLE>
================================================================================
Cash payments for interest were $470,000, $906,000, and $635,000 in fiscal 1997,
1996, and 1995, respectively.
The bond, line of credit and term loan agreements include various covenants that
require maintenance of certain financial ratios and balances and restrict
creation of funded debt and payment of dividends. Under the most restrictive
covenants the Company may not pay dividends except restricted payments in an
amount not to exceed $100,000 in connection with the redemption of certain
common stock repurchase rights.
28
<PAGE>
---------------------------------------
Alpha Industries, Inc. and Subsidiaries
---------------------------------------
Notes To Consolidated Financial Statements (continued)
Note 5 Repositioning Charge
During fiscal 1997, the Company successfully completed the resizing of Trans-
Tech, Inc.(TTI), its Maryland subsidiary, which included the sale of Trans-Tech
Europe (TTE), its French ceramic manufacturing operation, and the closing of the
TTI California facility. The Company also completed the sale of the digital
radio product line. The above actions resulted in a repositioning charge which
was recorded in the fourth quarter of fiscal 1997. The charge included the
following items (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Employee severance at TTI............. $ 493
Lease commitments on unoccupied
facilities at TTI................... 512
Write-off of excess equipment at TTI.. 263
Net loss on divestitures.............. 806
------
Total repositioning charge............ $2,074
======
</TABLE>
The severance charges were related to a reduction in force of 47 employees,
largely among support personnel, and were completed in the fourth quarter of
fiscal 1997.
The cash payments relating to the repositioning charge will total approximately
$1.4 million. As of March 31, 1997, cash payments totaling $308 thousand were
made. Approximately $971 thousand is expected to be paid in fiscal 1998 with the
remaining balance to be paid in fiscal 1999.
During fiscal 1996, the Company sold its Methuen, Massachusetts plant which
resulted in a $320 thousand repositioning credit attributable to the reversal
of certain accruals as a result of an earlier than expected disposition of this
facility.
Note 6 Income Taxes
Income (loss) before income taxes consisted of (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic....................... $(13,520) $3,553 $2,723
Foreign........................ (2,052) 910 626
-------- ------ ------
$(15,572) $4,463 $3,349
======== ====== ======
<CAPTION>
The provision for income taxes consisted of (in thousands):
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current income taxes
Federal...................... $ --- $ 69 $ 75
State........................ (119) 108 217
Foreign...................... 119 492 210
-------- ------ ------
$ --- $ 669 $ 502
======== ====== ======
</TABLE>
29
<PAGE>
- ---------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ---------------------------------------
Notes To Consolidated Financial Statements (continued)
Note 6 Income Taxes (continued)
The provision for income taxes is different from that which would be obtained by
applying the statutory Federal income tax rate to income (loss) before income
taxes. The items causing this difference are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax expense (benefit) at U.S. statutory rate.. $(5,294) $1,517 $1,139
State income taxes, net of Federal benefit.... 79 71 143
Change in valuation allowance................. 5,189 (882) (763)
Other net..................................... 26 (37) (17)
------- ------ ------
$ --- $ 669 $ 502
======= ====== ======
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at March 30, 1997 and
March 31, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Accounts receivable due to bad debts...................... $ 195 $ 234
Inventories due to reserves and inventory capitalization.. 1,417 729
Accrued liabilities....................................... 1,584 575
Deferred compensation..................................... 102 177
Other..................................................... 7 6
Net operating loss carryforward........................... 13,109 9,275
Charitable contribution carryforward...................... 37 32
Minimum tax credits and state tax credit carryforwards.... 555 415
-------- -------
Total gross deferred tax assets.......................... 17,006 11,443
Less valuation allowance................................. (13,503) (8,314)
-------- -------
Net deferred tax assets.................................. 3,503 3,129
-------- -------
Deferred tax liabilities:
Property, plant and equipment due to depreciation......... (3,503) (3,129)
-------- -------
Total gross deferred tax liability....................... ( 3,503) (3,129)
-------- -------
Net deferred tax......................................... $ --- $ ---
======== =======
</TABLE>
The valuation allowance for deferred tax assets as of March 30, 1997 and March
31, 1996 was $13,503,000 and $8,314,000, respectively. The net change in the
total valuation allowance for the years ended March 30, 1997 and March 31, 1996
was an increase of $5,189,000 and a decrease of $882,000, respectively.
Cash payments for income taxes were $149,000, $241,000 and $157,000 in fiscal
1997, 1996 and 1995, respectively. As of March 30, 1997, the Company has
available for income tax purposes approximately $36,000,000 in federal net
operating loss carryforwards which may be used to offset future taxable income.
These loss carryforwards begin to expire in fiscal year 2004. Should the Company
undergo an ownership change as defined in Section 382 of the Internal Revenue
Code, the Company's tax net operating loss carryforwards generated prior to the
ownership change will be subject to an annual limitation which could reduce or
defer the utilization of these losses. The Company also has minimum tax credit
carryforwards of approximately $25,000 which are available to reduce future
federal regular income taxes, if any, over an indefinite period. In addition,
the Company has state tax credit carryforwards of $530,000 of which $218,000 is
available to reduce state income taxes over an indefinite period.
30
<PAGE>
---------------------------------------
Alpha Industries, Inc. and Subsidiaries
---------------------------------------
Notes To Consolidated Financial Statements (continued)
Note 6 Income Taxes (continued)
The Company has not recognized a deferred tax liability of approximately
$148,000 for the undistributed earnings of its 100 percent owned foreign
subsidiaries that arose in 1997 and prior years because the Company currently
does not expect those unremitted earnings to reverse and become taxable to the
Company in the foreseeable future. A deferred tax liability will be recognized
when the Company expects that it will recover those undistributed earnings in a
taxable manner, such as through receipt of dividends or sale of the investments.
As of March 30, 1997, the undistributed earnings of these subsidiaries were
approximately $436,000.
Note 7 Common Stock
Long-Term Incentive Plan
The Company has a Long-Term Incentive Plan adopted in 1986 pursuant to which
stock options, with or without stock appreciation rights, may be granted and
restricted stock awards and book value awards may be made.
Common Stock Options
These options may be granted in the form of incentive stock options or
non-qualified stock options. The option price may vary at the discretion of
the Compensation Committee but shall not be less than the greater of fair
market value or par value. The option term may not exceed ten years. The
options may be exercised in cumulative annual increments commencing one
year after the date of grant.
Restricted Stock Awards
No restricted shares of the Company's common stock were issued during
fiscal 1997. For fiscal 1996 and 1995, respectively, a total of 8,500 and
31,000 restricted shares of the Company's common stock were granted to
certain employees.
The market value of shares awarded were $51,000 and $147,000 for fiscal
1996 and 1995, respectively. These amounts were recorded as unearned
compensation - restricted stock and are shown as a separate component of
stockholders' equity. Unearned compensation is being amortized to expense
over the five year vesting period and amounted to $35,000, $61,000, and
$64,000 in fiscal 1997, 1996, and 1995, respectively.
Long-Term Compensation Plan
On October 1, 1990, the Company adopted a Supplemental Executive Retirement Plan
(SERP) for certain key executives. Benefits payable under this plan are based
upon the participant's base pay at retirement reduced by proceeds from the
exercise of certain stock options. Options vest over a five year period.
Benefits earned under the SERP are fully vested at age 55, however, the benefit
is ratably reduced if the participant retires prior to age 65. Compensation
expense related to the plan was $106,000, $62,000 and $68,000 in fiscal 1997,
1996, and 1995, respectively. Total benefits accrued under these plans were
$180,000 at March 30, 1997 and $515,000 at March 31, 1996.
31
<PAGE>
- ---------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ---------------------------------------
Notes To Consolidated Financial Statements (continued)
Note 7 Common Stock (continued)
A summary of stock option and restricted stock award transactions follows:
<TABLE>
<CAPTION>
Weighted average
exercise price of
Shares shares under plan
- --------------------------------------------------------------------------------
<S> <C> <C>
Balance, April 3, 1994................. 970,564 $2.73
---------
Granted.............................. 87,000 8.31
Exercised............................ (147,255) 2.66
Restricted........................... (19,335) ---
Cancelled............................ (21,749) 4.44
---------
Balance outstanding at April 2, 1995... 869,225 3.14
---------
Granted.............................. 115,500 12.36
Exercised............................ (78,432) 2.82
Restricted........................... (22,664) ---
Cancelled............................ (44,242) 6.06
---------
Balance outstanding at March 31, 1996.. 839,387 4.38
---------
Granted.............................. 598,500 8.36
Exercised............................ (172,750) 2.73
Restricted........................... (23,164) ---
Cancelled............................ (186,503) 8.61
---------
Balance outstanding at March 30, 1997.. 1,055,470 6.21
=========
Balance exercisable at March 30, 1997.. 422,936 $3.25
=========
</TABLE>
The following table summarizes information concerning currently outstanding and
exercisable options as of March 30, 1997:
<TABLE>
<CAPTION>
Weighted
average Weighted
remaining average Weighted
Range of Number contractual outstanding Options average
exercise prices outstanding life (years) option price exercisable exercise price
- --------------- ----------- ---------------- ------------------ ----------- ----------------
<S> <C> <C> <C> <C> <C>
$2.375 - $5.00 432,868 4.4 $2.68 391,336 $2.62
$5.01 - $10.00 499,000 9.3 $8.15 9,200 $8.87
$10.01 - $13.00 94,600 8.1 $12.09 22,400 $11.90
Restricted 29,002 4.5 --- --- ---
--------- -------
1,055,470 422,936
========= =======
</TABLE>
32
<PAGE>
---------------------------------------
Alpha Industries, Inc. and Subsidiaries
---------------------------------------
Notes To Consolidated Financial Statements (continued)
Note 7 Common Stock (continued)
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" and related interpretations in accounting for its
stock option and employee stock purchase plans, accordingly, no compensation
expense has been recognized in the consolidated financial statements for such
plans. The following assumptions were used in the calculation of these values
for fiscal years 1997 and 1996, respectively: volatility of 85%, risk free
interest rate of 7% and expected life of 9.95 years. Had compensation cost for
the Company's stock option plans been determined based upon the fair value at
the grant date for awards under these plans consistent with the methodology
prescribed under SFAS 123, "Accounting for Stock-based Compensation," the
Company's net income would have been reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
(in thousands) 1997 1996
-------------------------------------------------------------------
<S> <C> <C>
Net income (loss) As reported $ (15,572) $ 3,794
Pro forma (15,711) 3,445
</TABLE>
The effect of applying SFAS 123 as shown in the above pro forma disclosure is
not representative of the pro forma effect on net income in future years because
it does not take into consideration proforma compensation expense related to
grants made prior to fiscal year 1996.
Stock Purchase Warrants
In April 1994, the Company amended its line of credit agreement and issued
50,000 stock purchase warrants to Silicon Valley Bank. The warrants are
exercisable at $3.75 per share and expire on April 1, 1999.
Stock Option Plan For Non-Employee Directors
On September 12, 1994, the shareholders approved a Non-Qualified Stock Option
Plan for Non-Employee Directors. A total of 50,000 options may be granted under
this plan. The option price is the greater of the fair market value of the
shares of common stock at the time the option is granted or four dollars
($4.00). Options are exercisable 20% per year. No options were granted under
this plan during fiscal 1997. During fiscal 1996, a new director was elected to
the Board of Directors and 5,000 non-qualified stock options were issued at
$17.875 per share. In fiscal 1995, each of the three directors received 5,000
non-qualified stock options issued at $5.875 per share. No options have been
exercised under this plan.
Stock Purchase Plan
In December 1989, the Company adopted an employee stock purchase plan. The plan
was amended in October 1992 to provide for six month offering periods. Under the
plan, eligible employees may purchase common stock through payroll deductions of
up to 10% of compensation. The price per share is the lower of 85% of the
market price at the beginning or end of the offering period. The plan
originally provided for purchases by employees of up to an aggregate of 300,000
shares through December 31, 1995. During fiscal 1996, the employee stock
purchase plan was amended and extended through December 31, 1998. Shares of
15,076, 16,836, and 28,875, were purchased under this plan in fiscal 1997,
1996, and 1995, respectively.
33
<PAGE>
- ---------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ---------------------------------------
Notes To Consolidated Financial Statements (continued)
Note 7 Common Stock (continued)
Shareholder Rights Plan
In December 1996, the Board of Directors of the Company declared a dividend
distribution of one right for each outstanding share of common stock. Each
right entitles the registered holder to purchase from the Company one common
share at an exercise price of $40 per share. A right will also be issued with
each common share that is issued prior to the time the rights become exercisable
or expire.
The rights are not exercisable until after a person or group acquires 10% or
more of the Company's common stock or announces a tender offer for 10% or more
of the common stock except with respect to persons who already hold 10% in which
case the threshold is any additional shares. In such events, each holder shall
be entitled to purchase that number of shares of the Company's common stock
having a market value equal to two times the $40 per share exercise price. In
lieu of such right, the Board of Directors may issue one share of common stock
for each right held by everyone except the acquiring person or group. In the
event that the Company is acquired in a merger or other business combination
transaction or more than 50% of its assets or earning power are sold, each
holder shall thereafter have the right to receive, upon exercise of each right,
that number of shares of common stock of the acquiring company which at the time
of such transaction would have a market value of two times the $40 per share
exercise price.
The Company is entitled to redeem the rights at one cent per share at any time
before the rights are exercisable. The rights will expire on December 5, 2006,
unless extended or unless the rights are earlier redeemed or exchanged;
provided, however, that the Shareholder Rights Plan will terminate at the annual
meeting of stockholders of the Company to be held on September 8, 1997, if the
stockholders do not approve the Plan at that meeting.
Note 8 Employment Benefit Plan
On March 31, 1995, the Company merged its Employee Stock Ownership Plan into the
Alpha Industries, Inc. Saving and Retirement Plan also known as the 401(k) plan.
All of the Company's employees who are at least 21 years old and have completed
six months of service (1,000 hours in a 12 month period) with the Company are
eligible to receive a Company contribution. Discretionary Company contributions
are determined by the Board of Directors and may be in the form of cash or the
Company's stock. The Company contributes a match of 100% of the first 1% and a
50% match on the next 4% of an employee's salary for employees with 5 years or
less of service. For employees with more than 5 years of service the Company
contributes a 100% match on the first 1% and a 75% match on the next 5% of an
employee's salary. For fiscal 1997, the Company contributed 110,956 shares of
the Company's common stock valued at $835,000 to the 401(k) plan. During fiscal
1996, the Company contributed $101,000 for the first three quarters and accrued
$208,000 that was distributed in the form of the Company's stock in fiscal 1997.
Under the previous 401(k) plan all of the Company's employees who were at least
21 years old and had completed one year of service (1,000 hours in a 12 month
period) with the Company were eligible to receive a Company matching
contribution. The Company contributed $.50 for each $1.00 contributed by
employees, up to a maximum Company matching contribution of $500 per employee
for fiscal 1995. For fiscal year 1995, the Company contributed $232,000.
Under the previous Employee Stock Ownership Plan contributions were determined
by the Board of Directors and contributed to a trust created to acquire shares
of the Company's common stock and other assets for the exclusive benefit of the
participants. The Company accrued a contribution of $226,000 for fiscal 1995
that was distributed during fiscal 1996.
34
<PAGE>
---------------------------------------
Alpha Industries, Inc. and Subsidiaries
---------------------------------------
Notes To Consolidated Financial Statements (continued)
Note 9 Commitments And Contingencies
The Company has various operating leases for manufacturing and engineering
equipment and buildings. Rent expense amounted to $1,937,000, $1,626,000, and
$1,255,000 in fiscal 1997, 1996, and 1995, respectively. Purchase options may be
exercised at various times for some of these leases. Future minimum payments
under these leases are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year
--------------------------------------------------------------------
<S> <C>
1998 ............................................ $ 1,321
1999 ............................................ 660
2000 ............................................ 370
2001 ............................................ 374
2002 ............................................ 388
Thereafter ....................................... 1,527
-------
$ 4,640
=======
</TABLE>
The Company has been notified by federal and state environmental agencies of its
potential liability with respect to the Spectron, Inc. Superfund site in Elkton,
Maryland. Several hundred other companies have also been notified about their
potential liability regarding this site. The Company continues to deny that it
has any responsibility with respect to this site other than as a de minimis
-- -------
party. Management is of the opinion that the outcome of the aforementioned
environmental matter will not have a material effect on the Company's operations
or financial position.
The Company is party to suits and claims arising in the normal course of
business. Management believes these are adequately provided for or will result
in no significant additional liability to the Company.
Note 10 Related Party Transactions
The Company has had transactions in the normal course of business with various
related parties. Scientific Components Corporation, currently a beneficial owner
of the Company's Common Stock purchased approximately $5.1 million, $4.3
million, and $1.9 million of products during fiscal 1997, 1996, and 1995,
respectively. In addition, a director of the Company is also a director of
Scientific Atlanta, Inc. During fiscal 1997, 1996, and 1995, Scientific Atlanta,
Inc. purchased approximately $1 million, $1.2 million, and $766 thousand of
product, respectively.
35
<PAGE>
- ---------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ---------------------------------------
Independent Auditors' Report
The Board of Directors and Stockholders
Alpha Industries, Inc.:
We have audited the consolidated financial statements of Alpha Industries, Inc.
and subsidiaries as listed in the accompanying index under Item 8. In connection
with our audits of the consolidated financial statements, we have also audited
the financial statement schedule as listed in the accompanying index under Item
14. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Alpha Industries,
Inc. and subsidiaries at March 30, 1997 and March 31, 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended March 30, 1997 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information set forth
therein.
KPMG Peat Marwick LLP
Boston, Massachusetts
May 9, 1997
36
<PAGE>
----------------------------------------
Alpha Industries, Inc. and Subsidiaries
----------------------------------------
Item 9 Changes In And Disagreements With Accountants On Accounting And
Financial Disclosure
None.
PART III
Item 10 Directors And Executive Officers Of The Registrant
See the section entitled "Election of Directors" appearing in the Company's
Proxy Statement for the Annual Meeting of Stockholders to be held on September
8, 1997, to be filed within 120 days of the end of the Company's fiscal year,
which section is incorporated herein by reference, and the section entitled
"Executive Officers" under Item 1 of this Annual Report on Form 10-K.
Item 11 Executive Compensation
See the section entitled "Executive Compensation" appearing in the Company's
Proxy Statement for the Annual Meeting of Stockholders to be held on September
8, 1997, which section is incorporated herein by reference.
Item 12 Security Ownership Of Certain Beneficial Owners And Management
See the section entitled "Securities Beneficially Owned by Certain Persons"
appearing in the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held on September 8, 1997, which section is incorporated
herein by reference.
Item 13 Certain Relationships And Related Transactions
See the section entitled "Certain Relationships and Related Transactions"
appearing in the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held on September 8, 1997, which section is incorporated
herein by reference.
PART IV
Item 14 Exhibits, Financial Statement Schedules, And Reports On Form 8-K
(a) 1. Index to Financial Statements
The financial statements filed as part of this report are listed on the
index appearing on page 17.
2. Index to Financial Statement Schedules
The following financial statement schedule is filed as part of this
report (page references are to this report):
Schedule II Valuation and Qualifying Accounts (page 41)
Other schedules are omitted because of the absence of conditions under
which they are required or because the required information is
presented in the financial statements or notes thereto.
37
<PAGE>
- ----------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ----------------------------------------
3. Exhibits
(3) Certificate of Incorporation and By-laws.
(a) Restated Certificate of Incorporation (Filed as Exhibit 3 (a)
to Registration Statement on Form S-3 (Registration No. 33-
63857))*.
(b) Amended and restated By-laws of the Corporation dated April 30,
1992 (Filed as Exhibit 3(b) to the Annual Report on Form 10-K
for the year ended March 29, 1992)*.
(4) Instruments defining rights of security holders, including
indentures.
(a) Specimen Certificate of Common Stock (Filed as Exhibit 4(a) to
Registration Statement on Form S-3 (Registration No. 33-
63857))*.
(b) Frederick County Industrial Development Revenue Bond, Deed of
Trust, Loan Agreement and Guaranty and Indemnification
Agreement dated June 17, 1982 (Filed as Exhibit 4(g) to the
Registration Statement on Form S-8 filed July 29, 1982)*. Bond
and Loan Document Modification Agreement dated December 9, 1993
(Filed as Exhibit 4(c) to the Quarterly Report on Form 10-Q for
the quarter ended December 26, 1993)*.
(c) Amended and restated Shareholder Rights Agreement dated as of
December 5, 1996 between Registrant and American Stock Transfer
and Trust Company, as Rights Agent as amended and restated June
23, 1997.
(d) Loan and Security Agreement dated December 15, 1993 between
Trans-Tech, Inc., and County Commissioners of Frederick County
(Filed as Exhibit 4(h) to the Quarterly Report on Form 10-Q for
the quarter ended July 3, 1994)*.
(e) Stock Purchase Warrant for 50,000 shares of the Registrant's
Common Stock issued to Silicon Valley Bank as of April 1, 1994
(Filed as Exhibit 4(i) to the Quarterly Report on Form 10-Q for
the quarter ended July 3, 1994)*.
(f) Credit Agreement dated September 29, 1995 between Alpha
Industries, Inc., and Trans-Tech Inc. and Fleet Bank of
Massachusetts, N.A. and Silicon Valley Bank. (Filed as Exhibit
4(j) to the Quarterly Report on Form 10-Q for the quarter ended
October 1, 1995)*; and as amended by Second Amendment dated as
of September 30, 1996, and as further amended by Third
Amendment dated as of June 12, 1997 and amended and restated
promissory notes dated as of June 12, 1997.
(10) Material Contracts.
(a) Alpha Industries, Inc., 1986 Long-Term Incentive Plan as
amended (Filed as Exhibit 10(a) to the Quarterly Report on
Form 10-Q for the quarter ended October 2, 1994)*. (1)
(b) Alpha Industries, Inc., Employee Stock Purchase Plan as
amended October 22, 1992 (Filed as Exhibit 10(b) to the Annual
Report on Form 10-K for the fiscal year ended March 28, 1993)*
and amended August 22, 1995. (Filed as Exhibit 10(b) to the
Annual Report on Form 10-K for the fiscal year ended March 31,
1996)*. (1)
(c) SERP Trust Agreement between the Registrant and the First
National Bank of Boston as Trustee dated April 8, 1991 (Filed
as Exhibit 10(c) to the Annual Report on Form 10-K for the
fiscal year ended March 31, 1991)*. (1)
(d) Alpha Industries, Inc., Long-Term Compensation Plan dated
September 24, 1990 (Filed as Exhibit 10(i) to the Annual
Report on Form 10-K for the fiscal year ended March 29,
1992)*; amended March 28, 1991 (Filed as Exhibit 10 (a) to the
Quarterly Report on Form 10-Q for the quarter ended June 27,
1993)* and as further amended October 27, 1994 (Filed as
Exhibit 10(f) to the Annual Report on Form 10-K for the fiscal
year ended April 2, 1995)*. (1)
38
<PAGE>
----------------------------------------
Alpha Industries, Inc. and Subsidiaries
----------------------------------------
(e) Master Equipment Lease Agreement between AT&T Commercial
Finance Corporation and the Registrant dated June 19, 1992
(Filed as Exhibit 10(j) to the Annual Report on Form 10-K for
the fiscal year ended March 28, 1993)*.
(f) Severance Agreement dated January 13, 1997 between the
Registrant and Thomas C. Leonard.(1)
(g) Severance Agreement dated May 20, 1997 between the Registrant
and David J. Aldrich. (1)
(h) Severance Agreement dated January 14, 1997 between the
Registrant and Richard Langman. (1)
(i) Employment Agreement dated October 4, 1996 between the
Registrant and Martin J. Reid.(1)
(j) Consulting Agreement dated August 13, 1992 between the
Registrant and Sidney Topol. (Filed as Exhibit 10(p) to the
Annual Report on Form 10-K for the fiscal year ended April 3,
1994)*.(1)
(k) Master Lease Agreement between Comdisco, Inc. and the
Registrant dated September 16, 1994 (Filed as Exhibit 10(q)
the Quarterly Report on Form 10-Q for the quarter ended
October 2, 1994)*.
(l) Alpha Industries, Inc., 1994 Non-Qualified Stock Option Plan
for Non-Employee Directors (Filed as Exhibit 10(r) to the
Quarterly Report on Form 10-Q for the quarter ended October 2,
1994)*. (1)
(m) Alpha Industries Executive Compensation Plan dated January 1,
1995 and Trust for the Alpha Industries Executive Compensation
Plan dated January 3, 1995 (Filed as Exhibit 10(p) to the
Annual Report on Form 10-K for the fiscal year ended April 2,
1995)*.(1)
(n) Alpha Industries, Inc. Savings and Retirement 401(k) Plan
dated July 1, 1996.
(o) Change in Control Agreement between the Registrant and Paul E.
Vincent dated August 23, 1996.(1)
(p) Change in Control Agreement between the Registrant and James
C. Nemiah dated August 23, 1996.(1)
(q) Severance Agreement dated April 30, 1996 between the
Registrant and Jean Pierre Gillard.(1)
(r) Lease Agreement between MIE Properties, Inc. and Trans-Tech,
Inc. (Filed as Exhibit 10(r) to the Quarterly Report on Form
10-Q for the quarter ended September 29, 1996)*.
(11) Statement re computation of per share earnings.
(21) Subsidiaries of the Registrant.
(23) Consent of Independent Auditors.
(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 fiscal quarter ended March 30,
1997.
--------------------
*Not filed herewith. In accordance with Rule 12b-32 promulgated pursuant to the
Securities Exchange Act of 1934, as amended, reference is hereby made to
documents previously filed with the Commission, which are incorporated by
reference herein.
(1) Management Contracts.
39
<PAGE>
- ---------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ---------------------------------------
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ALPHA INDUSTRIES, INC.
(Registrant)
By: /s/ THOMAS C. LEONARD
-----------------------------------------
Thomas C. Leonard, President
Date: June 20, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on June 20, 1997.
<TABLE>
<CAPTION>
Signature and Title Signature and Title
- ----------------------------- --------------------------
<S> <C>
/s/ GEORGE S. KARIOTIS /s/ MARTIN J. REID
- ----------------------------- --------------------------
George S. Kariotis Martin J. Reid
Chairman of the Board Director
/s/ THOMAS C. LEONARD /s/ RAYMOND SHAMIE
- ----------------------------- --------------------------
Thomas C. Leonard Raymond Shamie
Chief Executive Officer Director
President and Director
/s/ PAUL E. VINCENT /s/ SIDNEY TOPOL
- ----------------------------- --------------------------
Paul E. Vincent Sidney Topol
Chief Financial Officer Director
Principal Financial Officer
Principal Accounting Officer
/s/ ARTHUR PAPPAS /s/ CHARLES A. ZRAKET
- ----------------------------- --------------------------
Arthur Pappas Charles A. Zraket
Director Director
</TABLE>
40
<PAGE>
---------------------------------------
Alpha Industries, Inc. and Subsidiaries
---------------------------------------
SCHEDULE II
Valuation And Qualifying Accounts
(In thousands)
<TABLE>
<CAPTION>
Charged
Balance At To Costs Balance At
Beginning And End Of
Description Of Year Expenses Deductions Year
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended March 30, 1997
Allowance for doubtful accounts.. $ 634 $ 206 $ 319 $ 521
Allowance for estimated losses
on contracts.................... $ 24 $ -- $ 21 $ 3
Year Ended March 31, 1996
Allowance for doubtful accounts.. $ 783 $ 60 $ 209 $ 634
Allowance for estimated losses
on contracts.................... $ 117 $ -- $ 93 $ 24
Year Ended April 2, 1995
Allowance for doubtful accounts.. $ 945 $ 60 $ 222 $ 783
Allowance for estimated losses
on contracts.................... $ 593 $ -- $ 476 $ 117
</TABLE>
41
<PAGE>
EXHIBIT (4)(c)
AMENDED AND RESTATED
SHAREHOLDER RIGHTS AGREEMENT
between
ALPHA INDUSTRIES, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
Dated as of December 5, 1996
as Amended and Restated June 23, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. CERTAIN DEFINITIONS..........................................................................i
SECTION 2. APPOINTMENT OF RIGHTS AGENT..................................................................i
SECTION 3. ISSUE OF RIGHT CERTIFICATES..................................................................i
SECTION 4. FORM OF RIGHT CERTIFICATES...................................................................i
SECTION 5. COUNTERSIGNATURE AND REGISTRATION............................................................i
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES;
MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES.................................................i
SECTION 7. EXERCISE OF RIGHTS; EXERCISE PRICE; EXPIRATION DATE OF RIGHTS................................i
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES...........................................i
SECTION 9. RESERVATION AND AVAILABILITY OF COMMON STOCK.................................................i
SECTION 10. COMMON STOCK RECORD DATE....................................................................i
SECTION 11. ADJUSTMENT OF EXERCISE PRICE, NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS.................i
SECTION 12. CERTIFICATE OF ADJUSTED EXERCISE PRICE OR NUMBER OF SHARES..................................i
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER........................i
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.....................................................i
SECTION 15. RIGHTS OF ACTION...........................................................................i
SECTION 16. AGREEMENT OF RIGHT HOLDERS..................................................................i
SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER...........................................i
SECTION 18. CONCERNING THE RIGHTS AGENT.................................................................i
SECTION 19. MERGER OR CONSOLIDATION OF OR CHANGE OF NAME OF RIGHTS AGENT................................i
SECTION 20. DUTIES OF RIGHTS AGENT......................................................................i
SECTION 21. CHANGE OF RIGHTS AGENT......................................................................i
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES........................................ ii
SECTION 23. REDEMPTION AND TERMINATION................................................ ii
SECTION 24. EXCHANGE.................................................................. ii
SECTION 25. NOTICE OF CERTAIN EVENTS.................................................. ii
SECTION 26. NOTICES................................................................... ii
SECTION 27. SUPPLEMENTS AND AMENDMENTS................................................ ii
SECTION 28. SUCCESSORS................................................................ ii
SECTION 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS...................... ii
SECTION 30. BENEFITS OF THIS AGREEMENT................................................ ii
SECTION 31. SEVERABILITY.............................................................. ii
SECTION 32. GOVERNING LAW............................................................. ii
SECTION 33. COUNTERPARTS.............................................................. ii
SECTION 34. DESCRIPTIVE HEADINGS...................................................... ii
</TABLE>
<PAGE>
SHAREHOLDER RIGHTS AGREEMENT
Agreement, dated as of December 5, 1996, as amended and restated as of June
23, 1997, between Alpha Industries, Inc., a Delaware corporation (the
"Company"), and American Stock Transfer & Trust Company, a New York trust
company (the "Rights Agent").
WITNESSETH
WHEREAS, the Board of Directors of the Company desires to provide
shareholders of the Company with the opportunity to benefit from the long-term
prospects and value of the Company and to ensure that shareholders of the
Company receive fair and equal treatment in the event of any proposed takeover
of the Company;
WHEREAS, the Company and the Rights Agent entered into the Agreement dated
as of December 5, 1996;
WHEREAS, on December 5, 1996, the Board of Directors of the Company
declared a dividend distribution of one Right (as hereafter defined) for each
outstanding share of Common Stock, par value $.25 per share of the Company (the
"Common Stock") outstanding as of the close of business on December 5, 1996 (the
"Record Date"), and authorized the issuance of one Right for each share of
Common Stock of the Company issued (whether originally issued or sold from the
Company's treasury) between the Record Date and the earlier of the Distribution
Date or the Expiration Date (as hereafter defined), each Right initially
representing the right to purchase one share of Common Stock of the Company upon
the terms and subject to the conditions hereinafter set forth (the "Rights");
WHEREAS, the Board of Directors of the Company has determined it to be in
the best interest of the Company to amend in certain respects and restate the
terms of the Agreement and of the Rights pursuant to Section 27 of the
Agreement; and
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree to amend and restate the Agreement as
follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
------------------------------
following terms have the indicated meanings:
"Acquiring Person" means any Person who or which, together with all
Affiliates and Associates of such Person, shall be the Beneficial Owner of 10%
or more of the shares of Common Stock then outstanding, but shall not include
(i) any Person who is the Beneficial Owner of 10% or more of the shares of
Common Stock outstanding on the date of this Agreement unless and until such
time hereafter as such Person shall become the Beneficial Owner (other than by
means of a stock dividend or stock split) of any additional shares of Common
Stock, and (ii) any Exempt Persons.
1
<PAGE>
Notwithstanding the foregoing, no Person shall become an "Acquiring Person"
(i) as the result of an acquisition of Common Stock by the Company which, by
reducing the number of shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to 10% or more of the shares of Common
Stock then outstanding; provided, however, that if a Person shall become the
Beneficial Owner of 10% or more of the shares of Common Stock of the Company
then outstanding by reason of share purchases by the Company and shall, after
such share purchases by the Company, become the Beneficial Owner of any
additional shares (other than pursuant to a stock split, stock dividend or
similar transaction) of Common Stock of the Company and immediately thereafter
be the Beneficial Owner of 10% or more of the shares of Common Stock then
outstanding, then such Person shall be deemed to be an "Acquiring Person," or
(ii) if the Board of Directors of the Company determines that a Person who would
otherwise be an "Acquiring Person" has become such inadvertently, and such
Person divests as promptly as practicable a sufficient number of shares of
Common Stock so that such Person would no longer be an "Acquiring Person," as
defined pursuant to the foregoing provisions.
"Affiliate" and "Associate" have the respective meanings ascribed to such
terms in Rule 12b-2 under the Exchange Act, as in effect on the date of this
Agreement; provided, however, that no Person who is a director or officer of the
Company shall be deemed an Affiliate or an Associate of any other director or
officer of the Company solely as a result of his or her position as director or
officer of the Company.
"Beneficial Owner" means a person who is deemed to "beneficially own," any
securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, beneficially owns (as determined
pursuant to Rule 13d-3 under the Exchange Act, as in effect on the date of
this Agreement);
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has:
(A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time or upon the satisfaction of
any conditions or both) pursuant to any agreement, arrangement or
understanding (whether or not in writing) (other than customary agreements
with and between underwriters and selling group members with respect to a
bona fide public offering of securities) or upon the exercise of conversion
rights, exchange rights, rights (other than the Rights), warrants or
options, or otherwise; provided, however, that a Person shall not be deemed
the "Beneficial Owner" of (1) securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange; (2) securities issuable upon exercise of these Rights
at any time prior to the occurrence of a Triggering Event; or (3)
securities issuable upon exercise of Rights from and after the
2
<PAGE>
occurrence of a Triggering Event, which Rights were acquired by such Person
or any of such Person's Affiliates or Associates prior to the Distribution
Date or pursuant to Sections 3(a), 11 (i) or 22 hereof; or
(B) the right to vote pursuant to any agreement, arrangement or
understanding (whether or not in writing); provided, however, that a Person
shall not be deemed the "Beneficial Owner" of any security under this
clause (B) if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy given in response to a
public proxy or consent solicitation made pursuant to, and in accordance
with, the rules of the Exchange Act and (2) is not also then reportable by
such person on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(C) the right to dispose of pursuant to any agreement,
arrangement or understanding (whether or not in writing) (other than
customary arrangements with and between underwriters and selling group
members with respect to a bona fide public offering of securities); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person
or any of such Person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing) (other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except, pursuant to a revocable
proxy as described in clause (B) hereof) or disposing of any securities of
the Company;
provided, however, that (1) no Person engaged in business as an underwriter of
- --------
securities shall be deemed the Beneficial Owner of any securities acquired
through such Person's participation as an underwriter in good faith in a firm
commitment underwriting until the expiration of 40 days after the date of such
acquisition, and (2) no Person who is a director or an officer of the Company
shall be deemed, as a result of his or her position as director or officer of
the Company, the Beneficial Owner of any securities of the Company that are
beneficially owned by any other director or officer of the Company.
"Business Day" means any day other than a Saturday, Sunday, or a day on
which banking institutions in the Commonwealth of Massachusetts are authorized
or obligated by law or executive order to close.
"Close of business" on any given date means 5:00 p.m., Boston,
Massachusetts time, on such date; provided, however, that if such date is not a
--------
Business Day it shall mean 5:00 P.M., Boston, Massachusetts time, on the next
succeeding Business Day.
"Common Stock" means the Common Stock, par value $.25 per share, of the
Company, except that "Common Stock" when used with reference to any Person other
than the Company shall mean the capital stock with the greatest voting power, or
the equity securities
3
<PAGE>
or other equity interests having power to control or direct the management, of
such Person or, if such Person is a Subsidiary of another Person, the Person
which ultimately controls such first-mentioned Person and which has issued and
outstanding such capital stock, equity securities or equity interests.
"Distribution Date" has the meaning defined in Section 3(a) hereof."
"Exchange Act" means the Securities Exchange Act of 1934, as amended."
"Exempt Person" means (i) the Company, (ii) any Subsidiary of the Company,
(iii) any employee benefit plan or compensation arrangement of the Company or
any Subsidiary of the Company, or (iv) any Person holding shares of Common Stock
organized, appointed or established by the Company or any Subsidiary of the
Company for or pursuant to the terms of any such employee benefit plan or
compensation arrangement.
"Exercise Price" has the meaning defined in Section 7(b) hereof."
"Expiration Date" means the earlier of (i) the date of the next annual
meeting of stockholders of the Company, unless at that meeting the stockholders
of the Company approve the continuation of this Agreement by vote of not less
than a majority of the stockholders present in person or by proxy at that
meeting, (ii) the close of business on December 5, 2006 (the "Final Expiration
Date"), (iii) the time at which the Rights are redeemed as provided in Section
23 hereof, or (iv) the time at which such Rights are exchanged as provided in
Section 24 hereof."
"Exchange Ratio" has the meaning defined in Section 24.
"Fair Market Value" of any securities or other property shall be as
determined in accordance with Section 11(d) hereof.
"Person" means an individual, a corporation, a partnership, an association,
a joint stock company, a trust, a business trust, a government or political
subdivision, any unincorporated organization, or any other association or
entity.
"Principal Party" has the meaning defined in Section 13(b) hereof.
"Redemption Price" has the meaning defined in Section 23 hereof."
"Rights Certificate" means a certificate evidencing the Rights
substantially in the form of Exhibit B hereto.
"Section 11 (a) (ii) Event" means any event described in Section 11(a)(ii)
hereof.
4
<PAGE>
"Section 13 Event" means any event described in clauses (x), (y) or (z) of
Section 13(a) hereof."
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Acquisition Date" means the date of the first public announcement
(which for purposes of this definition shall include, without limitation, the
issuance of a press release or the filing of a publicly-available report or
other document with the Securities and Exchange Commission or any other
governmental agency) by the Company or an Acquiring Person that an Acquiring
Person has become such.
"Subsidiary" means with respect to any Person, any other Person of which a
majority of the voting power of the voting equity securities or voting interests
is owned, directly or indirectly, by such Person, or which is otherwise
controlled by such Person."
"Trading Day" means a day on which the principal national securities
exchange on which such security is listed or admitted to trading is open for the
transaction of business or, if such security is not listed or admitted to
trading on any national securities exchange, a Business Day.
"Triggering Event" means any Section 11(a)(ii) Event or any Section 13
Event.
Section 2. Appointment of Rights Agent.
--------------------------------------
The Company hereby appoints the Rights Agent to act as agent for the
Company and the holders of the Rights (who, in accordance with Section 3 hereof,
shall prior to the Distribution Date also be the holders of the Common Stock) in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such Co-
Rights Agents as it may deem necessary or desirable. In the event the Company
appoints one or more Co-Rights Agents, the respective duties of the Rights Agent
and any Co-Rights Agents shall be as the Company shall determine.
Section 3. Issue of Right Certificates.
--------------------------------------
(a) From the date hereof until the earlier of (i) the close of business on
the tenth Business Day after the Stock Acquisition Date, or (ii) the close of
business on the tenth Business Day (or such other Business Day, if any, as the
Board of Directors may determine in its sole discretion) after the date of the
commencement by any Person, other than an Exempt Person, of a tender or exchange
offer if, upon consummation thereof, such Person would be the beneficial Owner
of 10% or more of the shares of Common Stock then outstanding, (the earliest of
such dates being herein referred to as the "Distribution Date"), (x) the Rights
will be evidenced (subject to the provisions of Section 3 (b) hereof) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the
5
<PAGE>
underlying shares of Common Stock. As soon as practicable after the Company has
notified the Rights Agent of the occurrence of the Distribution Date, the Rights
Agent will, at the Company's expense, send by first-class, insured, postage
prepaid mail, to each record holder of the Common Stock as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more certificates, in substantially the form of
Exhibit A hereto (the "Right Certificates"), evidencing one Right for each share
of Common Stock so held. In the event that an adjustment in the number of Rights
per share of Common Stock has been made pursuant to Section 11(o) hereof, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) at the time of distribution of the Right
Certificates, so that Right Certificates representing only whole numbers of
Rights are distributed and cash is paid in lieu of any fractional Rights. As of
and after the close of business on the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
(b) With respect to certificates for the Common Stock issued prior to the
close of business on the Record Date, the Rights will be evidenced by such
certificates for the Common Stock on or until the Distribution Date (or the
earlier redemption, expiration or termination of the Rights), and the registered
holders of the Common Stock also shall be the registered holders of the
associated Rights. Until the Distribution Date (or the earlier redemption,
expiration or termination of the Rights), the transfer of any of the
certificates for the Common Stock outstanding prior to the date of this
Agreement shall also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate.
(c) Certificates for the Common Stock issued after the Record Date, but
prior to the Distribution Date (or the earlier redemption, expiration or
termination of the Rights), shall be deemed also to be certificates for Rights,
and shall bear a legend, substantially in the form set forth below:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Shareholder Rights Agreement between
Alpha Industries, Inc. and American Stock Transfer & Trust Company as
Rights Agent, dated as of December 5, 1996 (the "Rights Agreement"),
the terms of which are hereby incorporated herein by reference and a
copy of which is on file at the principal offices of Alpha Industries,
Inc. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. Alpha Industries,
Inc. may redeem the Rights at a redemption price of $0.01 per Right,
subject to adjustment, under the terms of the Rights Agreement. Alpha
Industries, Inc. will mail to the holder of this certificate a copy of
the Rights Agreement, as in effect on the date of mailing, without
charge promptly after receipt of a written request therefor. Under
certain circumstances, Rights issued to or held by Acquiring Persons
or any Affiliates or Associates thereof (as defined in the Rights
Agreement), and any subsequent holder of such Rights, may become null
and void.
6
<PAGE>
(d) The Rights associated with the Common Stock represented by certificates
containing the legend in paragraph (c) above shall be evidenced by the Common
Stock certificates alone until the Distribution Date (or the earlier redemption,
expiration or termination of the Rights), and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Stock represented by such certificates. In the event that the Company
purchases or acquires any shares of Common Stock after the Record Date but prior
to the Distribution Date, any Rights associated with such Common Stock shall be
deemed canceled and retired so that the Company shall not be entitled to
exercise any Rights associated with the Shares of Common Stock which are no
longer outstanding. The failure to print the foregoing legend on any such Common
Stock certificate or any defect therein shall not affect in any manner
whatsoever the application or interpretation of the provisions of Section 7(e)
hereof.
Section 4. Form of Right Certificates.
-------------------------------------
(a) The Right Certificates (and the forms of election to purchase shares
and of assignment and certificate to be printed on the reverse thereof) shall
each be substantially in the form of Exhibit A hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law, rule or regulation or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
customary usage. The Rights Certificates shall be in a machine printable format
and in a form reasonably satisfactory to the Rights Agent. Subject to the
provisions of Section 11 and Section 22 hereof, the Right Certificates, whenever
distributed, shall be dated as of the Record Date, shall show the date of
countersignature, and on their face shall entitle the holders thereof to
purchase such number of shares of Common Stock as shall be set forth therein at
the price set forth therein (the "Exercise Price"), but the number of such
shares and the Exercise Price shall be subject to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights beneficially owned by (i) an Acquiring Person, or
any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who
becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any Associate or Affiliate of the
Acquiring Person) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person to holders
of equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
(whether or not in writing) regarding the transferred Rights, or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of Section 7(e) hereof, and any Right Certificate issued pursuant to
Section 6, Section 11 or Section 22 upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this sentence, shall
have deleted therefrom the second sentence
7
<PAGE>
of the existing legend on such Right Certificate and in substitution therefor
shall contain the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person,
or an Affiliate or an Associate of an Acquiring Person (as such terms
are defined in the Rights Agreement). This Right Certificate and the
Rights represented hereby may become null and void under certain
circumstances as specified in Section 7(e) of the Rights Agreement.
(c) The Company shall give notice to the Rights Agent promptly after it
becomes aware of the existence and identity of any Acquiring Person or any
Associate or Affiliate thereof. The Company shall instruct the Rights Agent in
writing of the Rights which should be so legended. The failure to print the
foregoing legend on any such Right Certificate or any defect therein shall not
affect in any manner whatsoever the application or interpretation of the
provisions of Section 7(e) hereof.
Section 5. Countersignature and Registration.
--------------------------------------------
(a) The Right Certificates shall be executed on behalf of the Company by
its Chairman of the Board, or its President or any Vice President and by its
Treasurer or any Assistant Treasurer, or by its Secretary or any Assistant
Secretary, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested to by
the Secretary or any Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
an authorized signatory of the Rights Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Right Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Right Certificates, nevertheless, may be countersigned by an
authorized signatory of the Rights Agent, and issued and delivered by the
Company with the same force and effect as though the person who signed such
Right Certificates had not ceased to be such officer of the Company; and any
Right Certificates may be signed on behalf of the Company by any person who, at
the actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at one of its offices designated as the appropriate place for surrender
of Right Certificates upon exercise or transfer, books for registration and
transfer of the Right Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced on its face by each of the Right Certificates and the
date of each of the Right Certificates.
8
<PAGE>
Section 6. Transfer, Split Up, Combination and Exchange of Right
----------------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
- ---------------------------------------------------------------------
(a) Subject to the provisions of Section 4(b), Section 7(e) and Section 14,
at any time after the close of business on the Distribution Date, and at or
prior to the close of business on the Expiration Date, any Right Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Right Certificate or Certificates, entitling the registered holder to purchase a
like number of shares of Common Stock (or following a Triggering Event, Common
Stock, cash, property, debt securities, common stock or any combination thereof)
as the Right Certificate or Certificates surrendered then entitled such holder
to purchase at the same Exercise Price. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate shall make such
request in writing delivered to the Rights Agent, and shall surrender the Right
Certificate or Certificates to be transferred, split up, combined or exchanged,
with the form of assignment and certificate duly executed, at the office or
offices of the Rights Agent designated for such purpose. Neither the Rights
Agent nor the Company shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Right Certificate until the
registered holder shall have completed and signed the certificate contained in
the form of assignment on the reverse side of such Right Certificate and shall
have provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to Section
4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the Person
entitled thereto a Right Certificate or Certificates, as the case may be, as so
requested. The Company may require payment by the registered holder of a Right
Certificate, of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security satisfactory to them, and reimbursement to the Company and the Rights
Agent of all reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Right Certificate, if mutilated, the
Company will execute and deliver a new Right Certificate of like tenor to the
Rights Agent for countersignature and delivery to the registered owner in lieu
of the Right Certificate so lost, stolen, destroyed or mutilated.
9
<PAGE>
Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights.
------------------------------------------------------------------------
(a) Subject to Section 7(e), the registered holder of any Right Certificate
may exercise the Rights evidenced thereby (except as otherwise provided herein)
in whole or in part at any time after the Distribution Date upon surrender of
the Right Certificate, with the form of election to purchase and the certificate
on the reverse side thereof duly executed, to the Rights Agent at the office or
offices of the Rights Agent designated for such purpose, together with payment
of the aggregate Exercise Price for the total number of shares of Common Stock
(or other securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercised, at or prior to the Expiration Date.
Except as set forth in Section 7(e) hereof and notwithstanding any other
provision of this Agreement, any Person who prior to the Distribution Date
becomes a record holder of shares of Common Stock may exercise all of the rights
of a registered holder of a Right Certificate with respect to the Rights
associated with such shares of Common Stock in accordance with the provisions of
this Agreement, as of the date such Person becomes a record holder of shares of
Common Stock.
(b) The Exercise Price for each share of Common Stock pursuant to the
exercise of a Right shall initially be $40.00, shall be subject to adjustment
from time to time as provided in Section 11 and Section 13 hereof, and shall be
payable in lawful money of the United States of America in accordance with
Section 7(c) below.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase and the certificate on the reverse side
thereof duly executed, accompanied by payment of the Exercise Price for the
shares to be purchased and an amount equal to any applicable transfer tax (as
determined by the Rights Agent) in cash, or by certified check or bank draft
payable to the order of the Company, the Rights Agent shall, subject to Section
20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of
Common Stock (or make available, if the Rights Agent is the transfer agent
therefor) certificates for the number of shares of Common Stock to be purchased
and the Company hereby irrevocably authorizes its transfer agent to comply with
all such requests, or (B) if the Company shall have elected to deposit the total
number of shares of Common Stock issuable upon exercise of the Rights hereunder
with a depository agent, requisition from the depository agent depositary
receipts representing such number of shares of Common Stock as are to be
purchased (in which case certificates for the shares of Common Stock represented
by such receipts shall be deposited by the transfer agent with the depositary
agent) and the Company will direct the depositary agent to comply with such
request, (ii) when appropriate, requisition from the Company the amount of cash,
if any, to be paid in lieu of issuance of fractional shares in accordance with
Section 14 hereof, (iii) promptly after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names as
may be designated by such holder and (iv) when appropriate, after receipt
promptly deliver such cash to or upon the order of the registered holder of such
Right Certificate. In the event that the Company is obligated to issue other
securities (including Common Stock) of the Company, pay cash or distribute other
property pursuant to Section 11 (a) hereof, the Company will make all
10
<PAGE>
arrangements necessary so that such other securities, cash or other property are
available for distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to the registered holder of such Right Certificate or
to his duly authorized assigns, subject to the provisions of Section 14.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person, or any Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any Associate or
Affiliate of an Acquiring Person) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring Person (or of any
Associate or Affiliate of an Acquiring Person) who becomes a transferee prior to
or concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights, or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action; and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Right Certificates or other Person as a
result of its failure to make any determinations with respect to an Acquiring
Person or any Affiliates or Associates of an Acquiring Person or any transferee
of any of them hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder of Rights upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Right Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates.
-------------------------------------------------------------
All Right Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or any of
its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Agreement. The Company shall
11
<PAGE>
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Right Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all canceled Right Certificates to the Company.
Section 9. Reservation and Availability of Common Stock.
-------------------------------------------------------
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Common Stock or any
authorized and issued shares of Common Stock held in its treasury, the number of
shares of Common Stock that will be sufficient to permit the exercise in full of
all outstanding and exercisable Rights.
(b) So long as the Common Stock (or following a Triggering Event, other
securities) issuable or deliverable upon exercise of Rights may be listed on any
national securities exchange or automated quotation system, the Company shall
use its best efforts to cause, from and after such time as the Rights become
exercisable, all shares of Common Stock issued or reserved for issuance to be so
listed, upon official notice of issuance, upon the principal national securities
exchange, if any, upon which the Common Stock is otherwise listed or, if the
principal market for the Common Stock is not on any national securities
exchange, to be eligible for quotation on the Nasdaq National Market or any
successor thereto or other comparable quotation system.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, or as soon as required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act with respect to
the securities purchasable upon exercise of the Rights on an appropriate form,
(ii) cause such registration statement to become effective as soon as
practicable after such filing, and (iii) cause such registration statement to
remain effective (with a prospectus that at all times meets the requirements of
the Securities Act) until the earlier of (A) the date as of which the Rights are
no longer exercisable for such securities or (B) the Expiration Date. The
Company will also take such action as may be appropriate under, and which will
ensure compliance with, the securities or "blue sky" laws of the various states
in connection with the exercisability of the Rights. The Company may temporarily
suspend, for a period of time not to exceed ninety (90) days after the date
determined in accordance with the provisions of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon such suspension,
the Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect, in each case with prompt
written notice to the Rights Agent. Notwithstanding any such provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction unless the requisite qualification in such jurisdiction shall have
been obtained.
12
<PAGE>
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of Common Stock delivered upon the
exercise of the Rights shall, at the time of delivery of the certificates for
such shares (subject to payment of the Exercise Price), be duly and validly
authorized and issued and fully paid and nonassessable.
(e) From and after the Distribution Date, the Company further covenants and
agrees that it will pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of the issuance or
delivery of the Right Certificates or of any certificates for shares of Common
Stock upon the exercise of Rights. The Company shall not, however, be required
to pay any transfer tax which may be payable in respect of any transfer or
delivery of Right Certificates to a person other than, or in respect of the
issuance or delivery of securities in a name other than that of, the registered
holder of the Right Certificates evidencing Rights surrendered for exercise or
to issue or deliver any certificates for securities in a name other than that of
the registered holder upon the exercise of any Rights until such tax shall have
been, paid (any such tax being payable by the holder of such Right Certificate
at the time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. Common Stock Record Date.
------------------------------------
Each Person in whose name any certificate for Common Stock is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the shares of Common Stock represented thereby on, and such
certificate shall be dated, the date upon which the Right Certificate evidencing
such Rights was duly surrendered and payment of the Exercise Price (and any
applicable transfer taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Common Stock transfer books of
the Company are closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Common Stock transfer books of the Company
are open. Prior to the exercise of the Right evidenced thereby, the holder of a
Right Certificate shall not be entitled to any rights of a shareholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Exercise Price, Number and Kind of Shares or
----------------------------------------------------------------------
Number of Rights.
- ----------------
The Exercise Price, the number and kind of shares covered by each Right and
the number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Common Stock payable in shares of Common
Stock, (B) subdivide the outstanding Common Stock, (C) combine the outstanding
Common Stock into a smaller number of shares, or (D) issue any shares of its
capital stock in a reclassification of the
13
<PAGE>
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11 (a) and Section 7
(e) hereof, the Exercise Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock issuable on
such date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the aggregate number and
kind of shares of capital stock which, if such Right had been exercised
immediately prior to such date and at a time when the Common Stock transfer
books of the Company were open, he would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of a Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of a Right. If an
event occurs which would require an adjustment under both Section 11 (a) (i) and
Section 11 (a) (ii) hereof, the adjustment provided for in this Section 11 (a)
(i) shall be in addition to, and shall be made prior to, any adjustment required
pursuant to Section 11 (a) (ii) hereof.
(ii) Subject to the provisions of Sections 23 and 24 hereof, in the
event that any Person (other than an Exempt Person), alone or together with its
Affiliates and Associates, shall become an Acquiring Person then, in such case,
promptly following any such occurrence, proper provision shall be made so that
each holder of a Right, except as provided in Section 7 (e) hereof, shall
thereafter have a right to receive, upon exercise thereof at the then current
Exercise Price in accordance with the terms of this Agreement, such number of
shares of Common Stock of the Company as shall equal the result obtained by (x)
multiplying the then current Exercise Price by the then number of shares of
Common Stock for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event and dividing that product by (y) 50% of
the Fair Market Value per share of the Common Stock (determined pursuant to
Section 11(d)) on the date of the occurrence of any one of the events listed
above in this Section 11(a)(ii).
(iii) In the event that there shall not be sufficient authorized but
unissued shares of Common Stock to permit the exercise in full of the Rights in
accordance with the foregoing Section 11(a)(ii), the Company shall take all
action as may be necessary to authorize and reserve for issuance such number of
additional shares of Common Stock as may from time to time be required to be
issued upon the exercise in full of all Rights outstanding and, if necessary,
shall use its best efforts to obtain shareholder approval thereof.
Notwithstanding the foregoing provisions of this Section 11(a)(iii), in lieu of
issuing shares of Common Stock in accordance with Section 11(a)(ii) hereof, (A)
if a majority of the Directors then in office determines that such action is
necessary or appropriate and is not contrary to the interests of the holders of
the Rights, they may elect to cause the Company to pay, /or (B) if sufficient
shares of Common Stock cannot be issued for such purpose in accordance with the
provisions hereof, then the Company shall issue or pay, upon the exercise of the
Rights, cash, property, debt securities, shares of Common stock or other capital
stock, or any combination thereof, having an aggregate Fair Market Value equal
to the Fair Market Value of the shares of
14
<PAGE>
Common Stock which otherwise would have been issuable pursuant to Section
11(a)(ii). Any such election by a majority of the Directors of the Company must
be made and publicly announced within 30 days after the date on which any
Section 11(a)(ii) Event first occurs following the Stock Acquisition Date.
(b) If the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Common Stock entitling them (for a period
expiring within 45 calendar days after such record date) to subscribe for or
purchase Common Stock (or securities having the same or more favorable rights,
privileges and preferences as the shares of Common Stock ("Common stock
equivalents")) or securities convertible into Common Stock or Common stock
equivalents at a price per share of Common Stock or per share of Common stock
equivalents (or having a conversion price per share, if a security convertible
into Common Stock or Common stock equivalents) less than the Fair Market Value
(as determined pursuant to Section 11 (d) hereof) per share of Common Stock on
such record date, the Exercise Price to be in effect after such record date
shall be determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding on such record date, plus the
number of shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock to be offered (and the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Fair Market Value and the denominator of which shall be the number of
shares of Common Stock outstanding on such record date, plus the number of
additional shares of Common Stock and Common stock equivalents to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no event shall
--------
the consideration to be paid upon the exercise of a Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of a Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be the Fair Market Value thereof determined in
accordance with Section 11(d) hereof. Shares of Common Stock owned by or held
for the account of the Company shall not be deemed outstanding for the purpose
of any such computation. Such adjustments shall be made successively whenever
such a record date is fixed, and in the event that such rights or warrants are
not so issued, the Exercise Price shall be adjusted to be the Exercise Price
which would then be in effect if such record date had not been fixed.
(c) If the Company shall fix a record date for the making of a distribution
to all holders of Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation) of evidences of indebtedness, cash (other than a
regular periodic cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Common Stock, but including
any dividend payable in stock other than Common Stock) or convertible
securities, subscription rights or warrants (excluding those referred to in
Section 11(b) ), the Exercise Price to be in effect after such record date shall
be determined by multiplying the Exercise Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the Fair Market
Value (as determined pursuant to Section 11 (d) hereof) per share of
15
<PAGE>
Common Stock on such record date, less the Fair Market Value (as determined
pursuant to Section 11(d) hereof) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such convertible
securities, subscription rights or warrants applicable to each share of Common
Stock and the denominator of which shall be the Fair Market Value (as determined
pursuant to Section 11(d) hereof) per share of Common Stock; provided, however,
that in no event shall the consideration to be paid upon the exercise of a Right
be less than the aggregate par value of the shares of capital stock of the
Company issuable upon exercise of a Right. Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that such
distribution is not so made, the Exercise Price shall again be adjusted to be
the Exercise Price which would be in effect if such record date had not been
fixed.
(d) For the purpose of this Agreement, the "Fair Market Value" of any share
of Common Stock, Common Stock or any other stock or any Right or other security
or any other property shall be determined as provided in this Section 11(d).
(i) In the case of a publicly-traded stock or other security, the
Fair Market Value on any date shall be deemed to be the average of the daily
closing prices per share of such stock or per unit of such other security for
the 30 consecutive Trading Days immediately prior to such date; provided,
however, that in the event that the Fair Market Value per share of any share of
stock is determined during a period following the announcement by the issuer of
such stock of (x) a dividend or distribution on such stock payable in shares of
such stock or securities convertible into shares of such stock or (y) any
subdivision, combination or reclassification of such stock, and prior to the
expiration of the 30 Trading Day period after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the Fair Market Value shall be
properly adjusted to take into account ex-dividend trading. The closing price
for each day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the American Stock Exchange or, if the securities are not listed or
admitted to trading on the American Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which such security is listed or
admitted to trading; or, if not listed or admitted to trading on any national
securities exchange, the last quoted price (or, if not so quoted, the average of
the last quoted high bid and low asked prices) in the over-the-counter market,
as reported by NASDAQ or such other system then in use; or, if on any such date
no bids for such security are quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in such security selected by the Board of Directors of the
Company. If on any such date no market maker is making a market in such
security, the Fair Market Value of such security on such date shall be
determined reasonably and with utmost good faith to the holders of the Rights by
the Board of Directors of the Company; provided, however, that if at the time of
such determination there is an Acquiring Person, the Fair Market Value of such
security on such date shall be determined by a nationally recognized investment
banking firm selected by the Board of Directors, which
<PAGE>
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights.
(ii) If the Common Stock is not publicly held or not so listed or
traded, "Fair Market Value" shall mean the fair value per share of stock or per
other unit of such security, determined reasonably and with utmost good faith to
the holders of the Rights by the Board of Directors of the Company; provided,
--------
however, that if at the time of such determination there is an Acquiring Person,
the Fair Market Value of such security on such date shall be determined by a
nationally recognized investment banking firm selected by the Board of
Directors, which determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights.
(iii) In the case of property other than securities, the Fair Market
Value thereof shall be determined reasonably and with utmost good faith to the
holders of Rights by the Board of Directors of the Company; provided, however,
--------
that if at the time of such determination there is an Acquiring Person. the Fair
Market Value of such property on such date shall be determined by a nationally
recognized investment banking firm selected by the Board of Directors, which
determination shall be described in a statement filed with the Rights Agent and
shall be binding upon the Rights Agent and the holders of the Rights.
(e) Anything herein to the contrary notwithstanding, no adjustment in the
Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Exercise Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest [tenth] of a share of Common Stock, as the case may be,
-----
or to such other figure as the Board of Directors may deem appropriate.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment or
(ii) the Expiration Date.
(f) If as a result of any provision of Section 11(a) hereof, the holder of
any Right thereafter exercised shall become entitled to receive any shares of
capital stock of the Company other than Common Stock, thereafter the number of
such other shares so receivable upon exercise of any Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
Section 11(a), (b), (c), and the provisions of Sections 7, 9, 10, 13 and 14
hereof with respect to the Common Stock shall apply on like terms to any such
other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of shares of Common Stock
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
<PAGE>
(h) Unless the Company shall have exercised its election as provided in
Section 11 (i), upon each adjustment of the Exercise Price as a result of the
calculations made in Section 11 (b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Exercise Price, that number of shares of Common Stock
(calculated to the nearest one tenth) obtained by (i) multiplying (x) the number
of shares of Common Stock for which a Right may be exercisable immediately prior
to this adjustment by (y) the Exercise Price in effect immediately prior to such
adjustment of the Exercise Price and (ii) dividing the product so obtained by
the Exercise Price in effect immediately after such adjustment of the Exercise
Price.
(i) The Company may elect on or after the date of any adjustment of the
Exercise Price to adjust the number of Rights, in substitution for any
adjustment in the number of shares of Common Stock purchasable upon the exercise
of a Right. Each of the Rights outstanding after the adjustment in the number of
Rights shall be exercisable for the number of shares of Common Stock for which a
Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that number
of Rights (calculated to the nearest one tenth) obtained by dividing the
Exercise Price in effect immediately prior to adjustment of the Exercise Price
by the Exercise Price in effect immediately after adjustment of the Exercise
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Exercise Price is adjusted or any day thereafter, but,
if the Right Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Right Certificates on such record date Right Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
(and may bear, at the option of the Company, the adjusted Exercise Price) and
shall be registered in the names of the holders of record of Right Certificates
on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Exercise Price or the
number of shares of Common Stock issuable upon, the exercise of the Rights, the
Right Certificates theretofore and thereafter issued may continue to express the
Exercise Price per share and the number of shares which were expressed in the
initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Exercise Price below the then stated value, if any, of the number of shares of
Common Stock issuable
<PAGE>
upon exercise of the Rights, the Company shall take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock at
such adjusted Exercise Price.
(1) In any case in which this Section 11 shall require that an adjustment
in the Exercise Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such record date the number
of shares of Common Stock or other capital stock or securities of the Company,
if any, issuable upon such exercise over and above the number of shares of
Common Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Exercise Price in effect prior
to such adjustment; provided, however, that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares upon the occurrence of the event requiring
such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Exercise Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any (i) consolidation or subdivision of the Common Stock, (ii)
issuance wholly for cash of any shares of Common Stock at less than the Fair
Market Value, (iii) issuance wholly for cash of shares of Common Stock or
securities which by their terms are convertible into or exchangeable for shares
of Common Stock, (iv) stock dividends, or (v) issuance of rights, options or
warrants referred to hereinabove in this Section 11 hereafter made by the
Company to holders of its Common Stock shall not be taxable to such
shareholders.
(n) The Company covenants and agrees that it shall not, at any time after
the Distribution Date and so long as the Rights have not been redeemed pursuant
to Section 23 hereof or exchanged pursuant to Section 24 hereof, (i) consolidate
with any other Person, (ii) merge with or into any other Person, or (iii) sell
or transfer (or permit any Subsidiary to sell or transfer), in one transaction
or a series of related transactions, assets or earning power aggregating 50% or
more of the assets or earning power of the Company and its Subsidiaries taken as
a whole, to any other Person if (x) at the time of or immediately after such
consolidation, merger or sale there are any rights, warrants or other
instruments outstanding or agreements or arrangements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights, or (y) prior to, simultaneously with or immediately
after such consolidation, merger or sale the shareholders of a person who
constitutes, or would constitute, the "Principal Party" for the purposes of
Section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates. The Company
further covenants and agrees that after the Distribution Date it will not,
except as permitted by Section 23 or Section 27 hereof, take (or permit any
Subsidiary to take) any action if at the time such action is taken it is
reasonably foreseeable that such action will substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights.
<PAGE>
(o) The exercise of Rights under Section 11(a)(ii) shall only result in
the loss of rights under Section 11(a)(ii) to the extent so exercised and shall
not otherwise affect the rights of holders of Right Certificates under this
Rights Agreement, including rights to purchase securities of the Principal Party
following a Section 13 Event which has occurred or may thereafter occur, as set
forth in Section 13 hereof. Upon exercise of a Right Certificate under Section
11(a)(ii), the Rights Agent shall return such Right Certificate duly marked to
indicate that such exercise has occurred.
<PAGE>
Section 12. Certificate of Adjusted Exercise Price or Number of Shares.
----------------------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 or Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Common Stock a copy of such certificate, and (c) mail a brief summary thereof to
each holder of a Right Certificate in accordance with Section 26 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment contained therein and shall not be deemed to have knowledge of
any such adjustment unless and until it shall have' received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
--------------------------------------------------------------------------
Power.
-----
(a) In the event that, following the Stock Acquisition Date, directly or
indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction which is
not prohibited by Section 11(n) hereof), and the Company shall not be the
continuing or surviving corporation of such consolidation or merger, (y) any
Person (other than a Subsidiary of the Company in a transaction which is not
prohibited by Section 11(n) hereof) shall consolidate with the Company, or merge
with and into the Company and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such merger, all or part of
the shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell, mortgage or otherwise transfer (or one or more of its Subsidiaries
shall sell, mortgage or otherwise transfer), in one transaction or a series of
related transactions, assets or earning power aggregating 50% or more of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than the Company or any Subsidiary of the
Company in one or more transactions, each of which is not prohibited by Section
11(n) hereof), then, and in each such case, proper provision shall be made so
that: (i) each holder of a Right, except as provided in Section 7(e) hereof,
shall have the right to receive, upon the exercise thereof at the then current
Exercise Price in accordance with the terms of this Agreement, such number of
validly authorized and issued, fully paid and nonassessable shares of freely
tradeable common stock of the Principal Party, free and clear of rights of call
or first refusal, liens, encumbrances or other adverse claims, as shall be equal
to the result obtained by (1) multiplying the then current Exercise Price by the
number of shares of Common Stock for which a Right is exercisable immediately
prior to the first occurrence of a Section 13 Event, and dividing that product
by (2) 50% of the Fair Market Value (determined pursuant to Section 11(d)
hereof) per share of the common stock of such Principal Party on the date of
consummation of such consolidation, merger, sale or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale, mortgage or transfer, all the obligations and
duties of the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply to such Principal
Party; and (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of shares of its common stock
to permit exercise of all outstanding Rights in accordance with this Section
13(a) and the
<PAGE>
making of payments in cash and/or other securities in accordance
with Section 11(a)(iii) hereof) in connection with such consummation as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its shares of common stock
thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a), the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted in
such merger or consolidation, and if no securities are so issued, the Person
that is the other party to the merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions;
provided, however, that in any such case, (x) if the common stock of such Person
- --------
is not at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary or Affiliate of another Person the common stock of
which is and has been so registered, "Principal Party" shall refer to such other
Person; (y) in case such Person is a direct or indirect Subsidiary or Affiliate
of more than one Person, the common stock of two or more of which are and have
been so registered, "Principal Party" shall refer to whichever of such Persons
is the issuer of the common stock having the greatest aggregate market value of
shares outstanding; and (z) in case such Person is owned, directly or
indirectly, by a joint venture formed by two or more Persons that are not owned,
directly or indirectly, by the same Person, the rules set forth in (x) and (y)
above shall apply to each of the chains of ownership having an interest in such
joint venture as if such party were a "Subsidiary" of both or all of such joint
ventures and the Principal Parties in each such chain shall bear the obligations
set forth in this Section 13 in the same ratio as their direct or indirect
interests in such Person bear to the total of such interests.
(c) The Company shall not consummate any such consolidation, merger, sale
or transfer unless prior thereto (x) the Principal Party shall have a sufficient
number of authorized shares of its common stock issued or reserved for issuance
to permit the exercise in full of the Rights in accordance with this Section 13,
and (y) the Company and each Principal Party and each other Person who may
become a Principal Party as a result of such consolidations merger, sale or
transfer shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in Section 13(a) and (b) and further
providing that, as soon as practicable after the date of any consolidation,
merger, sale or transfer of assets mentioned in Section 13(a), the Principal
Party at its own expense will:
(i) prepare and file a registration statement under the Securities
Act with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, use its best efforts to cause such
registration statement to become effective as soon as
<PAGE>
practicable after such filing and use its best efforts to cause such
registration statement to remain effective (with a prospectus that at all times
meets the requirements of the Securities Act) until the Expiration Date;
(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the blue sky laws of
such jurisdictions as may be necessary or appropriate;
(iii) use its best efforts to list (or continue the listing of) the
Rights and the securities purchasable upon exercise of the Rights on a national
securities exchange or to meet the eligibility requirements for quotation on the
NASDAQ National Market; and
(iv) deliver to holders of the Rights historical financial statements
for the Principal Party and each of its Affiliates which comply in all material
respects with the requirements for registration on Form 10 under the Exchange
Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------------------
(a) The Company shall not be required to issue fractions of Rights, except
prior to the Distribution Date as provided in Section 11(o) hereof, or to
distribute Right Certificates which evidence fractional Rights. If the Company
elects not to issue such fractional Rights, the Company shall pay, in lieu of
such fractional Rights, to the registered holders of the Right Certificates with
regard to which such fractional Rights would otherwise be issuable, an amount in
cash equal to the same fraction of the Fair Market Value of a whole Right, as
determined pursuant to Section 11(d) hereof.
(b) The Company shall not be required to issue fractions of shares of
Common Stock upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock, the Company may pay to the registered holders of Right
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the Fair Market Value of one share of
Common Stock. For purposes of this Section 14 (b), the Fair Market Value of one
share of Common Stock shall be determined pursuant to Section 11(d) hereof for
the Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action.
-----------------------------
<PAGE>
All rights of action in respect of this Agreement, other than rights of
action vested in the Rights Agent pursuant to Sections 18 and 20 hereof, are
vested in the respective registered holders of the Right Certificates (or, prior
to the Distribution Date, the registered holders of the Common Stock). Any
registered holder of any Right Certificate (or, prior to the Distribution Date,
of the Common Stock), without the consent of the Right Agent or of the holder of
any other Right Certificate (or, prior to the Distribution Date, of the Common
Stock), may, on his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Right
evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Holders of Rights shall be entitled to recover the reasonable costs and
expenses, including attorneys' fees, incurred by them in any action to enforce
the provisions of this Agreement.
Section 16. Agreement of Right Holders.
--------------------------------------
Every holder of a Right, by accepting the same, consents and agrees with
the Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, each Right will be transferable only
simultaneously and together with the transfer of shares of Common Stock;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the office or
offices of the Rights Agent designated for such purpose, duly endorsed or
accompanied by a proper instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the person in whose
name a Right Certificate (or, prior to the Distribution Date, the associated
Common Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or writing
on the Right Certificates or the associated Common Stock certificate made by
anyone other than the Company or the Rights Agent) for all purposes whatsoever,
and neither the Company nor the Rights Agent shall be affected by any notice to
the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Rights Agent shall have any liability to any holder of a Right
or other Person as the result of its inability to perform any of its obligations
under this Agreement by reason of any preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent jurisdiction or by
a governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by any
<PAGE>
governmental authority prohibiting or otherwise restraining performance of such
obligations; provided, however, that the Company must use its best efforts to
--------
have any such order, decree or ruling lifted or otherwise overturned as soon as
possible.
Section 17. Right Certificate Holder Not Deemed a Shareholder.
-------------------------------------------------------------
No holder of any Right Certificate, as such, shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the shares of
Common Stock or any other securities of the Company which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall anything
contained herein or in any Right Certificate be construed to confer upon the
holder of any Right Certificate, as such, any of the rights of a shareholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting shareholders (except as provided in Section 25 hereof), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------------------
(a) The Company agrees to pay to the Rights Agent such compensation as
shall be agreed to in writing between the Company and the Rights Agent for all
services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability arising therefrom, directly or indirectly. The provisions of this
Section 18(a) shall survive the expiration of the Rights and the termination of
this Agreement.
(b) The Rights Agent shall be protected and shall incur no liability for or
in respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Right Certificate or
certificate for Common Stock or other securities of the Company, instrument of
assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed and executed by the proper Person
or Persons.
(c) The Rights Agent shall not be liable for consequential damages under
any provision of this Agreement or for any consequential damages arising out, of
any act or failure to act hereunder.
<PAGE>
Section 19. Merger or Consolidation of or Change of Name of Rights Agent.
------------------------------------------------------------------------
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or shareholder services business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement any of the Right Certificates shall have
been countersigned but not delivered, any such successor Rights Agent may adopt
the countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any Successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent.
----------------------------------
The Rights Agent undertakes the duties and obligations expressly imposed by
this Agreement upon the following terms and conditions, by all of which the
Company and the holders of Right Certificates, by their acceptance thereof,
shall be bound :
(a) The Rights Agent may consult with legal counsel selected by it (who may
be legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such open on.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of Fair Market Value) be proved or established by the Company
prior to taking or suffering any action hereunder, such, fact or matter (unless
other evidence in respect thereof shall be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by a
person believed
<PAGE>
by the Rights Agent to be the Chairman of the Board, a Vice Chairman of the
Board, the President, a Vice President, the Treasurer, any Assistant Treasurer,
the Secretary or Assistant Secretary of the Company and delivered to the Rights
Agent, and such certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 7(e) hereof) or any adjustment required
under the provisions of Sections 11, 13 or 23(c) hereof, nor shall it be
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Right Certificates
after receipt of a certificate describing any such adjustment furnished in
accordance with Section 12 hereof), nor shall it be responsible for any
determination by the Board of Directors of the Company of the Fair Market Value
of the Rights or Common Stock pursuant to the provisions of Section 14 hereof;
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock to
be issued pursuant to this Agreement or any Right Certificate or as to whether
any shares of Common Stock will, when so issued, be validly authorized and
issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder and
certificates delivered pursuant to any provision hereof from any person believed
by the Rights Agent to be the Chairman of the Board, any Vice Chairman of the
Board, the President, a Vice President, the Secretary, an Assistant Secretary,
the Treasurer or an Assistant Treasurer of the Company, and is authorized to
apply to such officers for advice or instructions in connection with its duties,
and it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer. Any application
by the Rights Agent for written instructions
<PAGE>
from the Company may, at the option of the Rights Agent, set forth in writing
any action proposed to be taken or omitted by the Rights Agent under this
Agreement and the date on or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any action
taken by, or omission of, the Rights Agent in accordance with a proposal
included in such application on or after the date specified in such application
(which date shall not be less than five Business Days after the date any officer
of the Company actually receives such application, unless any such officer shall
have consented in writing to an earlier date) unless, prior to taking any such
action (or the effective date in the case of an omission), the Rights Agent
shall have received written instructions in response to such application
specifying the action to be taken or omitted.
(h) The Rights Agent and any shareholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become peculiarly interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not the Rights Agent under
this Agreement. Nothing herein shall preclude the Rights Agent from acting in
any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, omission, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company or to the holders of the
Rights resulting from any such act, omission, default, neglect or misconduct,
provided reasonable care was exercised in the selection and continued employment
thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause (1) or clause (2)
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent.
----------------------------------
The Rights Agent or any successor Rights Agent may resign and be discharged
from its duties under this Agreement upon thirty (30) days' notice in writing
mailed to the Company by first class mail. The Company may remove the Rights
Agent or any successor Rights Agent (with or without cause) upon thirty (30)
days' notice in writing, mailed to the Rights Agent or
<PAGE>
successor Rights Agent, as the case may be, and to the transfer agent of the
Common Stock by registered or certified mails and to the holders of the Right
Certificates by first-class mail. If the Rights Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company), then the incumbent Rights Agent or the registered
holder of any Right Certificate may apply to any court of competent jurisdiction
for the appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or of the
Commonwealth of Massachusetts or the State of New York (or of any other state of
the United States so long as such corporation is authorized to do business as a
banking institution in the Commonwealth of Massachusetts or the State of New
York), in good standing, which is authorized under such laws to exercise stock
transfer or corporate trust powers and is subject to supervision or examination
by federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $10,000,000 or (b) an
Affiliate of a corporation described in clause (a) of this sentence. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall delete
and transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and the transfer agent of the Common Stock, and mail a
notice thereof in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 22. Issuance of New Right Certificates.
-----------------------------------------------
Notwithstanding any of the provisions of this Agreement or of the Rights to
the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or Change in the Exercise Price per share and the number
or kind or class of shares of stock or other securities or property purchasable
under the Right Certificates made in accordance with the provisions of this
Agreement. In addition, in connection with the issuance or sale of shares of
Common Stock following the Distribution Date and prior to the redemption or
expiration of the Rights, the Company (a) shall, with respect to shares of
Common Stock so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities hereafter issued by the Company, and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors of the
Company, issue Right Certificates representing the appropriate number of Rights
in connection with such issuance or sale; provided, however, that (i) no such
--------
Right Certificate shall be
<PAGE>
issued if, and to the extent that, the Company shall be advised by counsel that
such issuance would create a significant risk of material adverse tax
consequences to the Company or the person to whom such Right Certificate would
be issued, and (ii) no such Right Certificate shall be issued if, and to the
extent that, appropriate adjustments shall otherwise have been made in lieu of
the issuance thereof.
Section 23. Redemption and Termination.
--------------------------------------
(a) The Board of Directors of the Company may, at its option, redeem all
but not less than all of the then outstanding Rights at a redemption price of
$0.01 per Right, appropriately adjusted to reflect any dividend declared or paid
on the Common Stock in shares of Common Stock or any subdivision or combination
of the outstanding shares of Common Stock or similar event occurring after the
date of this Agreement (such redemption price, as adjusted from time to time,
being hereinafter referred to as the "Redemption Price"). The Rights may be
redeemed only until the earliest to occur of (i) 5:00 P.M., Boston,
Massachusetts time, on the tenth Business Day after the Stock Acquisition Date,
or (ii) the Final Expiration Date.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, and without any further action and
without any notice, the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to receive the Redemption
Price for each Right so held. Promptly after the action of the Board of
Directors ordering the redemption of the Rights, the Company shall give notice
of such redemption to the Rights Agent and the holders of the then outstanding
Rights by mailing such notice to the Rights Agent and to all such holders at
their last addresses as they appear upon the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Stock. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or Section
24 hereof or in connection with the purchase of shares of Common Stock prior to
the Distribution Date.
(c) The Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock (based on the Fair Market Value of the Common Stock as of
the time of redemption) or any other form of consideration deemed appropriate by
the Board of Directors.
Section 24. Exchange.
--------------------
(a) The Board of Directors of the Company may, at its option, at any time
on or after the occurrence of a Section 11(a)(ii) Event, exchange all or part of
the then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e) hereof) for shares
of Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or
<PAGE>
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than an Exempt Person), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Stock of the Company.
(b) Immediately upon the action of the Company ordering the exchange of any
Rights pursuant to subsection (a) of this Section 24 and without any further
action and without any notice, the right to exercise such Rights shall terminate
and the only right thereafter of a holder of such Rights shall be to receive
that number of shares of Common Stock equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. The Company shall promptly give
notice of any such exchange in accordance with Section 26 hereof; provided,
--------
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. Each such notice of exchange will state
the method by which the exchange of the shares of Common Stock for Rights will
be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become void pursuant to
the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient shares of Common Stock
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional shares of
Common Stock for issuance upon exchange of the Rights.
(d) The Company shall not be required to issue fractions of Common Stock or
to distribute certificates which evidence fractional shares of Common Stock. If
the Company elects not to issue such fractional shares of Common Stock, the
Company shall pay, in lieu of such fractional shares of Common Stock, to the
registered holders of the Right Certificates with regard to which such
fractional shares of Common Stock would otherwise be issuable, an amount in cash
equal to the same fraction of the Fair Market Value of a whole share of Common
Stock. For the purposes of this paragraph (e), the Fair Market Value of a whole
share of Common Stock shall be the closing price of a share of Common Stock (as
determined pursuant to the second sentence of section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of exchange pursuant to this Section
24.
<PAGE>
Section 25. Notice of Certain Events.
------------------------------------
(a) In case the Company shall propose, at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to the holders of
Common Stock or to make any other distribution to the holders of Common Stock
(other than a regular periodic cash dividend out of earnings or retained
earnings of the Company), or (ii) to offer to the holders of Common Stock rights
or warrants to subscribe for or to purchase any additional shares of Common
Stock or shares of stock of any class or any other securities, rights or
options, or (iii) to effect any reclassification of its Common Stock (other than
a reclassification involving only the subdivision of outstanding shares of
Common Stock), or (iv) to effect any consolidation or merger into or with, or to
effect any sale, mortgage or other transfer (or to permit one or more of its
Subsidiaries to effect any sale, mortgage or other transfer), in one transaction
or a series of related transactions, of 50% or more of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to, any other
Person (other than a Subsidiary of the Company in one or more transactions each
of which is not prohibited by Section 11 (n) hereof), or (v) to effect the
liquidation, dissolution or winding up of the Company, (vi) to declare or pay
any dividend on the Common Stock payable in Common Stock or to effect a
subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in Common Stock) then
in each such case, the Company shall give to each holder of a Right Certificate
and to the Rights Agent, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Common Stock, if any such date is to be
fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least twenty (20) days prior to the record date for
determining holders of the shares of Common Stock for purposes of such action,
and in the case of any such other action, at least twenty (20) days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of the shares of Common Stock, whichever shall be the earlier.
(b) In case any Section 11(a)(ii) Event shall occur, then, in any such
case, the Company shall as soon as practicable thereafter give to each
registered holder of a Right Certificate and to the Rights Agent, in accordance
with Section 26 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof.
Section 26. Notices.
-------------------
Notices or demands authorized by this Agreement to be given or made by the
Rights Agent or by the holder of any Right Certificate to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
<PAGE>
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
Subject to the provisions of Section 21, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of any Right
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
Alpha Industries, Inc.
20 Sylvan Road
Woburn, MA 01801
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate (or, prior to
the Distribution Date, to the holder of any certificate representing shares of
Common Stock) shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.
Section 27. Supplements and Amendments.
--------------------------------------
Prior to the Distribution Date, the Company and the Rights Agent shall, if
the Company so directs, supplement or amend any provision of this Agreement as
the Company may deem necessary or desirable without the approval of any holders
of certificates representing shares of Common Stock. From and after the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holder
of Right Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) to shorten or lengthen any time period
hereunder, or (iv) to change or supplement the provisions hereof in any manner
which the Company may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Right Certificates (other than an
Acquiring Person or any Affiliate or Associate thereof); provided, however, that
from and after the Distribution Date this Agreement may not be supplemented or
amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time
period relating to when the Rights may be redeemed at such time as the Rights
are not then redeemable or (B) any other time period unless such lengthening is
for the purpose of protecting, enhancing or clarifying the rights of, and the
benefits to, the holders of Rights. Upon the delivery of such certificate from
an appropriate officer of the Company which states that the proposed supplement
or amendment is in compliance with the terms of this Section 27, the Rights
Agent shall execute such supplement or amendment. Prior to the Distribution
Date, the interests of the holders of Rights shall be deemed coincident with the
interests of the holders of Common Stock. Notwithstanding any other provision
hereof, the Rights Agent's consent must be obtained regarding any amendment or
supplement pursuant to this Section 27 which alters the Rights Agent's rights or
duties.
<PAGE>
Section 28. Successors.
----------------------
All the covenants and provisions of this Agreement by or for the benefit of the
Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors.
----------------------------------------------------------------
For all purposes of this Agreement, any calculation of the number of shares
of Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the rules under the Exchange Act as
in effect on the date hereof. The Board of Directors of the Company shall have
the exclusive power and authority to administer this Agreement and to exercise
all rights and powers specifically granted to the Board or to the Company, or as
may be necessary or advisable in the administration of this Agreement, including
without limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
of Directors in good faith shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties, and
(y) not subject any member of the Board of Directors to any liability to the
holders of the Rights or to any other person.
Section 30. Benefits of this Agreement.
--------------------------------------
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company, the Rights Agent and the registered holders
of the Right Certificates (and, prior to the Distribution Date, the Common
Stock) any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, registered holders of the Common Stock).
<PAGE>
Section 31. Severability.
------------------------
If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid language from
the Agreement would adversely affect the purpose or effect of the Agreement, the
right of redemption set forth in Section 23 hereof shall be reinstated and shall
not expire until the close of business on the tenth day following the date of
such determination by the Board of Directors.
Section 32. Governing Law.
-------------------------
This Agreement, each Right and each Right Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of Delaware
and for all purposes shall be governed by and construed in accordance with the
laws of such State applicable to contracts to be made and to be performed
entirely within such State.
Section 33. Counterparts.
------------------------
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
Section 34. Descriptive Headings.
--------------------------------
Descriptive headings of the several Sections of this Agreement are inserted
for convenience only and shall not control or affect the meaning or construction
of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
ATTEST: ALPHA INDUSTRIES, INC.
By: By:
----------------------------------
Name:
Title:
35
<PAGE>
ATTEST: AMERICAN STOCK TRANSFER & TRUST
COMPANY, as Rights Agent
By:_______________________________
Name:
Title:
<PAGE>
EXHIBITS TO
SHAREHOLDER RIGHTS AGREEMENT
Exhibit A - Rights Certificate
Exhibit B - Summary of Rights for Dissemination to Stockholders
37
<PAGE>
ALPHA INDUSTRIES, INC.
Form of Right Certificate
Certificate No. R- _____ Rights
NOT EXERCISABLE AFTER DECEMBER 5, 2006 OR EARLIER IF NOTICE OF REDEMPTION IS
GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF ALPHA INDUSTRIES,
INC., AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE SHAREHOLDER RIGHTS
AGREEMENT BETWEEN ALPHA INDUSTRIES, INC. AND AMERICAN STOCK TRANSFER & TRUST
COMPANY, AS RIGHTS AGENT, DATED AS OF DECEMBER 5, 1996 (THE "RIGHTS AGREEMENT").
UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN SECTION 7 (e) OF THE RIGHTS AGREEMENT,
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON, OR AN ASSOCIATE OR AFFILIATE
OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND
ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
Right Certificate
ALPHA INDUSTRIES, INC.
This certifies that _________________________ , or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the
Shareholder Rights Agreement dated as of December 5, 1996 (the "Rights
Agreement") between Alpha Industries, Inc. (the "Company") and American Stock
Transfer & Trust Company, as Rights Agent (the "Rights Agent"), to purchase from
the Company at any time after the Distribution Date (as such term is defined in
the Rights Agreement) and prior to the close of business on December 5, 2006 at
the office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one share of the Common Stock (the "Common Stock")
of the Company, at a purchase price of $40 per share (the "Exercise Price") upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase and the related Certificate duly executed. The number of Rights
evidenced by this Right Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Exercise Price per
share set forth above, are the number and Exercise Price as of December 5, 1996,
based on the Common Stock as constituted at such date.
Upon the occurrence of a Section 11 (a) (ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are beneficially owned by (i) an Acquiring Person, or an Affiliate
or Associate of any such Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
<PAGE>
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a Person who, after such transfer, became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person, then in
each such event such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the occurrence
of such Section 11 (a) (ii) Event.
As provided in the Rights Agreement, the Exercise Price and the number of
shares of Common Stock or other securities which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal office of the
Company and the designated office of the Rights Agent and are also available
upon written request to the Company or the Rights Agent.
Upon surrender at the office or offices of the Rights Agent designated
for such purpose, this Right Certificate may be exchanged for another Right
Certificate or Certificates of like tenor and date evidencing Rights entitling
the holder to purchase a like aggregate number of shares of Common Stock as the
Rights evidenced by the Right Certificate or Certificates surrendered shall have
entitled such holder to purchase. If this Right Certificate shall be exercised
in part, the holder shall be entitled to receive upon surrender hereof another
Right Certificate or Certificates for the number of whole Rights not exercised.
If this Right Certificate shall be exercised in whole or in part pursuant to
Section 11(a) (ii) of the Rights Agreement, the holder shall be entitled to
receive this Right Certificate duly marked to indicate that such exercise has
occurred as set forth in the Rights Agreement.
Under certain circumstances, subject to the provisions of the Rights
Agreement, the Board of Directors of the Company at its option may exchange all
of any part of the Rights evidenced by this Certificate for shares of the
Company's Common Stock at an exchange ratio (subject to adjustment) of one share
of Common Stock per Right.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Board of Directors of the Company at
its option at a redemption price of $.01 per Right (payable in cash, Common
Stock or other consideration deemed appropriate by the Board of Directors).
The Company is not obligated to issue fractional shares of stock upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one tenth of a share, which may, at the election of the
Company, be evidenced by depository
39
<PAGE>
receipts). If the Company elects not to issue such fractional shares, in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of shares of Common
Stock or any other securities of the Company which may at any time be issuable
on the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by any authorized signatory of the Rights
Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Corporate Seal ALPHA INDUSTRIES, INC.
Attested: By: _______________________________
Name:
Title: Chairman,Vice Chairman,
By: __________________________________ President or Vice President
Secretary or Assistant Secretary
Countersigned:
AMERICAN STOCK TRANSFER & TRUST
COMPANY, as Rights Agent
______________________________________
Authorized Signatory
Date of countersignature:
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer
the Right Certificate.)
FOR VALUE RECEIVED __________________________ hereby sells, assigns and
transfers unto ______________________(Please print name and address of
transferred) _____________________ this Right Certificate, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint _________________ Attorney, to transfer the within Right Certificate on
the books of the within-named Company, with full power of substitution.
Dated: _____________, ____.
_________________________________
Signature
Signature Guaranteed: ___________________________
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate _______ are ______ are
not being transferred by or on behalf of the Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned ___ did ___ did not directly or indirectly acquire the Rights
evidenced by the Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of any such Person.
Dated: ____________________, ___ ____________________________
Signature
41
<PAGE>
NOTICE
The signature to the foregoing Assignment and Certificate must correspond to
the name as written upon the face of this Right Certificate in every particular,
without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate.)
To: Alpha Industries, Inc.:
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Right Certificate to purchase the shares of Common Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of:
Please insert social security
or other identifying taxpayer number: _________________
(Please print name and address)
If such number of Rights shall not be all the Rights evidences by this Right
Certificate or if the Rights are being exercised pursuant to Section 11(a)(ii)
of the Rights Agreement, a new Right Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying taxpayer number: _________________
(Please print name and address)
Dated: ______________, ____
<PAGE>
_______________________________
Signature
Signature Guaranteed:___________________________
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate ____ are ____ are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned ___ did ___ did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any person who is, was or became an
Acquiring Person or an Affiliate or Associate of any such person.
Dated: ___________, ____ _______________________________
Signature
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
43
<PAGE>
COMPANY LETTERHEAD
To Our Stockholders:
On December 5, 1996 your Board of Directors adopted a Common Stock Rights
Plan and declared a dividend distribution of Common Stock Purchase Rights. This
Plan replaces the rights plan originally adopted in 1986 which expires on
December 5, 1996. This letter describes the new Rights Plan and the Board's
reasons for adopting it. As described below, the Board of Directors will submit
the new Rights Plan to stockholders for approval.
The Rights approved today are substantially similar to the rights which have
been in place for the last ten years. These new Rights contain provisions to
protect stockholders in the event of an unsolicited attempt to acquire the
Company, including a gradual accumulation of shares in the open market, a
partial or two-tier tender offer that does not treat all stockholders equally, a
squeeze-out merger, or other abusive takeover tactics which the Board believes
are not in the best interests of stockholders. These tactics unfairly pressure
stockholders, squeeze them out of their investment without giving them any real
choice and deprive them of the full value of their shares.
Over 1,600 companies, including over 60% of the companies in the Fortune
500, have adopted rights plans in order to protect their stockholders against
these tactics. We consider the Rights to be the best available means of
protecting both your right to retain your equity investment in the Company and
the full value of that investment, while not foreclosing a fair acquisition bid
for the Company.
The Rights are not intended to prevent a takeover of the Company and will
not do so. However, they should deter any attempt to acquire the Company in a
manner or on terms not approved by the Board. They are designed to deal with the
very serious problem of another person or company using abusive tactics to
deprive the Company's Board of Directors and its stockholders of any real
opportunity to determine the destiny of the Company.
Because the Rights may be terminated or amended by the Board of Directors at
any time prior to an actual threat to the Company materializing, they should not
interfere with any merger or business combination approved by the Board of
Directors prior to that time.
Like the existing rights which are about to expire, these new Rights do not
in any way weaken the financial strength of the Company or interfere with its
business plans. The issuance of the Rights has no dilutive effect, will not
affect reported earnings per share, is not taxable to the Company or to you, and
will not change the way in which you can presently trade the Company's shares.
The Rights will only become exercisable after the "Distribution Date" described
in the attached Summary of Common Stock Purchase Rights, and will then operate
to protect you against being deprived of your right to share in the full measure
of your Company's long-term potential.
<PAGE>
Your Board of Directors was aware when it acted that some commentators have
argued that rights plans deter legitimate acquisition proposals. We carefully
considered these views and concluded that, on balance, the arguments do not
justify leaving stockholders without any protection against unfair treatment by
an acquiror -- who, after all, is seeking his own advantage, not yours.
However, because the Board is sensitive to the objections which have been raised
to adoption of rights plans, it has determined to submit the Rights Plan to
stockholders for their approval at the Company's next annual meeting. If the
stockholders do not approve the Rights Plan, it will terminate as of the date of
the annual meeting. Your Board believes that these Rights represent a
reasonable and balanced means of addressing the complex issues of corporate
policy created by the current takeover environment.
The distribution of the Rights will not be taxable to you or the Company.
Stockholders may recognize taxable income upon the occurrence or certain
subsequent events. At no time will the Rights have any voting power.
You should review and retain for your records the attached Summary of Common
Stock Purchase Rights describing the Rights in more detail.
In declaring the Rights dividend, we have expressed our confidence in the
Company's future and our determination that you, our stockholders, be given
every opportunity to participate fully in that future.
On behalf of the Board of Directors
45
<PAGE>
SUMMARY OF RIGHTS TO PURCHASE
COMMON STOCK
On December 4, 1996, the Board of Directors of Alpha Industries, Inc. (the
"Company") declared a dividend of one common stock purchase right (a "Right")
for each outstanding share of common stock, par value $0.25 per share (the
"Common Stock"), of the Company. The dividend is payable at the close of
business on December 5, 1996 to all holders of record of Common Stock as of the
close of business on December 5, 1996 (the "Record Date"). Each Right entitles
the registered holder to purchase from the Company one share of Common Stock of
the Company at a price of $40 per share (the "Purchase Price"), subject to
adjustment. The description and terms of the rights are set forth in a
Shareholder Rights Agreement (the "Rights Agreement") between the Company and
American Stock Transfer & Trust Company, New York, New York, as Rights Agent
(the "Rights Agent").
The Rights are not exercisable until the Distribution Date. The Distribution
Date is defined as the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 10% or more of the
outstanding Common Stock, or (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any person
or group of affiliated persons becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 10% or more of the outstanding Common Stock.
Until the Distribution Date (or earlier redemption or expiration of the
Rights) (i) the Rights will be evidenced by the certificates representing Common
Stock with a copy of this Summary of Rights attached thereto, (ii) the Rights
will be transferred with and only with the Common Stock, (iii) new Common Stock
certificates issued after the Record Date upon transfer or new issuance of
Common Stock will contain a notation incorporating the Rights Agreement by
reference, and (iv) the surrender for transfer of any certificates for Common
Stock outstanding as of the Record Date, even without such notation or a copy of
this Summary of Rights being attached thereto, will also constitute the transfer
of the Rights associated with the Common Stock represented by the stock
certificate.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date, and thereafter the separate Right Certificates alone will
evidence the Rights.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, proper provision must be made so that after the
Distribution Date each holder of a Right (other than Rights beneficially owned
by the Acquiring Person or the affiliates and associates of such Acquiring
Persons, which will thereafter be void) will have the right to acquire that
number of shares of Common Stock at the then current Purchase Price of
46
<PAGE>
the Right which at that time have a market value of two times the Purchase Price
of the Right. (This is sometimes referred to as a "flip-in".) For example, at a
Purchase Price of $40, each Right would entitle its holder to purchase for $40
the number of shares of Common Stock as equals $40 divided by one half the
market price of the Company's Common Stock. If the Common Stock were trading at
$10 share, each Right would entitle the holder to purchase 8 shares.
In the event that after the Distribution Date the Company is acquired in a
merger or other business combination transaction or 50% or more of its
consolidated assets or earning power are sold after a person or group has become
an Acquiring Person, proper provision will be made so that each holder of a
Right (other than an Acquiring Person and the affiliates and associates or such
Acquiring Person, whose Rights will have become void) will thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
of the Right, that number of shares of common stock of the acquiring company
which at the time of that transaction will have a market value of two times the
Purchase Price of the Right. (This is sometimes referred to as a "flip-over".)
For example, at a Purchase Price of $40, each Right (other than those owned by
an Acquiring Person or its affiliates or associates, which will be void) will
entitle its holder to purchase for $40 that number of shares of stock of the
acquiring company having a market value of $80.
The Rights will expire on December 5, 2006 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or unless the Rights are earlier
redeemed or exchanged by the Company, in each case, as described below;
provided, however, the Rights and the Rights Agreement will terminate on the
date of the next annual meeting of stockholders of the Company following the
date of the Rights Agreement if at that meeting, the stockholders do not approve
the Rights Agreement.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by the Acquiring Person of 50% or more of the outstanding
Common Stock, the Board of Directors of the Company may exchange the Rights
(other than Rights owned by the Acquiring Person and affiliates and associates
of the Acquiring Person, which will have become void) in whole or in part, at an
exchange ratio of one share of Common Stock per Right (subject to adjustment).
At any time prior to or within 10 business days following the acquisition by
an Acquiring Person of beneficial ownership of 10% or more of the outstanding
Common Stock, the Board of Directors of the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right (the "Redemption Price").
The redemption of the Rights may be made effective at such time on such basis
with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
The Purchase Price payable, and the number of Common Stock or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to
47
<PAGE>
prevent dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Common Stock, (ii) upon the grant to
holders of the Common Stock of certain rights or warrants to subscribe for or
purchase Common Stock at a price, or securities convertible into Common Stock
with a conversion price, less than the then-current market price of the Common
Stock, or (iii) upon the distribution to holders of the Common Stock of
evidences of indebtedness or assets (excluding regular periodic cash dividends
paid out of earnings or retained earnings or dividends payable in Common Stock)
or of subscription rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of shares of Common Stock
issuable upon exercise of each Right are also subject to adjustment in the event
of a stock split of the Common Stock, a stock dividend on the Common Stock
payable in Common Stock or a subdivision, consolidation or combination of the
Common Stock occurring prior to the Distribution Date.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Common Stock will be issued (other than
fractions which are integral multiples of one one-tenth of a share, which may,
at the election of the Company, be evidenced by depository receipts) and in lieu
thereof, an adjustment in cash will be made based on the market price of the
Common Stock on the last trading day prior to the date of exercise.
Pursuant to the Rights Agreement, certain actions (e.g. redeeming
outstanding Rights, amending the Rights Agreement, etc.) may only be made with
the approval of the Board of Directors of the Company.
<PAGE>
Exhibit (4)(f)
THIRD AMENDMENT TO CREDIT AGREEMENT
Dated as of June 12, 1997
Alpha Industries, Inc.
20 Sylvan Road
Woburn, MA 01801
Trans-Tech, Inc.
5520 Adamstown Road
Adamstown, MD
Re: Third Amendment to the Credit Agreement dated as of September 29, 1995
by and among Alpha Industries, Inc. ("Alpha"), Trans-Tech, Inc.
("Trans-Tech"), Silicon Valley Bank ("SVB"), Fleet Bank of
Massachusetts, N.A., predecessor to Fleet National Bank ("Fleet"), and
Silicon Valley Bank as collateral agent for SVB and Fleet (the
"Collateral Agent"), as previously amended by the First Amendment to
Credit Agreement dated as of July 31, 1996 and the Second Amendment to
Credit Agreement dated as of September 30, 1996.
----------------------------------------------------------------------
Ladies and Gentlemen:
The purpose of this letter is to evidence the agreement between Alpha and
Trans-Tech (each a "Borrower" and, together, the "Borrowers" or "you"), SVB and
Fleet (each a "Bank" and, together, the "Banks") and the Collateral Agent that,
effective on the Effective Date (as defined below), the above-referenced Credit
Agreement (together with the schedules thereto, the "Credit Agreement") is
amended, and certain existing defaults thereunder are waived, all as set forth
on Annex I hereto (which is incorporated in this letter amendment by reference).
Capitalized terms used but not defined herein shall have the meanings assigned
to them in the Credit Agreement.
This letter amendment (the "Amendment") shall become effective as of June
12, 1997 (the "Effective Date"), provided that SVB, on behalf of the Banks,
shall have received the following on or before June 30, 1997 and provided
further, however, in no event shall this Amendment become effective until signed
by an officer of SVB in California:
(i) three copies of this letter, duly executed by each of you, with
the attached consent of Alpha Securities Corp. (the "Guarantor"), duly
executed thereby; and
(ii) two amended and restated promissory notes in the forms enclosed
herewith (the "Amended and Restated Notes"), duly executed by each of you.
By your signatures below, you are hereby representing that your
representations set forth in the Loan Documents (including those contained in
the Credit Agreement, as amended hereby) are true and correct as of the date
hereof as if made on and as of the date hereof. In addition, Alpha confirms its
grant of authorization, in connection with this transaction, (A) to SVB to debit
Alpha's account with SVB by $3,500 in payment of SVB's extension fee and by
$3,000 in payment of SVB's waiver and amendment fee and (B) to Fleet to debit
Alpha's account with Fleet by $2,333 in payment of Fleet's extension fee
relating to the Working Capital Line of Credit, by $2,000 in
<PAGE>
-2-
payment of Fleet's waiver and amendment fee relating to the Working Capital Line
of Credit and by $3,000 in payment of Fleet's amendment fee relating to the
Equipment Line of Credit. Finally, each of you and the Guarantor agrees that, as
of this date, it has no defenses against its obligations to pay any amounts due
under the Credit Agreement and the other Loan Documents.
Upon the effectiveness hereof, each reference in each Security Instrument
or other Loan Document to "the Credit Agreement", "thereunder", "thereof",
"therein", or words of like import referring to the Credit Agreement, shall mean
and be a reference to the Credit Agreement as amended hereby. Except as
specifically set forth above, the Credit Agreement shall remain in full force
and effect and is hereby ratified and confirmed. Each of the other Loan
Documents is in full force and effect and is hereby ratified and confirmed. The
amendments and waivers set forth above (a) do not constitute a waiver or
modification of any term, condition or covenant of the Credit Agreement or any
other Loan Document, other than as expressly set forth herein, and (b) shall not
prejudice any rights which the Banks may now or hereafter have under or in
connection with the Credit Agreement, as modified hereby, or the other Loan
Documents.
You agree to pay on demand all costs and expenses of the Banks in
connection with the preparation, reproduction, execution and delivery of this
letter amendment and the other instruments and documents to be delivered
hereunder, including, without limitation, the reasonable fees and out-of-pocket
expenses of Sullivan & Worcester LLP, special counsel for the Banks with respect
thereto.
This letter amendment may be signed in one or more counterparts each of
which taken together shall constitute one and the same instrument.
THIS LETTER AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
[remainder of page blank]
<PAGE>
-3-
If you are in agreement with the foregoing, please sign and return the
enclosed copy of this letter amendment no later than June 30, 1997.
Sincerely,
SILICON VALLEY EAST, a Division of Silicon
Valley Bank, as a Bank hereunder and as
Collateral Agent
By:_____________________________
Name:
Title:
SILICON VALLEY BANK, as a Bank hereunder and as
Collateral Agent
By:______________________________
Name:
Title:
(signed in Santa Clara, California)
FLEET NATIONAL BANK, successor to Fleet Bank of
Massachusetts, N.A., as a Bank hereunder
By:______________________________
Name:
Title:
The undersigned have reviewed and
accept and agree to the terms
of the foregoing (including the
attached Annex I):
ALPHA INDUSTRIES, INC.
By:__________________________
Name:_______________________
Title:________________________
Date:________________________
<PAGE>
-4-
TRANS-TECH, INC.
By:__________________________
Name:_______________________
Title:________________________
Date:________________________
<PAGE>
ANNEX I TO LETTER AMENDMENT
Effective as of the Effective Date and subject to the conditions set forth
in the foregoing letter amendment, the Credit Agreement is hereby amended, and
the Banks hereby waive certain existing defaults thereunder, as follows:
A. Amendments to Credit Agreement.
------------------------------
1. The date "August 1, 1997" appearing in Section 1.1 is deleted and the
date "October 1, 1997" is substituted in lieu thereof.
2. The phrase "80% of all Eligible Domestic Accounts Receivable"
appearing in clause (ii) of Section 1.5 is deleted and there is substituted in
lieu thereof the phrase "75% of all Eligible Domestic Accounts Receivable".
3. The date "August 1, 1997" appearing in Section 1.6 is deleted and the
date "October 1, 1997" is substituted in lieu thereof.
4. Section 3.1(a)(i) is amended and restated in its entirety as follows:
"(i) for Prime Rate Loans, at the Prime Rate per annum, plus 1.0% per
----
annum."
5. The first sentence of Section 7.9 ("Use of Proceeds") is amended and
---------------
restated in its entirety as follows:
"The Borrowers shall use the proceeds of the borrowings under the Working
Capital Notes for the working capital purposes of the Borrowers, including
the purchase of equipment."
6. Section 8.11 is amended and restated in its entirety as follows:
"8.11 Quick Ratio. The Borrowers will not permit the Quick Ratio to be
-----------
less than (a) 1.00 to 1 at the end of the fiscal quarters ending June 30,
1997 or September 30, 1997 or (b) 1.20 to 1 at the end of the fiscal
quarter ending December 31, 1997 or thereafter."
7. Section 8.14 is amended and restated in its entirety as follows:
"8.14 Tangible Net Worth. The Borrowers will not permit Tangible Net
------------------
Worth at the end of any fiscal quarter ending June 30, 1997 or thereafter
to be less than 42,500,000."
B. Waiver of Certain Existing Defaults.
-----------------------------------
The Banks and the Borrowers acknowledge and agree that certain Events of
Default (the "Existing Defaults") have occurred and currently exist with respect
-----------------
to the financial covenants set forth in Section 8.14 of the Credit Agreement as
in effect prior to the effectiveness of this Amendment with respect to the
fiscal quarter ended March 30, 1997. The Banks hereby waive, effective upon the
Effective Date, the Existing Defaults, provided that this waiver shall in no
--------
event be deemed to constitute a waiver with respect to any fiscal period other
than the fiscal period ended March 30, 1997 or with respect to any covenants
other than the financial covenants expressly identified in the first sentence of
this paragraph.
<PAGE>
CONSENT
The undersigned, as Guarantor under the Subsidiary Guaranty dated as of
September 29, 1995 (the "Guaranty") in favor of Silicon Valley Bank and Fleet
National Bank (successor to Fleet Bank of Massachusetts, N.A.), hereby consents
to the foregoing letter amendment and to the amendment and restatement of the
two Working Capital Notes dated as of September 29, 1995 effected in connection
therewith and hereby confirms and agrees that the Guaranty is, and shall
continue to be, in full force and effect and is hereby ratified and confirmed in
all respects, except that, upon the effectiveness of, and on and after the date
of, said letter amendment, each reference in the Guaranty and in each other Loan
Document (as defined in the Credit Agreement) to which the undersigned is a
party, including, without limitation, the Security Agreement dated as of
September 29, 1995 to which the Guarantor is a party, to "the Credit Agreement",
"thereunder", "thereof", "therein", or words of like import referring to the
Credit Agreement shall mean and be a reference to the Credit Agreement, as
amended thereby, and that each reference, by whatever terms, in the aforesaid
Loan Documents to the Working Capital Notes shall mean and be a reference to the
Working Capital Notes as amended and restated in connection therewith.
ALPHA SECURITIES CORP.
By:___________________________
Name:
Title:
<PAGE>
AMENDED AND RESTATED PROMISSORY NOTE
(Working Capital Line of Credit Loans)
$4,500,000 Woburn, Massachusetts
June 12, 1997
(Originally dated as
of September 29, 1995)
For value received, the undersigned, ALPHA INDUSTRIES, INC., a
Delaware corporation, and TRANS-TECH, INC., a Maryland corporation (each a
"Borrower" and collectively the "Borrowers"), jointly and severally promise to
- --------- ---------
pay to SILICON VALLEY BANK (the "Bank") at the office of the Bank located at
----
3003 Tasman Drive, Santa Clara, California 95054, or to its order, the lesser of
FOUR MILLION FIVE HUNDRED THOUSAND DOLLARS ($4,500,000) or the outstanding
principal amount hereunder, on October 1, 1997 (the "Maturity Date"), together
-------------
with interest on the principal amount hereof from time to time outstanding at a
fluctuating rate per annum equal to the Prime Rate (as defined below) plus one
percent (1%) until the Maturity Date, payable monthly in arrears on the first
day of each calendar month occurring after the date hereof and on the Maturity
Date. The Bank's "Prime Rate" is the per annum rate of interest from time to
time announced and made effective by the Bank as its Prime Rate (which rate may
or may not be the lowest rate available from the Bank at any given time).
Computations of interest shall be made by the Bank on the basis of a
year of 360 days for the actual number of days occurring in the period for which
such interest is payable.
This promissory note amends and restates the terms and conditions of
the obligations of the Borrowers under the promissory note dated September 29,
1995 (the "Original Note") by the Borrowers to the Bank. Nothing contained in
-------------
this promissory note shall be deemed to create or represent the issuance of new
indebtedness or the exchange by the Borrowers of the Original Note for a new
promissory note. This promissory note is referred to in the credit agreement
dated September 29, 1995, as amended by amendments dated as of July 31, 1996,
September 30, 1996 and June 12, 1997, by the Bank and accepted by the Borrowers
together with all related schedules, as the same may be amended, modified or
supplemented from time to time (the "Credit Agreement"), and is subject to
----------------
optional and mandatory prepayment as provided therein, and is entitled to the
benefits thereof and of the other Loan Documents referred to therein. This note
is secured by a Security Agreement and a Pledge Agreement, both dated as of
September 29, 1995, by Alpha Industries, Inc., and a Guarantee dated as of
September 29, 1995 of Alpha Securities Corp., a Massachusetts corporation, as
the same may be amended, modified or supplemented from time to time.
Each reference in each Loan Document (as defined in the Credit
Agreement) to "the Note", "thereof", "therein", "thereunder", or words of like
import referring to the Original Note, shall mean and be a reference to the
Original Note, as amended and restated hereby.
Upon the occurrence of any Event of Default under, and as defined in,
the Credit Agreement, at the option of the Bank, the principal amount then
outstanding of and the accrued interest on the advances under this note and all
other amounts payable under this note shall become immediately due and payable,
without notice (including, without limitation, notice of intent
<PAGE>
-2-
to accelerate), presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrowers.
The Bank shall keep a record of the amount and the date of the making
of each advance pursuant to the Credit Agreement and each payment of principal
with respect thereto by maintaining a computerized record of such information
and printouts of such computerized record, which computerized record, and the
printouts thereof, shall constitute prima facie evidence of the accuracy of the
----- -----
information so endorsed.
Each of the undersigned agrees to pay all reasonable costs and
expenses of the Bank (including, without limitation, the reasonable fees and
expenses of attorneys) in connection with the enforcement of this note and the
other Loan Documents and the preservation of its rights hereunder and
thereunder.
No delay or omission on the part of the Bank in exercising any right
hereunder shall operate as a waiver of such right or of any other right of the
Bank, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to or waiver of the same or any other right on any future occasion. The
Borrowers and every endorser or guarantor of this note regardless of the time,
order or place of signing waives presentment, demand, protest and notices of
every kind and assents to any one or more extensions or postponements of the
time of payment or any other indulgences, to any substitutions, exchanges or
releases of collateral for this note, and to the additions or releases of any
other parties or persons primarily or secondarily liable.
THIS NOTE HAS BEEN DELIVERED TO THE BANK AND ACCEPTED BY THE BANK IN
THE STATE OF CALIFORNIA.
THE BORROWERS HEREBY EXPRESSLY WAIVE ANY RIGHT THEY MAY NOW OR
HEREAFTER HAVE TO A JURY TRIAL IN ANY SUIT, ACTION OR PROCEEDING WHICH ARISES
OUT OF OR BY REASON OF THIS NOTE, ANY LOAN DOCUMENT (AS DEFINED IN THE CREDIT
AGREEMENT), OR THE TRANSACTIONS CONTEMPLATED HEREBY.
BY ITS EXECUTION AND DELIVERY OF THIS NOTE, EACH BORROWER ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS (OR IF FOR ANY REASON ACCESS
TO SUCH COURTS IS DENIED TO THE BANK, THEN, IN THE STATE OF CALIFORNIA) IN ANY
ACTION, SUIT OR PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY
REASON OF THIS NOTE, ANY LOAN DOCUMENT (AS DEFINED IN THE CREDIT AGREEMENT), OR
THE TRANSACTIONS CONTEMPLATED HEREBY, IN ADDITION TO ANY OTHER COURT IN WHICH
SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT, IRREVOCABLY AGREES TO BE BOUND
BY ANY FINAL JUDGMENT RENDERED BY ANY SUCH COURT IN ANY SUCH ACTION, SUIT OR
PROCEEDING IN WHICH IT SHALL HAVE BEEN SERVED WITH PROCESS IN THE MANNER
HEREINAFTER PROVIDED, SUBJECT TO EXERCISE AND EXHAUSTION OF ALL RIGHTS OF APPEAL
AND TO THE EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES AND AGREES NOT TO ASSERT,
BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN SUCH ACTION, SUIT OR PROCEEDING
ANY CLAIMS THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT,
THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE
ACTION, SUIT OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE
THEREOF IS IMPROPER, AND AGREES THAT PROCESS MAY BE SERVED UPON IT IN ANY SUCH
ACTION, SUIT OR PROCEEDING IN THE MANNER PROVIDED BY CHAPTER 223A OF THE GENERAL
LAWS OF MASSACHUSETTS, RULE 4 OF THE MASSACHUSETTS RULES OF CIVIL PROCEDURE OR
RULE 4 OF THE FEDERAL RULES OF CIVIL PROCEDURE.
(remainder of page blank)
<PAGE>
-3-
ALL RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE GOVERNED BY THE LAW OF
THE COMMONWEALTH OF MASSACHUSETTS AND THIS NOTE SHALL BE DEEMED TO BE UNDER
SEAL.
Attest: ALPHA INDUSTRIES, INC.
By:
- ---------------------------- -------------------------
Name: Name:
Title: Title:
[Seal]
Attest: TRANS-TECH, INC.
By:
- ---------------------------- -------------------------
Name: Name:
Title: Title:
[Seal]
Accepted and Agreed
as of June 12, 1997:
SILICON VALLEY BANK
By:
-------------------------
Name:
Title:
<PAGE>
AMENDED AND RESTATED PROMISSORY NOTE
(Working Capital Line of Credit Loans)
$3,000,000 Woburn, Massachusetts
June 12, 1997
(Originally dated as
of September 29, 1995)
For value received, the undersigned, ALPHA INDUSTRIES, INC., a
Delaware corporation, and TRANS-TECH, INC., a Maryland corporation (each a
"Borrower" and collectively the "Borrowers"), jointly and severally promise to
- --------- ---------
pay to FLEET NATIONAL BANK, successor in interest to Fleet Bank of
Massachusetts, N.A. (the "Bank"), at the office of the Bank located at 75 State
----
Street, Boston, Massachusetts 02106, or to its order, the lesser of THREE
MILLION DOLLARS ($3,000,000) or the outstanding principal amount hereunder, on
October 1, 1997 (the "Maturity Date"), together with interest on the principal
-------------
amount hereof from time to time outstanding at a fluctuating rate per annum
equal to the Prime Rate (as defined below) plus one percent (1%) until the
Maturity Date, payable monthly in arrears on the first day of each calendar
month occurring after the date hereof and on the Maturity Date. The Bank's
"Prime Rate" is the per annum rate of interest from time to time announced and
made effective by the Bank as its Prime Rate (which rate may or may not be the
lowest rate available from the Bank at any given time).
Computations of interest shall be made by the Bank on the basis of a
year of 360 days for the actual number of days occurring in the period for which
such interest is payable.
This promissory note amends and restates the terms and conditions of
the obligations of the Borrowers under the promissory note dated September 29,
1995 (the "Original Note") by the Borrowers to the Bank. Nothing contained in
-------------
this promissory note shall be deemed to create or represent the issuance of new
indebtedness or the exchange by the Borrowers of the Original Note for a new
promissory note. This promissory note is referred to in the credit agreement
dated September 29, 1995, as amended by amendments dated as of July 31, 1996,
September 30, 1996 and June 12, 1997, by the Bank and accepted by the Borrowers
together with all related schedules, as the same may be amended, modified or
supplemented from time to time (the "Credit Agreement"), and is subject to
----------------
optional and mandatory prepayment as provided therein, and is entitled to the
benefits thereof and of the other Loan Documents referred to therein. This note
is secured by a Security Agreement and a Pledge Agreement, both dated as of
September 29, 1995, by Alpha Industries, Inc., and a Guarantee dated as of
September 29, 1995 of Alpha Securities Corp., a Massachusetts corporation, as
the same may be amended, modified or supplemented from time to time.
Each reference in each Loan Document (as defined in the Credit
Agreement) to "the Note", "thereof", "therein", "thereunder", or words of like
import referring to the Original Note, shall mean and be a reference to the
Original Note, as amended and restated hereby.
Upon the occurrence of any Event of Default under, and as defined in,
the Credit Agreement, at the option of the Bank, the principal amount then
outstanding of and the accrued interest on the advances under this note and all
other amounts payable under this note shall become immediately due and payable,
without notice (including, without limitation, notice of intent
<PAGE>
-2-
to accelerate), presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrowers.
The Bank shall keep a record of the amount and the date of the making
of each advance pursuant to the Credit Agreement and each payment of principal
with respect thereto by maintaining a computerized record of such information
and printouts of such computerized record, which computerized record, and the
printouts thereof, shall constitute prima facie evidence of the accuracy of the
----- -----
information so endorsed.
Each of the undersigned agrees to pay all reasonable costs and
expenses of the Bank (including, without limitation, the reasonable fees and
expenses of attorneys) in connection with the enforcement of this note and the
other Loan Documents and the preservation of its rights hereunder and
thereunder.
No delay or omission on the part of the Bank in exercising any right
hereunder shall operate as a waiver of such right or of any other right of the
Bank, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to or waiver of the same or any other right on any future occasion. The
Borrowers and every endorser or guarantor of this note regardless of the time,
order or place of signing waives presentment, demand, protest and notices of
every kind and assents to any one or more extensions or postponements of the
time of payment or any other indulgences, to any substitutions, exchanges or
releases of collateral for this note, and to the additions or releases of any
other parties or persons primarily or secondarily liable.
THIS NOTE HAS BEEN DELIVERED TO THE BANK AND ACCEPTED BY THE BANK IN
THE STATE OF CALIFORNIA.
THE BORROWERS HEREBY EXPRESSLY WAIVE ANY RIGHT THEY MAY NOW OR
HEREAFTER HAVE TO A JURY TRIAL IN ANY SUIT, ACTION OR PROCEEDING WHICH ARISES
OUT OF OR BY REASON OF THIS NOTE, ANY LOAN DOCUMENT (AS DEFINED IN THE CREDIT
AGREEMENT), OR THE TRANSACTIONS CONTEMPLATED HEREBY.
BY ITS EXECUTION AND DELIVERY OF THIS NOTE, EACH BORROWER ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS (OR IF FOR ANY REASON ACCESS
TO SUCH COURTS IS DENIED TO THE BANK, THEN, IN THE STATE OF CALIFORNIA) IN ANY
ACTION, SUIT OR PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY
REASON OF THIS NOTE, ANY LOAN DOCUMENT (AS DEFINED IN THE CREDIT AGREEMENT), OR
THE TRANSACTIONS CONTEMPLATED HEREBY, IN ADDITION TO ANY OTHER COURT IN WHICH
SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT, IRREVOCABLY AGREES TO BE BOUND
BY ANY FINAL JUDGMENT RENDERED BY ANY SUCH COURT IN ANY SUCH ACTION, SUIT OR
PROCEEDING IN WHICH IT SHALL HAVE BEEN SERVED WITH PROCESS IN THE MANNER
HEREINAFTER PROVIDED, SUBJECT TO EXERCISE AND EXHAUSTION OF ALL RIGHTS OF APPEAL
AND TO THE EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES AND AGREES NOT TO ASSERT,
BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN SUCH ACTION, SUIT OR PROCEEDING
ANY CLAIMS THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT,
THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE
ACTION, SUIT OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE
THEREOF IS IMPROPER, AND AGREES THAT PROCESS MAY BE SERVED UPON IT IN ANY SUCH
ACTION, SUIT OR PROCEEDING IN THE MANNER PROVIDED BY CHAPTER 223A OF THE GENERAL
LAWS OF MASSACHUSETTS, RULE 4 OF THE MASSACHUSETTS RULES OF CIVIL PROCEDURE OR
RULE 4 OF THE FEDERAL RULES OF CIVIL PROCEDURE.
(remainder of page blank)
<PAGE>
-3-
ALL RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE GOVERNED BY THE LAW OF
THE COMMONWEALTH OF MASSACHUSETTS AND THIS NOTE SHALL BE DEEMED TO BE UNDER
SEAL.
Attest: ALPHA INDUSTRIES, INC.
_______________________________ By:_________________________________
Name: Name:
Title: Title:
[Seal]
Attest: TRANS-TECH, INC.
_______________________________ By:_________________________________
Name: Name:
Title: Title:
[Seal]
Accepted and Agreed
as of June 12, 1997:
FLEET NATIONAL BANK, successor
to Fleet Bank of Massachusetts, N.A.
By:_____________________________________
Name:
Title:
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
Dated as of September 30, 1996
Alpha Industries, Inc.
20 Sylvan Road
Woburn, MA 01801
Trans-Tech, Inc.
5520 Adamstown Road
Adamstown, MD
Re: Second Amendment to the Credit Agreement dated as of September 29,
1995 by and among Alpha Industries, Inc. ("Alpha"), Trans-Tech, Inc.
("Trans-Tech"), Silicon Valley Bank ("SVB"), Fleet Bank of
Massachusetts, N.A., predecessor to Fleet National Bank ("Fleet"), and
Silicon Valley Bank as collateral agent for SVB and Fleet (the
"Collateral Agent"), as previously amended by the First Amendment to
Credit Agreement dated as of July 31, 1996
Ladies and Gentlemen:
The purpose of this letter is to evidence the agreement between Alpha and
Trans-Tech (each a "Borrower" and, together, the "Borrowers" or "you"), SVB and
Fleet (each a "Bank" and, together, the "Banks") and the Collateral Agent that,
effective on the Effective Date (as defined below), the above-referenced Credit
Agreement (as previously amended and together with the schedules thereto, the
"Credit Agreement") is amended as set forth on Annex I hereto (which is
incorporated in this letter amendment by reference). Capitalized terms used but
not defined herein shall have the meanings assigned to them in the Credit
Agreement.
This letter amendment (the "Amendment") shall become effective as of
September 30, 1996 (the "Effective Date"), provided that SVB, on behalf of the
Banks, shall have received on or before December 23, 1996 three (3) copies of
this letter, duly executed by each of you, with the attached consent of Alpha
Securities Corp. (the "Guarantor"), duly executed thereby, and provided,
further, however, that in no event shall this Amendment become effective until
signed by an officer of SVB in California.
By your signatures below, you are hereby representing that your
representations set forth in the Loan Documents (including those contained in
the Credit Agreement, as amended hereby) are true and correct as of the date
hereof as if made on and as of the date hereof. In addition, each of you and
the Guarantor agrees that, as of this date, it has no defenses against its
obligations to pay any amounts due under the Credit Agreement and the other Loan
Documents.
Upon the effectiveness hereof, each reference in each Security Instrument
or other Loan Document to "the Credit Agreement", "thereunder", "thereof",
"therein", or words of like import referring to the Credit Agreement, shall mean
and be a reference to the Credit Agreement as amended hereby. Except as
specifically set forth above, the Credit Agreement shall remain in full force
and effect and is hereby ratified and confirmed. Each of the other Loan
Documents is in full force and effect and is hereby ratified and confirmed. The
amendments set forth herein (a) do not
<PAGE>
constitute a waiver or modification of any term, condition or covenant of the
Credit Agreement or any other Loan Document, other than as expressly set forth
herein, and (b) shall not prejudice any rights which the Banks may now or
hereafter have under or in connection with the Credit Agreement, as modified
hereby, or the other Loan Documents.
You agree to pay on demand all costs and expenses of the Banks in
connection with the preparation, reproduction, execution and delivery of this
letter amendment and the other instruments and documents to be delivered
hereunder, including, without limitation, the reasonable fees and out-of-pocket
expenses of Sullivan & Worcester LLP, special counsel for the Banks with respect
thereto.
This letter amendment may be signed in one or more counterparts each of
which taken together shall constitute one and the same instrument.
THIS LETTER AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
If you are in agreement with the foregoing, please sign and return the
enclosed copy of this letter amendment no later than December 23, 1996.
Sincerely,
SILICON VALLEY EAST, a Division of Silicon Valley Bank,
as a Bank hereunder and as Collateral Agent
By:_____________________________
Name:
Title:
SILICON VALLEY BANK, as a Bank hereunder and as
Collateral Agent
By:______________________________
Name:
Title:
(signed in Santa Clara, California)
FLEET NATIONAL BANK, successor to Fleet Bank of
Massachusetts, N.A., as a Bank hereunder
By:______________________________
Name:
Title:
<PAGE>
The undersigned have reviewed and
accept and agree to the terms
of the foregoing (including the
attached Annex I):
ALPHA INDUSTRIES, INC.
By:___________________________
Name:_________________________
Title:________________________
Date:_________________________
TRANS-TECH, INC.
By:___________________________
Name:_________________________
Title:________________________
Date:_________________________
<PAGE>
ANNEX I TO LETTER AMENDMENT
Effective as of the Effective Date and subject to the conditions set forth
in the foregoing letter amendment, the Credit Agreement is hereby amended as
follows:
1. Section 1.5 is amended by deleting clause (ii) thereof and
substituting in lieu thereof the following:
"(ii) 80% of all Eligible Domestic Accounts Receivable and 75% of all
Eligible International Accounts Receivable at such time,".
2. Effective as of November 15, 1996, Sections 3.1(a)(i) and (ii) are
amended and restated in their entirety as follows:
"(i) for Prime Rate Loans, at the Prime Rate per annum, plus 0.50% per
----
annum.
"(ii) [Intentionally deleted]."
3. Effective as of November 15, 1996, Sections 3.1(b)(i) and (ii) are
amended and restated in their entirety as follows:
"(i) for Prime Rate Loans, at the Prime Rate per annum, plus 0.50% per
----
annum; and
"(ii) for LIBOR Loans, at the LIBOR Rate, plus 300 basis points
----
per annum."
4. Section 3.1 is further amended by inserting the following subsection
(d):
"(d) Notwithstanding anything to the contrary in this Credit
Agreement or any other agreement or instrument to which either of the Banks
is a party, effective as of November 15, 1996 the Borrowers shall not
request, and shall have no right to receive, from the Banks any Working
Capital Line of Credit Loan that would constitute a LIBOR Loan."
5. The Section 8.11 is amended and restated in its entirety as follows:
"8.11 Quick Ratio. The Borrowers will not permit the Quick Ratio to
-----------
be less than (a) 1.10 to 1 at the end of the fiscal quarter ending December
31, 1996 or (b) 1.20 to 1 at the end of any fiscal quarter thereafter."
6. Section 8.12 is amended and restated in its entirety as follows:
"8.12 Minimum Profitability. The Borrowers will not (a) incur Net
---------------------
Losses in the fiscal quarter ending September 30, 1997 or thereafter, (b)
permit cumulative Net Income for the four consecutive fiscal quarters
ending on March 31, 1998 and June 30, 1998, respectively, to be less than
$1,000,000, or (c) permit cumulative Net Income for any four consecutive
fiscal quarters, beginning with the four consecutive fiscal quarters ending
on September 30, 1998, to be less than $2,000,000."
7. Section 8.13 is amended by deleting the ratio "1.25 to 1" appearing
therein and substituting in lieu thereof the ratio "0.75 to 1".
8. Section 8.14 is amended and restated in its entirety as follows:
<PAGE>
"8.14 Tangible Net Worth. The Borrowers will not permit Tangible Net
------------------
Worth at the end of any fiscal quarter to be less than $47,500,000 minus
-----
the cumulative amount, not to exceed $3,000,000 in the aggregate, of
extraordinary charges appropriately disclosed in the Borrowers' financial
statements beginning with the fiscal quarter ending December 31, 1996."
9. Section 8.15 is deleted and there is substituted in lieu thereof the
following:
"8.15 Cash Flow Coverage. [Intentionally deleted.]"
------------------
10. The definition of "Quick Ratio" in Section 11.1 is amended and
restated in its entirety as follows:
"Quick Ratio" means, at any time, all cash and accounts receivable,
-----------
less reserves for doubtful accounts, less advance billings to customers, of
the Borrowers and their Subsidiaries at such time, on a consolidated basis,
determined in accordance with GAAP, divided by the sum (without
duplication) of (a) the aggregate of all Current Liabilities at such time,
(b) then outstanding Working Capital Extensions of Credit, (c) then
outstanding Equipment Line of Credit Loans, and (d) the then current
portion of long-term Indebtedness of the Borrowers and their Subsidiaries
as calculated in accordance with GAAP."
<PAGE>
CONSENT
The undersigned, as Guarantor under the Subsidiary Guaranty dated as of
September 29, 1995 (the "Guaranty") in favor of Silicon Valley Bank and Fleet
National Bank (successor to Fleet Bank of Massachusetts, N.A.), hereby consents
to the foregoing letter amendment and hereby confirms and agrees that the
Guaranty is, and shall continue to be, in full force and effect and is hereby
ratified and confirmed in all respects, except that, upon the effectiveness of,
and on and after the date of, said letter amendment, each reference in the
Guaranty and in each other Loan Document (as defined in the Credit Agreement
referred to in the foregoing letter amendment) to which the undersigned is a
party, including, without limitation, the Security Agreement dated as of
September 29, 1995 to which the Guarantor is a party, to "the Credit Agreement",
"thereunder", "thereof", "therein", or words of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit Agreement as
amended thereby.
ALPHA SECURITIES CORP.
By:___________________________
Name:
Title:
<PAGE>
[LETTERHEAD OF ALPHA INDUSTRIES, INC. APPEARS HERE]
Exhibit (10)(f)
January 13, 1997
Mr. Thomas C. Leonard
15 Meadow View Rd.
Topsfield MA 01983
Re: Severance Agreement
Dear Tom:
This letter is to confirm the severance arrangements that we have agreed upon
with respect to your employment with Alpha Industries, Inc. (the "Company").
1. Change in Control
-----------------
1.1. If: (i) a Change in Control occurs while you are employed by the Company
as President and Chief Executive Officer, and (ii) your employment with
the Company is voluntarily or involuntarily terminated within two (2)
years after such Change in Control, then you will receive the benefits
specified Section 1.3 below.
1.2. A "Change in Control" shall be deemed to have occurred if the Continuing
Directors shall have ceased for any reason to constitute a majority of the
Board of Directors of the Company. For this purpose, a "Continuing
Director" shall include and be limited to any member of the Board of
Directors of the Company as of the date of this letter and any Director
nominated for election to the Board of Directors of the Company by at
least 75% of the then Continuing Directors.
1.3. In the event that your employment with the Company is terminated in the
manner described in Section 1.1 above (the date of such termination being
referred to as the "Control Termination Date"), (i) on the Control
Termination Date, the Company will pay to you a lump sum equal to two
times your annual compensation for the twelve (12) full month period prior
to the Change in Control, including all wages, salary, bonus and incentive
compensation, whether or not includable in gross income for federal income
tax purposes (the "Control Severance Payment"); and (ii) all Company stock
options then outstanding and
<PAGE>
Thomas C. Leonard
January 13, 1997
Page 2
held by you, whether or not by their terms then exercisable, shall,
subject to their other terms and conditions, become immediately
exercisable and remain exercisable for a period of ninety (90) days after
the Control Termination Date. Notwithstanding anything to the contrary
contained in this Agreement, in the event that the Control Severance
Payment, either alone or together with other payments which you have the
right to receive from the Company, would constitute a "parachute payment"
(as defined in Section 280G of the Internal Revenue Code of 1986 as
amended (the "Code")), then the Control Severance Payment shall be reduced
to the largest amount that will result in no portion of such payment being
subject to the excise tax imposed by Section 4999 of the Code. The
determination of any such reduction shall be made by the Board of
Directors of the Company, acting in good faith and in consultation with
the Company's accountants and counsel.
2. Termination Without Cause or for Good Reason
--------------------------------------------
2.1. If, while you are employed by the Company as President and Chief Executive
Officer, (i) your employment with the Company is involuntarily terminated
without Cause, or (ii) you terminate your employment with the Company for
Good Reason, then you will receive the benefits specified in Section 2.4
below. If your employment is terminated involuntarily by the Company for
Cause, you will not be entitled to receive the benefits specified in
Section 2.4 below.
2.2. "Cause" shall mean: (i) deliberate dishonesty significantly detrimental to
the best interests of the Company or any subsidiary or affiliate; (ii)
conduct on your part constituting an act of moral turpitude; (iii) willful
disloyalty to the Company or refusal or failure to obey the directions of
the Board of Directors; (iv) incompetent performance or substantial or
continuing inattention to or neglect of duties assigned to you.
2.3 "Good Reason" shall mean: (i) the assignment to you of any duties
inconsistent in any respect with your position as the President and Chief
Executive Officer of the Company; or (ii) any reduction in your base
salary or rate of compensation; or (iii) any requirement imposed on you by
the Company that you relocate outside the eastern Massachusetts area.
2.4 In the event that your employment with the Company is terminated in the
manner described in Section 2.1 above (the date of such termination being
referred to as
<PAGE>
Thomas C. Leonard
January 13, 1997
Page 3
the "Termination Date"), (i) beginning with the Termination Date, the
Company will pay to you a continuing stream of weekly salary payments for
two years at the highest rate that your base salary was paid to you at any
time during the one (1) year period immediately preceding the Termination
Date; and (ii) all Company stock options then outstanding and held by you,
whether or not by their terms then exercisable, shall, subject to their
other terms and conditions, become immediately exercisable and remain
exercisable for a period of ninety (90) days after the Termination Date.
3. Non-Competition
---------------
3.1. During: (i) the term of your employment with the Company and for one (1)
year thereafter, and (ii) the actual term of your consulting arrangement
(the "Noncompete Period"), you will not, directly or indirectly, whether
as owner, partner, shareholder, director, consultant, agent, employee, or
otherwise, or through any person, engage in any employment, consulting or
other activity which competes with the business of the Company or any of
its subsidiaries or affiliates. You acknowledge and agree that your direct
or indirect participation in the conduct of such competing business alone
or with any person other than the Company will materially impair the
business and prospects of the Company. During the Noncompete Period, you
will not (i) attempt to hire any director, officer, employee or agent of
the Company, (ii) assist in hiring such hiring by any other person, (iii)
encourage any person to terminate his or her employment or business
relationship with the Company, (iv) encourage any customer or supplier of
the Company to terminate its relationship with the Company, or (v) obtain,
or assist in obtaining, for your own benefit (other than indirectly as an
employee of the Company) any customer of the Company. If any of the
restrictions provided for in this Section 3.1 are adjudicated to be
excessively broad as to scope, geographic area, time or otherwise, said
restriction shall be reduced to the extent necessary to make the
restriction reasonable and shall be binding on you as so reduced. Any
provisions of this Section 3.1 not so reduced shall remain in full force
an effect. It is understood that during the Noncompete Period, you will
make yourself available to the Company for consultation on behalf of the
Company, upon reasonable request and at a reasonable rate of compensation
and at reasonable times in light of any commitment you may have to a new
employer.
3.2. You understand and acknowledge that the Company's remedies at law for
breach of any of the restrictions in Section 3.1 above are inadequate and
that any such
<PAGE>
Thomas C. Leonard
January 13, 1997
Page 4
breach will cause irreparable harm to the Employer. You therefore agree
that in addition and as a supplement to such other rights and remedies as
may exist in the Company's favor, the Company may apply to any court
having jurisdiction to enforce the specific performance of the
restrictions in Section 3.1, and may apply for injunctive relief against
any act which would violate those restrictions.
4. Post-employment Consulting
--------------------------
4.1 The Company wishes to ensure that your continuing advice and support is
available after you cease to serve in your current capacity, and you are
agreeable to providing such advice and support. Therefore, subject to the
conditions set out in Section 4.2 below, the Company agrees: (i) to retain
you, and you agree to act, as a consultant for a term of two (2) years
from the date of your retirement, at an annual consulting fee equal to
your annual salary as of the date of your retirement, and (ii) that all
Company stock options then outstanding and held by you, whether or not by
their terms then exercisable, shall, subject to their other terms and
conditions, become immediately exercisable and remain exercisable for a
period of ninety (90) days after the effective date of your retirement
4.2 The consulting arrangement set out in Section 4.1 above will be available
to you only if: (i) you are still President and Chief Executive Officer of
the Company on September 30, 1999, and (ii) your retirement is effective
at any time between October 1, 1999 and September 30, 2000, and (iii) you
give the Company six (6) months written advance notice of your intention
to retire.
5. Payments Under Sections 2.4 and 4.1
-----------------------------------
Payments provided for in Sections 2.4 and 4.1 of this letter will:
(i) be made at the same rate as you were receiving on the date of
employment termination or retirement; (ii) be paid in equal periodic
installments at such intervals as the Company shall generally pay its
officers, and (iii) be reduced by the amount of any compensation that you
receive from any person for services rendered during the period in which
you are receiving such payments.
6. Miscellaneous
-------------
This agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof and may be modified only by a written
instrument duly
<PAGE>
Thomas C. Leonard
January 13, 1997
Page 5
executed by each party. This agreement replaces and supersedes all prior
agreements relating to your employment by the Company. This agreement
shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts.
Please sign both copies of this letter and return one to the Company.
Sincerely,
/s/ George S. Kariotis
- ---------------------------
--------------------------------
George Kariotis AGREED TO:
Chairman of the Board
/s/ Thomas C. Leonard
/s/ Sidney Topol ----------------------------
- --------------------------- Thomas C. Leonard
Sidney Topol
Chairman of the Compensation Committee Date: 17 JAN 1997
of the Board of Directors -----------------------
--------------------------------
<PAGE>
[LETTERHEAD OF ALPHA INDUSTRIES, INC. APPEARS HERE]
May 20, 1997
Exhibit (10)(g)
Mr. David J. Aldrich
81 Cross Street
Andover MA 01810
Re: Severance Agreement
Dear Dave:
This letter is to confirm the severance arrangements that we have offered to you
as a Vice President of Alpha Industries, Inc. ("Alpha").
1. If: (i) a Change in Control occurs while you are employed by Alpha, and
(ii) your employment with Alpha is voluntarily or involuntarily terminated
within two (2) years thereafter, then: (a) Alpha will pay you two (2) years of
salary continuation (and any bonus guaranteed or earned prior to the date of
termination) in accordance with the terms and conditions of this letter, and
(b) all Alpha stock options then outstanding and held by you, whether or not by
their terms then exercisable, will, subject to their other terms and conditions,
become immediately exercisable and remain exercisable for a period of ninety
(90) days after the date of employment termination.
2. A "Change in Control" will be deemed to have occurred if the Continuing
Board of Alpha shall have ceased for any reason to constitute a majority of the
Board of Directors of Alpha. For this purpose, a "Continuing Director" will
include any member of the Board of Directors of Alpha as a date of this letter
and any person nominated for election to the Board of Directors of Alpha by a
majority of the then Continuing Directors.
3. If, at any time, your employment with Alpha is involuntarily terminated
without Cause, then: (a) Alpha will pay you two (2) years of salary continuation
(and any bonus guaranteed or earned prior to the date of termination) in
accordance with the terms and conditions of this letter, and (b) all Alpha stock
options then outstanding and held by you, whether or not by their terms then
exercisable, will, subject to their other terms and conditions, become
immediately exercisable and remain exercisable for a period of ninety (90) days
after the date of employment termination.
4. "Cause" will mean: (a) deliberate dishonesty detrimental to the best
interests of Alpha or any subsidiary, or (b) conduct constituting moral
turpitude, or (c) willful disloyalty to Alpha, or (d) refusal or failure to obey
the directions of the CEO of Alpha, or (e) incompetent performance or
substantial or continuing inattention to or neglect of duties and
responsibilities assigned to you.
5. Salary continuation payments under this letter will: (a) be made at the same
rate as you were receiving on the date of employment termination; (b) be paid in
equal periodic installments at such intervals as Alpha shall generally pay its
officers, and (c) be reduced by the amount of any
<PAGE>
David J. Aldrich
May 20, 1997
Page 2
compensation that you receive from any person for services rendered during the
salary continuation period. Notwithstanding the foregoing, you will not receive
any salary continuation payments for any period in which you fail to actively
seek gainful employment.
6. During the term of your employment with Alpha and for the first twelve (12)
months after the date on which your employment with Alpha is voluntarily or
involuntarily terminated (the "Noncompete Period"), you will not, directly or
indirectly, whether as owner, partner, shareholder, director, consultant, agent,
employee, or otherwise, or through any person, engage in any employment,
consulting or other activity which competes with the business of Alpha or any
subsidiary or affiliate of Alpha (collectively, the "Company"). You acknowledge
and agree that your direct or indirect participation in the conduct of such
competing business alone or with any person will materially impair the business
and prospects of Alpha. During the Noncompete Period, you will not (i) attempt
to hire any director, officer, employee or agent of the Company, (ii) assist in
such hiring by any other person, (iii) encourage any person to terminate his or
her employment or business relationship with the Company, (iv) encourage any
customer or supplier of the Company to terminate its relationship with the
Company, or (v) obtain, or assist in obtaining, for your own benefit (other than
indirectly as an employee of the Company) any customer of the Company. If any
of the restrictions provided for in this Section 6 are adjudicated to be
excessively broad as to scope, geographic area, time or otherwise, said
restriction shall be reduced to the extent necessary to make the restriction
reasonable and shall be binding on you as so reduced. Any provisions of this
Section 6 not so reduced shall remain in full force and effect. It is
understood that during the Noncompete Period, you will make yourself available
to the Company for consultation on behalf of the Company, upon reasonable
request and at a reasonable rate of compensation and at reasonable times in
light of any commitment you may have to a new employer. You understand and
acknowledge that the Company's remedies at law for breach of any of the
restrictions in this Section are inadequate and that any such breach will cause
irreparable harm to the Company. You therefore agree that in addition and as a
supplement to such other rights and remedies as may exist in the Company's
favor, the Company may apply to any court having jurisdiction to enforce the
specific performance of the restrictions in this Section, and may apply for
injunctive relief against any act which would violate those restrictions.
Please sign both copies of this letter and return one to me. If you have any
questions, please feel free to call me or Jim Nemiah.
---------------------------------
Sincerely, AGREED TO:
/s/ Thomas C. Leonard /s/ David J. Aldrich
----------------------------
Thomas C. Leonard
President and CEO Date: 4/5/97
-----------------------
JCN/hs ---------------------------------
<PAGE>
[LETTERHEAD OF ALPHA INDUSTRIES, INC. APPEARS HERE]
January 14, 1997
Exhibit (10)(h)
Mr. Richard Langman
1952 Sugarbush Drive
Evergreen, CO 80439
Re: Severance Agreement
Dear Rick:
This letter is to confirm the severance arrangements that we have offered you if
you accept our offer of employment with Alpha Industries, Inc. ("Alpha") and
Trans-Tech, Inc. ("Trans-Tech").
1. If: (i) a Change in Control occurs while you are employed by Trans-Tech,
and (ii) your employment with Trans-Tech is voluntarily or involuntarily
terminated within two (2) years thereafter, then: (a) Trans-Tech will pay you
two (2) years of salary continuation (and any bonus guaranteed or earned prior
to the date of termination) in accordance with the terms and conditions of this
letter, and (b) all Alpha stock options then outstanding and held by you,
whether or not by their terms then exercisable, will, subject to their other
terms and conditions, become immediately exercisable and remain exercisable for
a period of ninety (90) days after the date of employment termination.
2. A "Change in Control" will be deemed to have occurred if:
(i) the Continuing Board of Alpha shall have ceased for any reason to
constitute a majority of the Board of Directors of Alpha. For this
purpose, a "Continuing Director" will include any member of the Board
of Directors of Alpha as a date of this letter and any person
nominated for election to the Board of Directors of Alpha by a
majority of the then Continuing Directors, or
(ii) Alpha ceases to own more than 50% of the stock of Trans-Tech (except
in the case of a public offering of Trans-Tech stock).
3. If your employment with Trans-Tech is involuntarily terminated while you
are employed by Trans-Tech without Cause, then: (a) Trans-Tech will pay you two
years of salary continuation (and any bonus guaranteed or earned prior to the
date of termination) in accordance with the terms and conditions of this letter,
and (b) all Alpha stock options then
<PAGE>
Richard Langman
January 14, 1997
Page 2
outstanding and held by you, whether or not by their terms then exercisable,
will, subject to their other terms and conditions, become immediately
exercisable and remain exercisable for a period of ninety (90) days after the
date of employment termination.
4. "Cause" will mean: (a) deliberate dishonesty detrimental to the best
interests of Alpha or Trans-Tech or any subsidiary, or (b) conduct constituting
moral turpitude, or (c) willful disloyalty to Alpha or Trans-Tech, or (d)
refusal or failure to obey the directions of the CEO of Alpha or the Board of
Directors of Trans-Tech, or (e) incompetent performance of substantial or
continuing inattention to or neglect of duties and responsibilities assigned to
you.
5. Salary continuation payments under this letter will: (a) be made at the
same rate as you were receiving on the date of employment termination; (b) be
paid in equal periodic installments at such intervals as Trans-Tech shall
generally pay its officers, and (c) be reduced by the amount of any compensation
that you receive from any person for services rendered during the salary
continuation period. Notwithstanding the foregoing, you will not receive any
salary continuation payments for any period in which you either: (i) engage in
activities or enterprises (on behalf of yourself or others) that are directly
competitive with any business activity of Alpha Industries, Inc. or any of its
subsidiaries, or (ii) fail to actively seek gainful employment.
6. The following noncompetition provisions apply during both of the following
(the "Noncompete Period"):
(i) the term of your employment with the Company, and
(ii) the first twelve (12) months after the date on which your employment with
Trans-Tech terminates , but only if your employment terminates after the
-----------
second anniversary of your date of hire.
During the Noncompete Period you will not, directly or indirectly, whether as
owner, partner, shareholder, director, consultant, agent, employee, or
otherwise, or through any person, engage in any employment, consulting or other
activity which competes with the business of Trans-Tech or any subsidiary or
affiliate of Alpha that develops, manufactures or sells high-dielectric
materials for wireless communication. You acknowledge and agree that your
direct or indirect participation in the conduct of such competing business alone
or with any person will materially impair the business and prospects of Alpha.
During the Noncompete Period, you will not (i) attempt to hire any director,
officer, employee or agent of Alpha or any subsidiary or affiliate of Alpha
(collectively, the "Company"), (ii) assist in such hiring by any other person,
(iii) encourage any person to terminate his or her employment or business
relationship with the Company, (iv) encourage any customer or supplier of the
Company to
<PAGE>
Richard Langman
January 14, 1997
Page 3
terminate its relationship with the Company, or (v) obtain, or assist in
obtaining, for your own benefit (other than indirectly as an employee of the
Company) any customer of the Company. If any of the restrictions provided for in
this Section 6 are adjudicated to be excessively broad as to scope, geographic
area, time or otherwise, said restriction shall be reduced to the extent
necessary to make the restriction reasonable and shall be binding on you as so
reduced. Any provisions of this Section 6 not so reduced shall remain in full
force an effect. It is understood that during the Noncompete Period, you will
make yourself available to the Company for consultation on behalf of the
Company, upon reasonable request and at a reasonable rate of compensation and at
reasonable times in light of any commitment you may have to a new employer. You
understand and acknowledge that the Company's remedies at law for breach of any
of the restrictions in this Section are inadequate and that any such breach will
cause irreparable harm to the Company. You therefore agree that in addition and
as a supplement to such other rights and remedies as may exist in the Company's
favor, the Company may apply to any court having jurisdiction to enforce the
specific performance of the restrictions in this Section, and may apply for
injunctive relief against any act which would violate those restrictions.
Please sign both copies of this letter and return one to me. If you have any
questions, please feel free to call me or Jim Nemiah.
Sincerely, --------------------------------------
AGREED TO:
/s/ George LeVan
---------------------------------
George LeVan Date:
Director of Human Resources ---------------------------
JCN/hs --------------------------------------
<PAGE>
[LETTERHEAD OF ALPHA INDUSTRIES, INC. APPEARS HERE]
EXHIBIT (10)(i)
October 4, 1996
Mr. Martin J. Reid
7 Wainwright Road, #59
Winchester MA 01890
Re: Ongoing relationship
Dear Woody:
As we have discussed, Alpha Industries, Inc. ("Alpha") wishes to provide a
contractual basis for an ongoing relationship between you and Alpha. This letter
sets out the terms that we have discussed.
1. This agreement replaces and supersedes all prior agreements relating to you
employment by the Company, including without limitation the Severance Agreement
dated July 1, 1996, which is hereby terminated and canceled as of the date of
this agreement.
2. You resigned your positions as President and Chief Executive Officer of
Alpha on July 16, 1996. You will remain an employee of Alpha on the terms and
with the rights and benefits set out below in this letter.
3. Alpha agrees that your salary will continue at the annual rate of
$290,000.00, which is $5,576.92 per week, on a weekly basis through October 4,
1998, subject to the following conditions.
a. In the event of your death, Alpha will make the stream of weekly payments
provided above in this Section to your estate until the first to occur
of: (i) one year after the date of your death, or (ii) October 4, 1998.
b. Except as prohibited by this agreement in Section 4, you are free to
accept any other employment opportunity. Except in the event that you
violate any term or provision of this agreement, the payments provided
for in this Section will not
<PAGE>
Martin J. Reid
October 4, 1996
Page 2
be reduced, terminated or otherwise effected by your acceptance of other
employment or your receipt of other compensation.
4. From July 16, 1996 through the later to occur of (a) October 4, 1997, or (b)
the termination of your employee status with Alpha (the "Noncompete Period"),
you will not, directly or indirectly, whether as owner, partner, shareholder,
director, consultant, agent, employee, or otherwise, or through any person,
engage in any employment, consulting or other activity which competes with the
business of the Company or any of its subsidiaries or affiliates. You
acknowledge and agree that your direct or indirect participation in the conduct
of such competing business alone or with any person other than the Company will
materially impair the business and prospects of the Company. During the
Noncompete Period, you will not (i) attempt to hire any director, officer,
employee or agent of the Company, (ii) assist in such hiring by any other
person, (iii) encourage any person to terminate his or her employment or
business relationship with the Company, (iv) encourage any customer or supplier
of the Company to reduce or terminate its relationship with the Company. If any
of the restrictions provided for in this Section are adjudicated to be
excessively broad as to scope, geographic area, time or otherwise, said
restriction shall be reduced to the extent necessary to make the restriction
reasonable and shall be binding on you as so reduced. Any provisions of this
Section not so reduced shall remain in full force an effect. It is understood
that during the Noncompete Period, you will make yourself available to the
Company for consultation on behalf of the Company, upon reasonable request and
at a reasonable rate of compensation and at reasonable times in light of any
commitment you may have to a new employer.
You understand and acknowledge that the Company's remedies at law for breach of
any of the restrictions in this Section are inadequate and that any such breach
will cause irreparable harm to the Employer. You therefore agree that in
addition and as a supplement to such other rights and remedies as may exist in
the Company's favor, the Company may apply to any court having jurisdiction to
enforce the specific performance of the restrictions in this Section, and may
apply for injunctive relief against any act which would violate those
restrictions.
5. You agree to cooperate with Alpha in effecting your resignation from all of
the positions that you have held with subsidiaries and other affiliates of Alpha
and in taking any other actions required due to your change of status with
Alpha.
6. You will be an employee of Alpha on the terms and conditions set out below:
a. Your responsibilities will be such as are mutually acceptable to and
agreed upon by you and the President of Alpha. Under no circumstances will
you be
<PAGE>
Martin J. Reid
October 4, 1996
Page 3
asked to perform any duties inconsistent in any respect with your
position as the former President and Chief Executive Officer of Alpha.
b. Your employee status will not affect your receipt of salary continuation
as set out in Section 3 above, and neither such status nor its termination
for any reason will entitle you to receipt of additional salary or to
continuation of your salary past October 4, 1998.
c. As long as your employee status continues, you will be eligible to
participate in Alpha's medical insurance plan on the same basis that you
did prior to July 16, 1996. Alpha's obligation to provide you with such
coverage is limited to allowing you to participate in any medical
insurance plan or plans then available to the employees of Alpha, subject
to the terms of the applicable plan documents, generally applicable Alpha
policies and actions by Alpha contemplated by such plans.
d. As long as your employee status continues, your Company stock options will
continue to be valid and exercisable in accordance with their terms and
conditions. Upon termination of such status for any reason, all Company
stock options then outstanding and held by you, whether or not by their
terms then exercisable, shall, subject to their other terms and
conditions, become immediately exercisable and remain exercisable for a
period of ninety (90) days after the date of termination.
e. As long as your employee status continues, you will be eligible to
participate in the following additional Alpha employee benefit plans:
Group Life Insurance, Dependent Life Insurance, Long-Term Disability,
Dental Insurance, 401(k) Plan, Executive Deferred Compensation Plan, and
Employee Stock Purchase Plan. Such participation shall be on the same
basis as your participation in such plans prior to July 16, 1996. Alpha's
obligation to provide you with such coverage is limited to allowing you to
participate in any such plan or plans then available to the employees of
Alpha, subject to the terms of the applicable plan documents, generally
applicable Alpha policies and actions by Alpha contemplated by such plans.
You will not participate in any other Alpha employee benefit plan or
policy, including without limitation accrual of vacation or sick time.
e. Your employee status with Alpha: (i) will terminate on October 4, 1998,
unless terminated sooner as provided herein, (ii) may be terminated by you
at any time for any reason, (iii) may be terminated by Alpha at any time
upon written notice to you in the event that you materially breach your
obligations under this
<PAGE>
Martin J. Reid
October 4, 1996
Page 4
agreement, and (iv) will terminate upon your receipt of full-time
employment that makes available to you and your family medical insurance
benefits substantially comparable to those then provided to you by Alpha.
7. Promptly after the execution of this letter, you will receive: (a) the
value of your accrued and unused vacation time in a lump sum, and (b) the value
of your SERP account in a lump sum.
If the agreement set out in this letter is acceptable to you, please so indicate
by signing both copies of the letter and returning one to Jim Nemiah at Alpha.
Sincerely,
ALPHA INDUSTRIES, INC.
By:
------------------------
Chairman of the Board
By: [SIGNATURE APPEARS HERE]
------------------------
President and CEO
-------------------------------
ACCEPTED AND AGREED TO:
/s/ Martin J. Reid
----------------------------
Martin J. Reid
-------------------------------
<PAGE>
EXHIBIT (10)(n)
ALPHA INDUSTRIES SAVINGS
AND RETIREMENT 401(k) PLAN
(July 1, 1996 Restatement)
<PAGE>
PREAMBLE
The Alpha Industries Savings and Retirement 401(k) Plan, originally effective as
of April 1, 1986, is hereby amended and restated in its entirety. The Plan, as
amended and restated hereby, is intended to qualify as a profit-sharing plan
under Section 401(a) of the Code, and includes a cash or deferred arrangement
that is intended to qualify under Section 401(k) of the Code. The Plan is
maintained for the exclusive benefit of eligible employees and their
beneficiaries.
Notwithstanding any other provision of the Plan to the contrary, a Participant's
vested interest in his Separate Account under the Plan on and after the
effective date of this amendment and restatement shall be not less than his
vested interest in his account on the day immediately preceding the effective
date. In addition, notwithstanding any other provision of the Plan to the
contrary, the forms of payment and other Plan provisions that were available
under the Plan immediately prior to the later of the effective date of this
amendment and restatement or the date this amendment and restatement is adopted
and that may not be eliminated under Section 411(d)(6) of the Code shall
continue to be available to Participants who had an account under the Plan on
the day immediately preceding the later of the effective date or the date this
amendment and restatement is adopted.
(2)
<PAGE>
ARTICLE I
DEFINITIONS
1.1. Plan Definitions
As used herein, the following words and phrases have the meanings hereinafter
set forth, unless a different meaning is plainly required by the context:
The "Administrator" means the Sponsor unless the Sponsor designates another
person or persons to act as such.
An "After-Tax Contribution" means any after-tax employee contribution made by a
Participant as may be permitted under Article V.
The "Beneficiary" of a Participant means the person or persons entitled under
the provisions of the Plan to receive distribution hereunder in the event the
Participant dies before receiving distribution of his entire interest under the
Plan.
The "Code" means the Internal Revenue Code of 1986, as amended from time to
time. Reference to a section of the Code includes such section and any
comparable section or sections of any future legislation that amends,
supplements, or supersedes such section.
The "Compensation" of a Participant for any period means the wages as defined in
Section 3401(a) of the Code, determined without regard to any rules that limit
compensation included in wages based on the nature or location of the employment
or services performed, and all other payments made to him for such period for
services as an Employee for which his Employer is required to furnish the
Participant a written statement under Sections 6041(d), 6051(a)(3), and 6052 of
the Code, and excluding reimbursements or other expense allowances, fringe
benefits, moving expenses, deferred compensation, and welfare benefits, but
determined prior to any exclusions for amounts deferred under Section 125,
402(e)(3), 402(h)(1)(B), 403(b), or 457(b) of the Code or for certain
contributions described in Section 414(h)(2) of the Code that are picked up by
the employing unit and treated as employer contributions.
Notwithstanding the foregoing, Compensation shall not include the value of any
qualified or non-qualified stock option granted to the Participant by his
Employer to the extent such value is includible in the Participant's taxable
income.
In no event, however, shall the Compensation of a Participant taken into account
under the Plan for any Plan Year exceed (1) $200,000 for Plan Years beginning
prior to January 1, 1994, or (2) $150,000 for Plan Years beginning on or after
January 1, 1994 (subject to adjustment annually as provided in Section
401(a)(17)(B) and Section 415(d) of the Code; provided, however, that the dollar
increase in effect on January 1 of any calendar year, if any, is effective for
Plan Years beginning in such calendar year). If the Compensation of a
Participant is determined over a period of time that contains fewer than 12
calendar months, then the annual compensation limitation described above shall
be adjusted with respect to that Participant by multiplying the annual
compensation limitation in effect for the Plan Year by a fraction the numerator
of which
(3)
<PAGE>
is the number of full months in the period and the denominator of which is 12;
provided, however, that no proration is required for a Participant who is
covered under the Plan for less than one full Plan Year if the formula for
allocations is based on Compensation for a period of at least 12 months. In
determining the Compensation, for purposes of applying the annual compensation
limitation described above, of a Participant who is a five percent owner or
among the ten Highly Compensated Employees receiving the greatest Compensation
for the Plan Year, the Compensation of the Participant's spouse and of his
lineal descendants who have not attained age 19 as of the close of the Plan Year
shall be included as Compensation of the Participant for the Plan Year. If as a
result of applying the family aggregation rule described in the preceding
sentence the annual compensation limitation would be exceeded, the limitation
shall be prorated among the affected family members in proportion to each
member's Compensation as determined prior to application of the family
aggregation rules.
A "Contribution Period" means the period specified in Article VI for which
Employer Contributions shall be made.
An "Eligible Employee" means any Employee who has met the eligibility
requirements of Article III to have Tax-Deferred Contributions made to the Plan
on his behalf.
The "Eligibility Service" of an employee means the period or periods of service
credited to him under the provisions of Article II for purposes of determining
his eligibility to participate in the Plan as may be required under Article III
or Article VI.
An "Employee" means any employee of an Employer other than an employee who is
covered by a collective bargaining agreement that does not specifically provide
for coverage under the Plan.
An "Employer" means the Sponsor and any entity which has adopted the Plan as may
be provided under Article XX.
An "Employer Contribution" means the amount, if any, that an Employer
contributes to the Plan as may be provided under Article VI or Article XXII.
An "Enrollment Date" means the first day of each calendar month of the Plan
Year.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time. Reference to a section of ERISA includes such section and
any comparable section or sections of any future legislation that amends,
supplements, or supersedes such section.
The "General Fund" means a Trust Fund maintained by the Trustee as required to
hold and administer any assets of the Trust that are not allocated among any
separate Investment Funds as may be provided in the Plan or the Trust Agreement.
No General Fund shall be maintained if all assets of the Trust are allocated
among separate Investment Funds.
A "Highly Compensated Employee" means an Employee or former Employee who is a
highly compensated active employee or highly compensated former employee as
defined hereunder.
(4)
<PAGE>
A "highly compensated active employee" includes any Employee who performs
services for an Employer during the determination year and who (i) was a five
percent owner at any time during the determination year or the look back year,
(ii) received compensation from an Employer during the look back year in excess
of $75,000 (subject to adjustment annually at the same time and in the same
manner as under Section 415(d) of the Code), (iii) was in the top paid group of
employees for the look back year and received compensation from an Employer
during the look back year in excess of $50,000 (subject to adjustment annually
at the same time and in the same manner as under Section 415(d) of the Code),
(iv) was an officer of an Employer during the look back year and received
compensation during that year in excess of 50 percent of the dollar limitation
in effect for that year under Section 415(b)(1)(A) of the Code or, if no officer
received compensation in excess of that amount for the look back year or the
determination year, received the greatest compensation for the look back year of
any officer, or (v) was one of the 100 employees paid the greatest compensation
by an Employer for the determination year and would be described in (ii), (iii),
or (iv) above if the term "determination year" were substituted for "look back
year"
A "highly compensated former employee" includes any Employee who separated from
service from an Employer and all Related Companies (or is deemed to have
separated from service from an Employer and all Related Companies) prior to the
determination year, performed no services for an Employer during the
determination year, and was a highly compensated active employee for either the
separation year or any determination year ending on or after the date the
Employee attains age 55.
The determination of who is a Highly Compensated Employee hereunder, including
determinations as to the number and identity of employees in the top paid group,
the 100 employees receiving the greatest compensation from an Employer, the
number of employees treated as officers, and the compensation considered, shall
be made in accordance with the provisions of Section 414(q) of the Code and
regulations issued thereunder. For purposes of this definition, the following
terms have the following meanings:
(a) The "determination year" means the Plan Year or, if the Administrator makes
the election provided in paragraph (b) below, the period of time, if any,
which extends beyond the look back year and ends on the last day of the
Plan Year for which testing is being performed (the "lag period"). If the
lag period is less than 12 months long, the dollar amounts specified in
(ii), (iii), and (iv) above shall be prorated based upon the number of
months in the lag period.
(b) The "look back year" means the 12-month period immediately preceding the
determination year; provided, however, that the Administrator may elect
instead to treat the calendar year ending with or within the determination
year as the "look back year"
An "Hour of Service" with respect to a person means each hour, if any, that may
be credited to him in accordance with the provisions of Article II.
An "Investment Fund" means any separate investment Trust Fund maintained by the
Trustee as may be provided in the Plan or the Trust Agreement or any separate
investment fund maintained
(5)
<PAGE>
by the Trustee, to the extent that there are Participant Sub-Accounts under such
funds, to which assets of the Trust may be allocated and separately invested.
A "Matching Contribution" means any Employer Contribution made to the Plan on
account of a Participant's Tax-Deferred Contributions as provided in Article VI.
The "Normal Retirement Date" of an employee means the date he attains age 65.
A "Participant" means any person who has a Separate Account in the Trust.
The "Plan" means Alpha Industries Savings and Retirement 401(k) Plan, as from
time to time in effect.
A "Plan Year" means the 12-consecutive-month period ending December 31.
A "Profit-Sharing Contribution" means any Employer Contribution made to the Plan
as provided in Article VI, other than Matching Contributions.
A "Related Company" means any corporation or business, other than an Employer,
which would be aggregated with an Employer for a relevant purpose under Section
414 of the Code.
A "Rollover Contribution" means any rollover contribution to the Plan made by a
Participant as may be permitted under Article V.
A "Separate Account" means the account maintained by the Trustee in the name of
a Participant that reflects his interest in the Trust and any Sub-Accounts
maintained thereunder, as provided in Article VIII.
The "Settlement Date" of a Participant means the date on which a Participant's
interest under the Plan becomes distributable in accordance with Article XV.
The "Sponsor" means Alpha Industries, Inc., and any successor thereto.
A "Sub-Account" means any of the individual sub-accounts of a Participant's
Separate Account that is maintained as provided in Article VIII.
A "Tax-Deferred Contribution" means the amount contributed to the Plan on a
Participant's behalf by his Employer in accordance with his reduction
authorization executed pursuant to Article IV.
The "Trust" means the trust maintained by the Trustee under the Trust Agreement.
The "Trust Agreement" means the agreement entered into between the Sponsor and
the Trustee relating to the holding, investment, and reinvestment of the assets
of the Plan, together with all amendments thereto.
(6)
<PAGE>
The "Trustee" means the trustee or any successor trustee which at the time shall
be designated, qualified, and acting under the Trust Agreement. The Sponsor may
designate a person or persons other than the Trustee to perform any
responsibility of the Trustee under the Plan, other than trustee
responsibilities as defined in Section 405(c)(3) of ERISA, and the Trustee shall
not be liable for the performance of such person in carrying out such
responsibility except as otherwise provided by ERISA. The term Trustee shall
include any delegate of the Trustee as may be provided in the Trust Agreement.
A "Trust Fund" means any fund maintained under the Trust by the Trustee.
A "Valuation Date" means the date or dates designated by the Sponsor and
communicated in writing to the Trustee for the purpose of valuing the General
Fund and each Investment Fund and adjusting Separate Accounts and Sub-Accounts
hereunder, which dates need not be uniform with respect to the General Fund,
each Investment Fund, Separate Account, or Sub-Account; provided, however, that
the General Fund and each Investment Fund shall be valued and each Separate
Account and Sub-Account shall be adjusted no less often than once annually.
The "Vesting Service" of an employee means the period or periods of service
credited to him under the provisions of Article II for purposes of determining
his vested interest in his Employer Contributions Sub-Account, if Employer
Contributions are provided for under either Article VI or Article XXII.
1.2. Interpretation
Where required by the context, the noun, verb, adjective, and adverb forms of
each defined term shall include any of its other forms. Wherever used herein,
the masculine pronoun shall include the feminine, the singular shall include the
plural, and the plural shall include the singular.
(7)
<PAGE>
ARTICLE II
SERVICE
2.1. Definitions
For purposes of this Article, the following terms have the following meanings:
(a) The "continuous service" of an employee means the service credited to him
in accordance with the provisions of Section 2.3 of the Plan.
(b) The "employment commencement date" of an employee means the date he first
completes an Hour of Service.
(c) A "maternity/paternity absence" means a person's absence from employment
with an Employer or a Related Company because of the person's pregnancy,
the birth of the person's child, the placement of a child with the person
in connection with the person's adoption of the child, or the caring for
the person's child immediately following the child's birth or adoption. A
person's absence from employment will not be considered a
maternity/paternity absence unless the person furnishes the Administrator
such timely information as may reasonably be required to establish that the
absence was for one of the purposes enumerated in this paragraph and to
establish the number of days of absence attributable to such purpose.
(d) The "reemployment commencement date" of an employee means the first date
following a severance date on which he again completes an Hour of Service.
(e) The "severance date" of an employee means the earlier of (i) the date on
which he retires, dies, or his employment with an Employer and all Related
Companies is otherwise terminated, or (ii) the first anniversary of the
first date of a period during which he is absent from work with an Employer
and all Related Companies for any other reason; provided, however, that if
he terminates employment with or is absent from work with an Employer and
all Related Companies on account of service with the armed forces of the
United States, he shall not incur a severance date if he is eligible for
reemployment rights under the Uniformed Services Employment and
Reemployment Rights Act of 1994 and he returns to work with an Employer or
a Related Company within the period during which he retains such
reemployment rights.
2.2. Crediting of Hours of Service
A person shall be credited with an Hour of Service for each hour for which he is
paid, or entitled to payment, for the performance of duties for an Employer or
any Related Company.
2.3. Crediting of Continuous Service
A person shall be credited with continuous service for the aggregate of the
periods of time between his employment commencement date or any reemployment
commencement date and the
(8)
<PAGE>
severance date that next follows such employment commencement date or
reemployment commencement date; provided, however, that an employee who has a
reemployment commencement date within the 12-consecutive-month period following
the earlier of the first date of his absence or his severance date shall be
credited with continuous service for the period between such severance date and
reemployment commencement date.
2.4. Eligibility Service
An employee shall be credited with Eligibility Service equal to his continuous
service.
2.5. Vesting Service
There shall be no Vesting Service credited under the Plan.
2.6. Crediting of Service on Transfer or Amendment
Notwithstanding any other provision of the Plan to the contrary, if an Employee
is transferred from employment covered under a qualified plan maintained by an
Employer or a Related Company for which service is credited based on Hours of
Service and computation periods in accordance with Department of Labor
Regulations similar to 2530.200 through 2530.203 to employment covered under the
Plan or, prior to amendment, the Plan provided for crediting of service on the
basis of Hours of Service and computation periods, an affected Employee shall be
credited with Eligibility Service hereunder equal to:
(a) the Employee's years of service credited to him under the Hours of Service
method before the computation period in which the transfer or the effective
date of the amendment occurs, plus
(b) the greater of (i) the period of service that would be credited to the
Employee under the elapsed time method provided hereunder for his
employment during the entire computation period in which the transfer or
the effective date of the amendment occurs or (ii) the service taken into
account under the Hours of Service method for such computation period as of
the transfer date or the effective date of the amendment, plus
(c) the service credited to such Employee under the elapsed time method
provided hereunder for the period of time beginning on the day after the
last day of the computation period in which the transfer or the effective
date of the amendment occurs.
(9)
<PAGE>
ARTICLE III
ELIGIBILITY
3.1. Eligibility
Each Employee who was an Eligible Employee immediately prior to the effective
date of this amendment and restatement shall continue to be an Eligible
Employee. Each other Employee shall become an Eligible Employee as of the
Enrollment Date coinciding with or next following the date on which he has both
attained age 21 and completed 6 full calendar months of Eligibility Service.
3.2. Transfers of Employment
If a person is transferred directly from employment with an Employer or with a
Related Company in a capacity other than as an Employee to employment as an
Employee, he shall become an Eligible Employee as of the date he is so
transferred if prior to an Enrollment Date coinciding with or preceding such
transfer date he has met the eligibility requirements of Section 3.1.
Otherwise, the eligibility of a person who is so transferred to elect to have
Tax-Deferred Contributions made to the Plan on his behalf shall be determined in
accordance with Section 3.1.
3.3. Reemployment
If a person who terminated employment with an Employer and all Related Companies
is reemployed as an Employee and if he had been an Eligible Employee prior to
his termination of employment, he shall again become an Eligible Employee on the
date he is reemployed. Otherwise, the eligibility of a person who terminated
employment with an Employer and all Related Companies and who is reemployed by
an Employer or a Related Company to elect to have Tax-Deferred Contributions
made to the Plan on his behalf shall be determined in accordance with Section
3.1 or 3.2.
3.4. Notification Concerning New Eligible Employees
Each Employer shall notify the Administrator as soon as practicable of Employees
becoming Eligible Employees as of any date.
3.5. Effect and Duration
Upon becoming an Eligible Employee, an Employee shall be entitled to elect to
have Tax-Deferred Contributions made to the Plan on his behalf and shall be
bound by all the terms and conditions of the Plan and the Trust Agreement. A
person shall continue as an Eligible Employee eligible to have Tax-Deferred
Contributions made to the Plan on his behalf only so long as he continues
employment as an Employee.
(10)
<PAGE>
ARTICLE IV
TAX-DEFERRED CONTRIBUTIONS
4.1. Tax-Deferred Contributions
Effective as of the date he becomes an Eligible Employee, or any subsequent
Enrollment Date, each Eligible Employee may elect in writing in accordance with
rules prescribed by the Administrator to have Tax-Deferred Contributions made to
the Plan on his behalf by his Employer as hereinafter provided. An Eligible
Employee's written election shall include his authorization for his Employer to
reduce his Compensation and to make Tax-Deferred Contributions on his behalf and
his election as to the investment of his contributions in accordance with
Article X. Tax-Deferred Contributions on behalf of an Eligible Employee shall
commence with the first payment of Compensation made on or after the date on
which his election is effective.
4.2. Amount of Tax-Deferred Contributions
The amount of Tax-Deferred Contributions to be made to the Plan on behalf of an
Eligible Employee by his Employer shall be an integral percentage of his
Compensation of not less than 1 percent nor more than 15 percent. In the event
an Eligible Employee elects to have his Employer make Tax-Deferred Contributions
on his behalf, his Compensation shall be reduced for each payroll period by the
percentage he elects to have contributed on his behalf to the Plan in accordance
with the terms of his currently effective reduction authorization.
4.3. Changes in Reduction Authorization
An Eligible Employee may change the percentage of his future Compensation that
his Employer contributes on his behalf as Tax-Deferred Contributions at such
time or times during the Plan Year as the Administrator may prescribe by filing
an amended reduction authorization with his Employer such number of days prior
to the date such change is to become effective as the Administrator shall
prescribe. An Eligible Employee who changes his reduction authorization shall
be limited to selecting a percentage of his Compensation that is otherwise
permitted hereunder. Tax-Deferred Contributions shall be made on behalf of such
Eligible Employee by his Employer pursuant to his amended reduction
authorization filed in accordance with this Section commencing with Compensation
paid to the Eligible Employee on or after the date such filing is effective,
until otherwise altered or terminated in accordance with the Plan.
4.4. Suspension of Tax-Deferred Contributions
An Eligible Employee on whose behalf Tax-Deferred Contributions are being made
may have such contributions suspended at any time by giving such number of days
advance written notice to his Employer as the Administrator shall prescribe.
Any such voluntary suspension shall take effect commencing with Compensation
paid to such Eligible Employee on or after the expiration of the required notice
period and shall remain in effect until Tax-Deferred Contributions are resumed
as hereinafter set forth.
(11)
<PAGE>
4.5. Resumption of Tax-Deferred Contributions
An Eligible Employee who has voluntarily suspended his Tax-Deferred
Contributions may have such contributions resumed at such time or times during
the Plan Year as the Administrator may prescribe, by filing a new reduction
authorization with his Employer such number of days prior to the date as of
which such contributions are to be resumed as the Administrator shall prescribe.
4.6. Delivery of Tax-Deferred Contributions
As soon after the date an amount would otherwise be paid to an Employee as it
can reasonably be separated from Employer assets, each Employer shall cause to
be delivered to the Trustee in cash all Tax-Deferred Contributions attributable
to such amounts.
4.7. Vesting of Tax-Deferred Contributions
A Participant's vested interest in his Tax-Deferred Contributions Sub-Account
shall be at all times 100 percent.
(12)
<PAGE>
ARTICLE V
AFTER-TAX AND ROLLOVER CONTRIBUTIONS
5.1. No After-Tax Contributions
There shall be no After-Tax Contributions made to the Plan.
5.2. Rollover Contributions
An Employee who was a participant in a plan qualified under Section 401 or 403
of the Code and who receives a cash distribution from such plan that he elects
either (i) to roll over immediately to a qualified retirement plan or (ii) to
roll over into a conduit IRA from which he receives a later cash distribution,
may elect to make a Rollover Contribution to the Plan if he is entitled under
Section 402(c), Section 403(a)(4), or Section 408(d)(3)(A) of the Code to roll
over such distribution to another qualified retirement plan. The Administrator
may require an Employee to provide it with such information as it deems
necessary or desirable to show that he is entitled to roll over such
distribution to another qualified retirement plan. An Employee shall make a
Rollover Contribution to the Plan by delivering, or causing to be delivered, to
the Trustee the cash that constitutes the Rollover Contribution amount within 60
days of receipt of the distribution from the plan or from the conduit IRA in the
manner prescribed by the Administrator. If the Employee does not already have
an investment election on file with the Administrator, the Employee shall also
deliver to the Administrator his election as to the investment of his
contributions in accordance with Article X.
5.3. Vesting of Rollover Contributions
A Participant's vested interest in his Rollover Contributions Sub-Account shall
be at all times 100 percent.
(13)
<PAGE>
ARTICLE VI
EMPLOYER CONTRIBUTIONS
6.1. Contribution Period
The Contribution Period for Employer Contributions under the Plan shall be each
Plan Year.
6.2. Profit-Sharing Contributions
Each Employer may, in its discretion, make a Profit-Sharing Contribution to the
Plan for the Contribution Period in an amount determined by the Sponsor.
6.3. Allocation of Profit-Sharing Contributions
Any Profit-Sharing Contribution made for a Contribution Period shall be
allocated among the Employees who are eligible to participate in the allocation
of Profit-Sharing Contributions for the Contribution Period, as determined under
this Article. The allocable share of each such Employee shall be in the ratio
which his Compensation from the Employers for the Contribution Period bears to
the aggregate of such Compensation for all such Employees. Notwithstanding any
other provision of the Plan to the contrary, Compensation with respect to any
period ending prior to the date on which an Employee first became eligible to
participate in the allocation of Profit-Sharing Contributions shall be
disregarded in determining the amount of the Employee's allocable share.
6.4. Matching Contributions
Each Employer shall make a Matching Contribution to the Plan for each
Contribution Period in an amount equal to the following percentage of the
aggregate "eligible Tax-Deferred Contributions" for the Contribution Period made
on behalf of its Employees during the Contribution Period who are eligible to
participate in the allocation of Matching Contributions for the Contribution
Period as determined under this Article, based on the number of years in which
the Employee has been employed by an Employer:
(a) With respect to eligible Employees employed by an Employer for less than 6
years, 100 percent of the first one percent of "eligible Tax-Deferred
Contributions" for the Contribution Period made on behalf of such eligible
Employees and 50 percent of the remaining "eligible Tax-Deferred
Contributions" for the Contribution Period made on behalf of such eligible
Employees. For purposes of this paragraph (a), similar to "eligible Tax-
Deferred Contributions" with respect to an Employee mean the Tax-Deferred
Contributions made on his behalf for the Contribution Period in an amount
up to, but not exceeding, the "match level". For purposes of this paragraph
(a), the "match level" means 5 percent of an Employee's Compensation for
the Contribution Period, excluding Compensation with respect to any period
ending prior to the date on which the Employee became eligible to
participate in the allocation of Matching Contributions.
(14)
<PAGE>
(b) With respect to eligible Employees employed by an Employer for 6 years or
more, 100 percent of the first one percent of "eligible Tax-Deferred
Contributions" for the Contribution Period made on behalf of such eligible
Employees and 75 percent of the remaining "eligible Tax-Deferred
Contributions" for the Contribution Period made on behalf of such eligible
Employees. For purposes of this paragraph (a), "eligible Tax-Deferred
Contributions" with respect to an Employee mean the Tax-Deferred
Contributions made on his behalf for the Contribution Period in an amount
up to, but not exceeding, the "match level". For purposes of this
paragraph (a), the "match level" means 6 percent of an Employee's
Compensation for the Contribution Period, excluding Compensation with
respect to any period ending prior to the date on which the Employee became
eligible to participate in the allocation of Matching Contributions.
6.5. Allocation of Matching Contributions
Any Matching Contribution made by an Employer for the Contribution Period shall
be allocated among its Employees during the Contribution Period who are eligible
to participate in the allocation of Matching Contributions for the Contribution
Period, as determined under this Article. The allocable share of each such
Employee shall be an amount equal to the percentage of the Tax-Deferred
Contributions made on his behalf for the Contribution Period determined as
provided in the preceding Section.
6.6. Verification of Amount of Employer Contributions by the Sponsor
The Sponsor shall verify the amount of Employer Contributions to be made by each
Employer in accordance with the provisions of the Plan. Notwithstanding any
other provision of the Plan to the contrary, the Sponsor shall determine the
portion of the Employer Contribution to be made by each Employer with respect to
an Employee who transfers from employment with one Employer as an Employee to
employment with another Employer as an Employee.
6.7. Payment of Employer Contributions
Employer Contributions made for a Contribution Period shall be paid in cash or
in qualifying employer securities, as defined in Section 407(d)(5) of ERISA, to
the Trustee within the period of time required under the Code in order for the
contribution to be deductible by the Employer in determining its Federal income
taxes for the Plan Year.
6.8. Eligibility to Participate in Allocation
Each Employee shall be eligible to participate in the allocation of Employer
Contributions beginning on the date he becomes, or again becomes, an Eligible
Employee in accordance with the provisions of Article III. Notwithstanding the
foregoing, no person shall be eligible to participate in the allocation of
Profit-Sharing Contributions for a Contribution Period unless he is employed by
an Employer or a Related Company on the last day of the Contribution Period;
provided, however, that if the Plan would not otherwise meet the minimum
coverage requirements of Section 410(b) of the Code in any Plan Year, the group
of Employees eligible to participate in the allocation of Profit-Sharing
Contributions shall be expanded to include the
(15)
<PAGE>
minimum number of Employees who are not employed by an Employer or a Related
Company on the last day of the Contribution Period that is necessary to meet the
minimum coverage requirements. The Employees who become eligible to participate
under the provisions of the immediately preceding clause shall be those
Employees who have completed the greatest number of Hours of Service during the
Contribution Period.
6.9. Vesting of Employer Contributions
A Participant's vested interest in his Employer Contributions Sub-Account shall
be at all times 100 percent.
6.10. Election of Former Vesting Schedule
If the Sponsor adopts an amendment to the Plan that directly or indirectly
affects the computation of a Participant's vested interest in his Employer
Contributions Sub-Account, any Participant with three or more years of Vesting
Service shall have a right to have his vested interest in his Employer
Contributions Sub-Account continue to be determined under the vesting provisions
in effect prior to the amendment rather than under the new vesting provisions,
unless the vested interest of the Participant in his Employer Contributions Sub-
Account under the Plan as amended is not at any time less than such vested
interest determined without regard to the amendment. A Participant shall
exercise his right under this Section by giving written notice of his exercise
thereof to the Administrator within 60 days after the latest of (i) the date he
receives notice of the amendment from the Administrator, (ii) the effective date
of the amendment, or (iii) the date the amendment is adopted. Notwithstanding
the foregoing, a Participant's vested interest in his Employer Contributions
Sub-Account on the effective date of such an amendment shall not be less than
his vested interest in his Employer Contributions Sub-Account immediately prior
to the effective date of the amendment.
(16)
<PAGE>
ARTICLE VII
LIMITATIONS ON CONTRIBUTIONS
7.1. Definitions
For purposes of this Article, the following terms have the following meanings:
(a) The "actual deferral percentage" with respect to an Eligible Employee for a
particular Plan Year means the ratio of the Tax-Deferred Contributions made
on his behalf for the Plan Year to his test compensation for the Plan Year;
provided, however, that contributions made on a Participant's behalf for a
Plan Year shall be included in determining his actual deferral percentage
for such Plan Year only if the contributions are made to the Plan prior to
the end of the 12-month period immediately following the Plan Year to which
the contributions relate. The determination and treatment of the actual
deferral percentage amounts for any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the Treasury.
(b) The "aggregate limit" means the sum of (i) 125 percent of the greater of
the average contribution percentage for eligible participants other than
Highly Compensated Employees or the average actual deferral percentage for
Eligible Employees other than Highly Compensated Employees and (ii) the
lesser of 200 percent or two plus the lesser of such average contribution
percentage or average actual deferral percentage, or, if it would result in
a larger aggregate limit, the sum of (iii) 125 percent of the lesser of the
average contribution percentage for eligible participants other than Highly
Compensated Employees or the average actual deferral percentage for
Eligible Employees other than Highly Compensated Employees and (iv) the
lesser of 200 percent or two plus the greater of such average contribution
percentage or average actual deferral percentage.
(c) The "annual addition" with respect to a Participant for a limitation year
means the sum of the Tax-Deferred Contributions and Employer Contributions
allocated to his Separate Account for the limitation year (including any
excess contributions that are distributed pursuant to this Article), the
employer contributions, employee contributions, and forfeitures allocated
to his accounts for the limitation year under any other qualified defined
contribution plan (whether or not terminated) maintained by an Employer or
a Related Company concurrently with the Plan, and amounts described in
Sections 415(1)(2) and 419A(d)(2) of the Code allocated to his account for
the limitation year; provided, however, that the annual addition for
limitation years beginning prior to January 1, 1987 shall not be
recalculated to treat all employee contributions as annual additions.
(d) The "Code Section 402(g) limit" means the dollar limit imposed by Section
402(g)(1) of the Code or established by the Secretary of the Treasury
pursuant to Section 402(g)(5) of the Code in effect on January 1 of the
calendar year in which an Eligible Employee's taxable year begins.
(17)
<PAGE>
(e) The "contribution percentage" with respect to an eligible participant for a
particular Plan Year means the ratio of the matching contributions made to
the Plan on his behalf for the Plan Year to his test compensation for such
Plan Year, except that, to the extent permitted by regulations issued under
Section 401(m) of the Code, the Sponsor may elect to take into account in
computing the numerator of each eligible participant's contribution
percentage the Tax-Deferred Contributions made to the Plan on his behalf
for the Plan Year; provided, however, that any Tax-Deferred Contributions
that were taken into account in computing the numerator of an eligible
participant's actual deferral percentage may not be taken into account in
computing the numerator of his contribution percentage; and provided,
further, that contributions made by or on a Participant's behalf for a Plan
Year shall be included in determining his contribution percentage for such
Plan Year only if the contributions are made to the Plan prior to the end
of the 12-month period immediately following the Plan Year to which the
contributions relate. The determination and treatment of the contribution
percentage amounts for any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the Treasury.
(f) An "elective contribution" means any employer contribution made to a plan
maintained by an Employer or any Related Company on behalf of a Participant
in lieu of cash compensation pursuant to his written election to defer
under any qualified CODA as described in Section 401(k) of the Code, any
simplified employee pension cash or deferred arrangement as described in
Section 402(h)(1)(B) of the Code, any eligible deferred compensation plan
under Section 457 of the Code, or any plan as described in Section
501(c)(18) of the Code, and any contribution made on behalf of the
Participant by an Employer or a Related Company for the purchase of an
annuity contract under Section 403(b) of the Code pursuant to a salary
reduction agreement.
(g) An "eligible participant" means any Employee who is eligible to have Tax-
Deferred Contributions made on his behalf (if Tax-Deferred Contributions
are taken into account in computing contribution percentages) or to
participate in the allocation of matching contributions.
(h) An "excess deferral" with respect to a Participant means that portion of a
Participant's Tax-Deferred Contributions that when added to amounts
deferred under other plans or arrangements described in Sections 401(k),
408(k), or 403(b) of the Code, would exceed the Code Section 402(g) limit
and is includable in the Participant's gross income under Section 402(g) of
the Code.
(i) A "family member" of an Employee means the Employee's spouse, his lineal
ascendants, his lineal descendants, and the spouses of such lineal
ascendants and descendants.
(j) A "limitation year" means the calendar year.
(k) A "matching contribution" means any employer contribution allocated to an
Eligible Employee's account under the Plan or any other plan of an Employer
or a Related
(18)
<PAGE>
Company solely on account of elective contributions made on his behalf or
employee contributions made by him.
(l) The "test compensation" of an Eligible Employee for a Plan Year means
compensation as defined in Section 414(s) of the Code and regulations
issued thereunder, limited, however, to (1) $200,000 for Plan Years
beginning prior to January 1, 1994, or (2) $150,000 for Plan Years
beginning on or after January 1, 1994 (subject to adjustment annually as
provided in Section 401(a)(17)(B) and Section 415(d) of the Code; provided,
however, that the dollar increase in effect on January 1 of any calendar
year, if any, is effective for Plan Years beginning in such calendar year).
If the test compensation of a Participant is determined over a period of
time that contains fewer than 12 calendar months, then the annual
compensation limitation described above shall be adjusted with respect to
that Participant by multiplying the annual compensation limitation in
effect for the Plan Year by a fraction the numerator of which is the number
of full months in the period and the denominator of which is 12; provided,
however, that no proration is required for a Participant who is covered
under the Plan for less than one full Plan Year if the formula for
allocations is based on Compensation for a period of at least 12 months.
In determining the test compensation, for purposes of applying the annual
compensation limitation described above, of a Participant who is a five-
percent owner or among the ten Highly Compensated Employees receiving the
greatest test compensation for the limitation year, the test compensation
of the Participant's spouse and of his lineal descendants who have not
attained age 19 as of the close of the limitation year shall be included as
test compensation of the Participant for the limitation year. If as a
result of applying the family aggregation rule described in the preceding
sentence the annual compensation limitation would be exceeded, the
limitation shall be prorated among the affected family members in
proportion to each member's test compensation as determined prior to
application of the family aggregation rules.
7.2. Code Section 402 (g) Limit
In no event shall the amount of the Tax-Deferred Contributions made on behalf of
an Eligible Employee for his taxable year, when aggregated with any elective
contributions made on behalf of the Eligible Employee under any other plan of an
Employer or a Related Company for his taxable year, exceed the Code Section
402(g) limit. In the event that the Administrator determines that the reduction
percentage elected by an Eligible Employee will result in his exceeding the Code
Section 402(g) limit, the Administrator may adjust the reduction authorization
of such Eligible Employee by reducing the percentage of his Tax-Deferred
Contributions to such smaller percentage that will result in the Code Section
402(g) limit not being exceeded. If the Administrator determines that the Tax-
Deferred Contributions made on behalf of an Eligible Employee would exceed the
Code Section 402(g) limit for his taxable year, the Tax-Deferred Contributions
for such Participant shall be automatically suspended for the remainder, if any,
of such taxable year.
If an Employer notifies the Administrator that the Code Section 402(g) limit has
nevertheless been exceeded by an Eligible Employee for his taxable year, the
Tax-Deferred Contributions
(19)
<PAGE>
that, when aggregated with elective contributions made on behalf of the Eligible
Employee under any other plan of an Employer or a Related Company, would exceed
the Code Section 402(g) limit, plus any income and minus any losses attributable
thereto, shall be distributed to the Eligible Employee no later than the April
15 immediately following such taxable year. Any Tax-Deferred Contributions that
are distributed to an Eligible Employee in accordance with this Section shall
not be taken into account in computing the Eligible Employee's actual deferral
percentage for the Plan Year in which the Tax-Deferred Contributions were made,
unless the Eligible Employee is a Highly Compensated Employee.
If an amount of Tax-Deferred Contributions is distributed to a Participant in
accordance with this Section, matching contributions that are attributable
solely to the distributed Tax-Deferred Contributions, plus any income and minus
any losses attributable thereto, shall be forfeited by the Participant. Any
such forfeited amounts shall be applied against the Employer Contribution
obligations for the Plan Year of the Employer for which the Participant last
performed services as an Employee. Notwithstanding the foregoing, however,
should the amount of all such forfeitures for any Plan Year with respect to any
Employer exceed the amount of such Employer's Employer Contribution obligation
for the Plan Year, the excess amount of such forfeitures shall be held
unallocated in a suspense account established with respect to the Employer and
shall for all Plan purposes be applied against the Employer's Employer
Contribution obligations for the following Plan Year.
7.3. Distribution of Excess Deferrals
Notwithstanding any other provision of the Plan to the contrary, if a
Participant notifies the Administrator in writing no later than the March 1
following the close of the Participant's taxable year that excess deferrals have
been made on his behalf under the Plan for such taxable year, the excess
deferrals, plus any income and minus any losses attributable thereto, shall be
distributed to the Participant no later than the April 15 immediately following
such taxable year. Any Tax-Deferred Contributions that are distributed to a
Participant in accordance with this Section shall nevertheless be taken into
account in computing the Participant's actual deferral percentage for the Plan
Year in which the Tax-Deferred Contributions were made. If an amount of Tax-
Deferred Contributions is distributed to a Participant in accordance with this
Section, matching contributions that are attributable solely to the distributed
Tax-Deferred Contributions, plus any income and minus any losses attributable
thereto, shall be forfeited by the Participant. Any such forfeited amounts
shall be applied against the Employer Contribution obligations for the Plan Year
of the Employer for which the Participant last performed services as an
Employee. Notwithstanding the foregoing, however, should the amount of all such
forfeitures for any Plan Year with respect to any Employer exceed the amount of
such Employer's Employer Contribution obligation for the Plan Year, the excess
amount of such forfeitures shall be held unallocated in a suspense account
established with respect to the Employer and shall for all Plan purposes be
applied against the Employer's Employer Contribution obligations for the
following Plan Year.
(20)
<PAGE>
7.4. Limitation on Tax-Deferred Contributions of Highly Compensated Employees
Notwithstanding any other provision of the Plan to the contrary, the Tax-
Deferred Contributions made with respect to a Plan Year on behalf of Eligible
Employees who are Highly Compensated Employees may not result in an average
actual deferral percentage for such Eligible Employees that exceeds the greater
of:
(a) a percentage that is equal to 125 percent of the average actual deferral
percentage for all other Eligible Employees; or
(b) a percentage that is not more than 200 percent of the average actual
deferral percentage for all other Eligible Employees and that is not more
than two percentage points higher than the average actual deferral
percentage for all other Eligible Employees.
In order to assure that the limitation contained herein is not exceeded with
respect to a Plan Year, the Administrator is authorized to suspend completely
further Tax-Deferred Contributions on behalf of Highly Compensated Employees for
any remaining portion of a Plan Year or to adjust the projected actual deferral
percentages of Highly Compensated Employees by reducing their percentage
elections with respect to Tax-Deferred Contributions for any remaining portion
of a Plan Year to such smaller percentages that will result in the limitation
set forth above not being exceeded. In the event of any such suspension or
reduction, Highly Compensated Employees affected thereby shall be notified of
the reduction or suspension as soon as possible and shall be given an
opportunity to make a new Tax-Deferred Contribution election to be effective the
first day of the next following Plan Year. In the absence of such an election,
the election in effect immediately prior to the suspension or adjustment
described above shall be reinstated as of the first day of the next following
Plan Year.
For purposes of applying the limitation contained in this Section, the Tax-
Deferred Contributions and test compensation of any Eligible Employee who is a
family member of another Eligible Employee who is a five percent owner or among
the ten Highly Compensated Employees receiving the greatest test compensation
for the Plan Year shall be aggregated with the Tax-Deferred Contributions and
test compensation of such other Eligible Employee, and such family member shall
not be considered an Eligible Employee for purposes of determining the average
actual deferral percentage for all other Eligible Employees.
In determining the actual deferral percentage for any Eligible Employee who is a
Highly Compensated Employee for the Plan Year, elective contributions made to
his accounts under any other plan of an Employer or a Related Company shall be
treated as if all such contributions were made to the Plan; provided, however,
that if such a plan has a plan year different from the Plan Year, any such
contributions made to the Highly Compensated Employee's accounts under the plan
for the plan year ending with or within the same calendar year as the Plan Year
shall be treated as if such contributions were made to the Plan.
Notwithstanding the foregoing, such contributions shall not be treated as if
they were made to the Plan if regulations issued under Section 401(k) of the
Code do not permit such plan to be aggregated with the Plan.
(21)
<PAGE>
If one or more plans of an Employer or Related Company are aggregated with the
Plan for purposes of satisfying the requirements of Section 401(a)(4) or 410(b)
of the Code, then actual deferral percentages under the Plan shall be calculated
as if the Plan and such one or more other plans were a single plan. For Plan
Years beginning after December 31, 1991, plans may be aggregated to satisfy
Section 401(k) of the Code only if they have the same plan year.
The Administrator shall maintain records sufficient to show that the limitation
contained in this Section was not exceeded with respect to any Plan Year.
7.5. Distribution of Excess Tax-Deferred Contributions
Notwithstanding any other provision of the Plan to the contrary, in the event
that the limitation contained in Section 7.4 is exceeded in any Plan Year, the
Tax-Deferred Contributions made with respect to a Highly Compensated Employee
that exceed the maximum amount permitted to be contributed to the Plan on his
behalf under Section 7.4, plus any income and minus any losses attributable
thereto, shall be distributed to the Highly Compensated Employee prior to the
end of the next succeeding Plan Year. If excess amounts are attributable to
Participants aggregated under the family aggregation rules described in Section
7.4, the excess shall be allocated among family members in proportion to the
Tax-Deferred Contributions made with respect to each family member. If such
excess amounts are distributed more than 2 1/2 months after the last day of the
Plan Year for which the excess occurred, an excise tax may be imposed under
Section 4979 of the Code on the Employer maintaining the Plan with respect to
such amounts.
The maximum amount permitted to be contributed to the Plan on a Highly
Compensated Employee's behalf under Section 7.4 shall be determined by reducing
Tax-Deferred Contributions made on behalf of Highly Compensated Employees in
order of their actual deferral percentages beginning with the highest of such
percentages. The determination of the amount of excess Tax-Deferred
Contributions shall be made after application of Section 7.3, if applicable.
If an amount of Tax-Deferred Contributions is distributed to a Participant in
accordance with this Section, matching contributions that are attributable
solely to the distributed Tax-Deferred Contributions, plus any income and minus
any losses attributable thereto, shall be forfeited by the Participant. Any
such forfeited amounts shall be applied against the Employer Contribution
obligations for the Plan Year of the Employer for which the Participant last
performed services as an Employee.
Notwithstanding the foregoing, however, should the amount of all such
forfeitures for any Plan Year with respect to any Employer exceed the amount of
such Employer's Employer Contribution obligation for the Plan Year, the excess
amount of such forfeitures shall be held unallocated in a suspense account
established with respect to the Employer and shall for all Plan purposes be
applied against the Employer's Employer Contribution obligations for the
following Plan Year.
(22)
<PAGE>
7.6. Limitation on Matching Contributions of Highly Compensated Employees
Notwithstanding any other provision of the Plan to the contrary, the matching
contributions made with respect to a Plan Year on behalf of eligible
participants who are Highly Compensated Employees may not result in an average
contribution percentage for such eligible participants that exceeds the greater
of:
(a) a percentage that is equal to 125 percent of the average contribution
percentage for all other eligible participants; or
(b) a percentage that is not more than 200 percent of the average contribution
percentage for all other eligible participants and that is not more than
two percentage points higher than the average contribution percentage for
all other eligible participants.
For purposes of applying the limitation contained in this Section, the matching
contributions, Tax-Deferred Contributions (to the extent that such Tax-Deferred
Contributions are taken into account in computing contribution percentages), and
test compensation of any eligible participant who is a family member of another
eligible participant who is a five percent owner or among the ten Highly
Compensated Employees receiving the greatest test compensation for the Plan Year
shall be aggregated with the matching contributions, Tax-Deferred Contributions,
and test compensation of such other eligible participant, and such family member
shall not be considered an eligible participant for purposes of determining the
average contribution percentage for all other eligible participants.
In determining the contribution percentage for any eligible participant who is a
Highly Compensated Employee for the Plan Year, matching contributions, employee
contributions, and elective contributions (to the extent that elective
contributions are taken into account in computing contribution percentages) made
to his accounts under any other plan of an Employer or a Related Company shall
be treated as if all such contributions were made to the Plan; provided,
however, that if such a plan has a plan year different from the Plan Year, any
such contributions made to the Highly Compensated Employee's accounts under the
plan for the plan year ending with or within the same calendar year as the Plan
Year shall be treated as if such contributions were made to the Plan.
Notwithstanding the foregoing, such contributions shall not be treated as if
they were made to the Plan if regulations issued under Section 401(m) of the
Code do not permit such plan to be aggregated with the Plan.
If one or more plans of an Employer or a Related Company are aggregated with the
Plan for purposes of satisfying the requirements of Section 401(a)(4) or 410(b)
of the Code, the contribution percentages under the Plan shall be calculated as
if the Plan and such one or more other plans were a single plan.
For Plan Years beginning after December 31, 1989, plans may be aggregated to
satisfy Section 401(m) of the Code only if they have the same plan year.
(23)
<PAGE>
The Administrator shall maintain records sufficient to show that the limitation
contained in this Section was not exceeded with respect to any Plan Year and the
amount of the elective contributions taken into account in computing
contribution percentages for any Plan Year.
7.7. Distribution of Excess Contributions
Notwithstanding any other provision of the Plan to the contrary, in the event
that the limitation contained in Section 7.6 is exceeded in any Plan Year, the
matching contributions made on behalf of a Highly Compensated Employee that
exceed the maximum amount permitted to be contributed to the Plan on behalf of
such Highly Compensated Employee under Section 7.6, plus any income and minus
any losses attributable thereto, shall be distributed to the Participant prior
to the end of the next succeeding Plan Year. If excess amounts are attributable
to Participants aggregated under the family aggregation rules described in
Section 7.5, the excess shall be allocated among family members in proportion to
the matching contributions made with respect to each family member. If such
excess amounts are distributed more than 2 1/2 months after the last day of the
Plan Year for which the excess occurred, an excise tax may be imposed under
Section 4979 of the Code on the Employer maintaining the Plan with respect to
such amounts.
The maximum amount permitted to be contributed to the Plan on behalf of a Highly
Compensated Employee under Section 7.6 shall be determined by reducing matching
contributions made on behalf of Highly Compensated Employees in order of their
contribution percentages beginning with the highest of such percentages.
The determination of the amount of excess matching contributions shall be made
after application of Section 7.3, if applicable, and after application of
Section 7.5, if applicable.
7.8. Multiple Use Limitation
Notwithstanding any other provision of the Plan to the contrary, the following
multiple use limitation as required under Section 401(m) of the Code shall
apply: the sum of the average actual deferral percentage for Eligible Employees
who are Highly Compensated Employees and the average contribution percentage for
eligible participants who are Highly Compensated Employees may not exceed the
aggregate limit. In the event that, after satisfaction of Section 7.5 and
Section 7.7, it is determined that contributions under the Plan fail to satisfy
the multiple use limitation contained herein, the multiple use limitation shall
be satisfied by further reducing the actual deferral percentages of Eligible
Employees who are Highly Compensated Employees (beginning with the highest such
percentage) to the extent necessary to eliminate the excess, with such further
reductions to be treated as excess Tax-Deferred Contributions and disposed of as
provided in Section 7.5, or in an alternative manner, consistently applied, that
may be permitted by regulations issued under Section 401(m) of the Code.
7.9. Determination of Income or Loss
The income or loss attributable to excess contributions that are distributed
pursuant to this Article shall be determined for the preceding Plan Year under
the method otherwise used for allocating income or loss to Participant's
Separate Accounts.
(24)
<PAGE>
7.10. Code Section 415 Limitations on Crediting of Contributions and
Forfeitures
Notwithstanding any other provision of the Plan to the contrary, the annual
addition with respect to a Participant for a limitation year shall in no event
exceed the lesser of (i) $30,000 (adjusted as provided in Section 415(d) of the
Code, with the first adjustment being made for limitation years beginning on or
after January 1, 1996) or (ii) 25 percent of the Participant's compensation, as
defined in Section 415(c)(3) of the Code and regulations issued thereunder, for
the limitation year. If the annual addition to the Separate Account of a
Participant in any limitation year would otherwise exceed the amount that may be
applied for his benefit under the limitation contained in this Section, the
limitation shall be satisfied by reducing contributions made on behalf of the
Participant to the extent necessary in the following order:
Tax-Deferred Contributions made on the Participant's behalf for the
limitation year and the matching contributions attributable thereto, if
any, shall be reduced pro rata.
Employer Contributions (other than matching contributions) otherwise
allocable to the Participant's Separate Account for the limitation year
shall be reduced.
The amount of any reduction of Tax-Deferred Contributions (plus any income
attributable thereto) shall be returned to the Participant. The amount of any
reduction of Employer Contributions shall be deemed a forfeiture for the
limitation year. Amounts deemed to be forfeitures under this Section shall be
held unallocated in a suspense account established for the limitation year and
shall be applied against the Employer's contribution obligation for the next
following limitation year (and succeeding limitation years, as necessary). If a
suspense account is in existence at any time during a limitation year, all
amounts in the suspense account must be allocated to Participants' Separate
Accounts (subject to the limitations contained herein) before any further Tax-
Deferred Contributions or Employer Contributions may be made to the Plan on
behalf of Participants. No suspense account established hereunder shall share
in any increase or decrease in the net worth of the Trust. For purposes of this
Article, excesses shall result only from the allocation of forfeitures, a
reasonable error in estimating a Participant's annual compensation (as defined
in Section 415(c)(3) of the Code and regulations issued thereunder), a
reasonable error in determining the amount of Tax-Deferred Contributions that
may be made with respect to any Participant under the limits of Section 415 of
the Code, or other limited facts and circumstances that justify the availability
of the provisions set forth above.
7.11. Coverage Under Other Qualified Defined Contribution Plan
If a Participant is covered by any other qualified defined contribution plan
(whether or not terminated) maintained by an Employer or a Related Company
concurrently with the Plan, and if the annual addition for the limitation year
would otherwise exceed the amount that may be applied for the Participant's
benefit under the limitation contained in Section 7.10, such excess shall be
reduced first by returning the employee contributions made by the Participant
for the limitation year under all of the defined contribution plans other than
the Plan and the income attributable thereto to the extent necessary. If the
limitation contained in Section 7.10 is still not satisfied after returning all
of the employee contributions made by the Participant under all such
(25)
<PAGE>
other plans, the excess shall be reduced by returning the elective contributions
made on the Participant's behalf for the limitation year under all such other
plans and the income attributable thereto to the extent necessary on a pro rata
basis among all of such plans. If the limitation contained in Section 7.10 is
still not satisfied after returning all of the elective contributions made on
the Participant's behalf under all such other plans, the procedure set forth in
Section 7.10 shall be invoked to eliminate any such excess. If the limitation
contained in Section 7.10 is still not satisfied after invocation of the
procedure set forth in Section 7.10, the portion of the employer contributions
and of forfeitures for the limitation year under all such other plans that has
been allocated to the Participant thereunder, but which exceeds the limitation
set forth in Section 7.10, shall be deemed a forfeiture for the limitation year
and shall be disposed of as provided in such other plans; provided, however,
that if the Participant is covered by a money purchase pension plan, the
forfeiture shall be effected first under any other defined contribution plan
that is not a money purchase pension plan and, if the limitation is still not
satisfied, then under such money purchase pension plan.
7.12. Coverage Under Qualified Defined Benefit Plan
If a Participant in the Plan is also covered by a qualified defined benefit plan
(whether or not terminated) maintained by an Employer or a Related Company, in
no event shall the sum of the defined benefit plan fraction (as defined in
Section 415(e)(2) of the Code) and the defined contribution plan fraction (as
defined in Section 415(e)(3) of the Code) exceed 1.0 in any limitation year.
If, before October 3, 1973, the Participant was an active participant in a
qualified defined benefit plan maintained by an Employer or a Related Company
and otherwise satisfies the requirements of Section 2004(d)(2) of ERISA, then
for purposes of applying this Section, the defined benefit plan fraction shall
not exceed 1.0. If the Plan satisfied the applicable requirements of Section
415 of the Code as in effect for all limitation years beginning before January
1, 1987, an amount shall be subtracted from the numerator of the defined
contribution plan fraction (not exceeding such numerator) as prescribed by the
Secretary of the Treasury so that the sum of the defined benefit plan fraction
and the defined contribution plan fraction computed under Section 415(e)(1) of
the Code, as revised by the Tax Reform Act of 1986, does not exceed 1.0 for such
limitation year. In the event the special limitation contained in this Section
is exceeded, the benefits otherwise payable to the Participant under any such
qualified defined benefit plan shall be reduced to the extent necessary to meet
such limitation.
7.13. Scope of Limitations
The limitations contained in Sections 7.10, 7.11, and 7.12 shall be applicable
only with respect to benefits provided pursuant to defined contribution plans
and defined benefit plans described in Section 415(k) of the Code.
(26)
<PAGE>
ARTICLE VIII
TRUST FUNDS AND SEPARATE ACCOUNTS
8.1. General Fund
The Trustee shall maintain a General Fund as required to hold and administer any
assets of the Trust that are not allocated among the Investment Funds as
provided in the Plan or the Trust Agreement. The General Fund shall be held and
administered as a separate common trust fund. The interest of each Participant
or Beneficiary under the Plan in the General Fund shall be an undivided
interest. The General Fund may be invested in whole or in part in equity
securities issued by an Employer or a Related Company that are publicly traded
and are "qualifying employer securities" as defined in Section 407(d)(5) of
ERISA.
8.2. Investment Funds
The Sponsor shall determine the number and type of Investment Funds and select
the investments for such Investment Funds. The Sponsor shall communicate the
same and any changes therein in writing to the Administrator and the Trustee.
Each Investment Fund shall be held and administered as a separate common trust
fund. The interest of each Participant or Beneficiary under the Plan in any
Investment Fund shall be an undivided interest.
The Sponsor may determine to offer one or more Investment Funds that are
invested in whole or in part in equity securities issued by an Employer or a
Related Company that are publicly traded and are "qualifying employer
securities" as defined in Section 407(d)(5) of ERISA.
8.3. Loan Investment Fund
If a loan from the Plan to a Participant is approved in accordance with the
provisions of Article XII, the Sponsor shall direct the establishment and
maintenance of a loan Investment Fund in the Participant's name. The assets of
the loan Investment Fund shall be held as a separate trust fund. A
Participant's loan Investment Fund shall be invested in the note reflecting the
loan that is executed by the Participant in accordance with the provisions of
Article XII. Notwithstanding any other provision of the Plan to the contrary,
income received with respect to a Participant's loan Investment Fund shall be
allocated and the loan Investment Fund shall be administered as provided in
Article XII.
8.4. Income on Trust
Any dividends, interest, distributions, or other income received by the Trustee
with respect to any Trust Fund maintained hereunder shall be allocated by the
Trustee to the Trust Fund for which the income was received.
8.5. Separate Accounts
As of the first date a contribution is made by or on behalf of an Employee,
there shall be established a Separate Account in his name reflecting his
interest in the Trust. Each Separate
(27)
<PAGE>
Account shall be maintained and administered for each Participant and
Beneficiary in accordance with the provisions of the Plan. The balance of each
Separate Account shall be the balance of the account after all credits and
charges thereto, for and as of such date, have been made as provided herein.
8.6. Sub-Accounts
A Participant's Separate Account shall be divided into individual Sub-Accounts
reflecting the portion of the Participant's Separate Account that is derived
from Tax-Deferred Contributions, Rollover Contributions, or Employer
Contributions. Each Sub-Account shall reflect separately contributions
allocated to each Trust Fund maintained hereunder and the earnings and losses
attributable thereto. Such other Sub-Accounts may be established as are
necessary or appropriate to reflect a Participant's interest in the Trust.
(28)
<PAGE>
ARTICLE IX
LIFE INSURANCE CONTRACTS
9.1. No Life Insurance Contracts
There shall be no life insurance contracts purchased under the Plan.
(29)
<PAGE>
ARTICLE X
DEPOSIT AND INVESTMENT OF CONTRIBUTIONS
10.1. Future Contribution Investment Elections
Each Eligible Employee shall make an investment election in the manner and form
prescribed by the Administrator directing the manner in which his Tax-Deferred
Contributions, Rollover Contributions, and Employer Contributions shall be
invested. An Eligible Employee's investment election shall specify the
percentage, in the percentage increments prescribed by the Administrator, of
such contributions that shall be allocated to one or more of the Investment
Funds with the sum of such percentages equaling 100 percent. The investment
election by a Participant shall remain in effect until his entire interest under
the Plan is distributed or forfeited in accordance with the provisions of the
Plan or until he files a change of investment election with the Administrator,
in such form as the Administrator shall prescribe. A Participant's change of
investment election may be made effective as of the date or dates prescribed by
the Administrator.
10.2. Deposit of Contributions
All Tax-Deferred Contributions, Rollover Contributions, and Employer
Contributions shall be deposited in the Trust and allocated among the Investment
Funds in accordance with the Participant's currently effective investment
election; provided, however, that any contributions made to the Plan in
qualifying employer securities shall be allocated to the Employer securities
Investment Fund established by the Sponsor, pending directions to the
Administrator regarding their future investment. If no investment election is
on file with the Administrator at the time contributions are to be deposited to
a Participant's Separate Account, the Participant shall be notified and an
investment election form shall be provided to him. Until such Participant shall
make an effective election under this Section, his contributions shall be
allocated among the Investment Funds as directed by the Administrator.
10.3. Election to Transfer Between Funds
A Participant may elect to transfer investments from any Investment Fund to any
other Investment Fund. The Participant's transfer election shall specify either
(i) a percentage, in the percentage increments prescribed by the Administrator,
of the amount eligible for transfer, which percentage may not exceed 100
percent, or (ii) a dollar amount that is to be transferred. Subject to any
restrictions pertaining to a particular Investment Fund, a Participant's
transfer election may be made effective as of the date or dates prescribed by
the Administrator.
(30)
<PAGE>
ARTICLE XI
CREDITING AND VALUING SEPARATE ACCOUNTS
11.1. Crediting Separate Accounts
All contributions made under the provisions of the Plan shall be credited to
Separate Accounts in the Trust Funds by the Trustee, in accordance with
procedures established in writing by the Administrator, either when received or
on the succeeding Valuation Date after valuation of the Trust Fund has been
completed for such Valuation Date as provided in Section 11.2, as shall be
determined by the Administrator.
11.2. Valuing Separate Accounts
Separate Accounts in the Trust Funds shall be valued by the Trustee on the
Valuation Date, in accordance with procedures established in writing by the
Administrator, either in the manner adopted by the Trustee and approved by the
Administrator or in the manner set forth in Section 11.3 as Plan valuation
procedures, as determined by the Administrator.
11.3. Plan Valuation Procedures
With respect to the Trust Funds, the Administrator may determine that the
following valuation procedures shall be applied. As of each Valuation Date
hereunder, the portion of any Separate Accounts in a Trust Fund shall be
adjusted to reflect any increase or decrease in the value of the Trust Fund for
the period of time occurring since the immediately preceding Valuation Date for
the Trust Fund (the "valuation period") in the following manner:
(a) First, the value of the Trust Fund shall be determined by valuing all of
the assets of the Trust Fund at fair market value.
(b) Next, the net increase or decrease in the value of the Trust Fund
attributable to net income and all profits and losses, realized and
unrealized, during the valuation period shall be determined on the basis
of the valuation under paragraph (a) taking into account appropriate
adjustments for contributions, loan payments, and transfers to and
distributions, withdrawals, loans, and transfers from such Trust Fund
during the valuation period.
(c) Finally, the net increase or decrease in the value of the Trust Fund
shall be allocated among Separate Accounts in the Trust Fund in the ratio
of the balance of the portion of such Separate Account in the Trust Fund
as of the preceding Valuation Date less any distributions, withdrawals,
loans, and transfers from such Separate Account balance in the Trust Fund
since the Valuation Date to the aggregate balances of the portions of all
Separate Accounts in the Trust Fund similarly adjusted, and each Separate
Account in the Trust Fund shall be credited or charged with the amount of
its allocated share. Notwithstanding the foregoing, the Administrator may
adopt such accounting procedures as it considers appropriate and
equitable to establish a proportionate crediting of net increase or
decrease in the value of the Trust Fund for contributions, loan payments,
and transfers to and distributions, withdrawals, loans, and
(31)
<PAGE>
transfers from such Trust Fund made by or on behalf of a Participant
during the valuation period.
11.4. Finality of Determinations
The Trustee shall have exclusive responsibility for determining the balance of
each Separate Account maintained hereunder. The Trustee's determinations
thereof shall be conclusive upon all interested parties.
11.5. Notification
Within a reasonable period of time after the end of each Plan Year, the
Administrator shall notify each Participant and Beneficiary of the balances of
his Separate Account and Sub-Accounts as of a Valuation Date during the Plan
Year.
(32)
<PAGE>
ARTICLE XII
LOANS
12.1. Application for Loan
A Participant who is a party in interest may make written application to the
Administrator for a loan from his Separate Account.
As collateral for any loan granted hereunder, the Participant shall grant to the
Plan a security interest in his vested interest under the Plan equal to the
amount of the loan; provided, however, that in no event may the security
interest exceed 50 percent of the Participant's vested interest under the Plan
determined as of the date as of which the loan is originated in accordance with
Plan provisions. In the case of a Participant who is an active employee, the
Participant also shall enter into an agreement to repay the loan by payroll
withholding. No loan in excess of 50 percent of the Participant's vested
interest under the Plan shall be made from the Plan. Loans shall not be made
available to Highly Compensated Employees in an amount greater than the amount
made available to other employees.
A loan shall not be granted unless the Participant consents in writing to the
charging of his Separate Account for unpaid principal and interest amounts in
the event the loan is declared to be in default. A Participant's spouse must
consent in writing to any loan hereunder. Any spousal consent given pursuant to
this Section must acknowledge the effect of the loan and must be witnessed by a
Plan representative or a notary public. Such spousal consent shall be binding
with respect to the consenting spouse and any subsequent spouse with respect to
the loan. A new spousal consent shall be required if the Participant's Separate
Account is used for security in any renegotiation, extension, renewal, or other
revision of the loan.
12.2. Reduction of Account Upon Distribution
Notwithstanding any other provision of the Plan, the amount of a Participant's
Separate Account that is distributable to the Participant or his Beneficiary
under Article XIII or XV shall be reduced by the portion of his vested interest
that is held by the Plan as security for any loan outstanding to the
Participant, provided that the reduction is used to repay the loan. If
distribution is made because of the Participant's death prior to the
commencement of distribution of his Separate Account and less than 100 percent
of the Participant's vested interest in his Separate Account (determined without
regard to the preceding sentence) is payable to his surviving spouse, then the
balance of the Participant's vested interest in his Separate Account shall be
adjusted by reducing the vested account balance by the amount of the security
used to repay the loan, as provided in the preceding sentence, prior to
determining the amount of the benefit payable to the surviving spouse.
12.3. Requirements to Prevent a Taxable Distribution
Notwithstanding any other provision of the Plan to the contrary, the following
terms and conditions shall apply to any loan made to a Participant under this
Article:
(33)
<PAGE>
(a) The interest rate on any loan to a Participant shall be a reasonable
interest rate commensurate with current interest rates charged for loans
made under similar circumstances by persons in the business of lending
money.
(b) The amount of any loan to a Participant (when added to the outstanding
balance of all other loans to the Participant from the Plan or any other
plan maintained by an Employer or a Related Company) shall not exceed the
lesser of:
(i) $50,000, reduced by the excess, if any, of the highest outstanding
balance of any other loan to the Participant from the Plan or any
other plan maintained by an Employer or a Related Company during the
preceding 12-month period over the outstanding balance of such loans
on the date a loan is made hereunder; or
(ii) 50 percent of the vested portions of the Participant's Separate
Account and his vested interest under all other plans maintained by
an Employer or a Related Company.
(c) The term of any loan to a Participant shall be no greater than five
years, except in the case of a loan used to acquire any dwelling unit
which within a reasonable period of time is to be used (determined at the
time the loan is made) as a principal residence of the Participant.
(d) Except as otherwise permitted under Treasury regulations, substantially
level amortization shall be required over the term of the loan with
payments made not less frequently than quarterly.
12.4. Administration of Loan Investment Fund
Upon approval of a loan to a Participant, the Administrator shall direct the
Trustee to transfer an amount equal to the loan amount from the Investment Funds
in which it is invested, as directed by the Administrator, to the loan
Investment Fund established in the Participant's name. Any loan approved by the
Administrator shall be made to the Participant out of the Participant's loan
Investment Fund. All principal and interest paid by the Participant on a loan
made under this Article shall be deposited to his Separate Account and shall be
allocated upon receipt among the Investment Funds in accordance with the
Participant's currently effective investment election. The balance of the
Participant's loan Investment Fund shall be decreased by the amount of principal
payments and the loan Investment Fund shall be terminated when the loan has been
repaid in full.
12.5. Default
If a Participant fails to make or cause to be made, any payment required under
the terms of the loan within 90 days following the date on which such payment
shall become due or there is an outstanding principal balance existing on a loan
after the last scheduled repayment date, the Administrator may direct the
Trustee to declare the loan to be in default, and the entire unpaid balance of
such loan, together with accrued interest, shall be immediately due and payable.
In
(34)
<PAGE>
any such event, if such balance and interest thereon is not then paid, the
Trustee shall charge the Separate Account of the borrower with the amount of
such balance and interest as of the earliest date a distribution may be made
from the Plan to the borrower without adversely affecting the tax qualification
of the Plan or of the cash or deferred arrangement.
12.6. Special Rules Applicable to Loans
Any loan made hereunder shall be subject to the following rules:
(a) Loans limited to Eligible Employees: No loans shall be made to an
Employee who makes a Rollover Contribution in accordance with Article IV,
but who is not an Eligible Employee as provided in Article III.
(b) Minimum Loan Amount: A Participant may not request a loan for less than
$1,000.
(c) Maximum Number of Outstanding Loans: A Participant with an outstanding
loan may not apply for another loan until the existing loan is paid in
full and may not refinance an existing loan or attain a second loan for
the purpose of paying off the existing loan. A Participant may not apply
for more than one loan during the Plan Year. The provisions of this
paragraph shall not apply to any loans made prior to the effective date
of this amendment and restatement; provided, however, that a Participant
may not apply for a new loan hereunder until all outstanding loans made
to the Participant prior to the effective date of this amendment and
restatement have been paid in full.
(d) Maximum Period for Real Estate Loans: The term of any loan to a
Participant that is used to acquire any dwelling unit which within a
reasonable period of time is to be used (determined at the time the loan
is made) as a principal residence of the Participant shall be no greater
than ten years.
(e) Pre-Payment Without Penalty: A Participant may pre-pay the balance of any
loan hereunder prior to the date it is due without penalty.
(f) Affect of Termination of Employment: Upon a Participant's termination of
employment, the balance of any outstanding loan hereunder shall
immediately become due and owing.
12.7. Loans Granted Prior to Amendment
Notwithstanding any other provision of this Article to the contrary, any loan
made under the provisions of the Plan as in effect prior to this amendment and
restatement shall remain outstanding until repaid in accordance with its terms
or the otherwise applicable Plan provisions.
(35)
<PAGE>
ARTICLE XIII
WITHDRAWALS WHILE EMPLOYED
13.1. Withdrawals From ESOP Sub-Account
A Participant who is employed by an Employer or a Related Company and who has
attained age 55 and completed 10 or more years of participation in the Alpha
Industries, Inc. Employee Stock Ownership Plan ("ESOP") and/or this Plan (a
"qualified participant") may elect in writing to make a cash withdrawal, or a
withdrawal in the form of a qualified joint and survivor annuity as provided in
Article XVI, from his ESOP Sub-Account. The maximum amount that a qualified
participant may withdrawal pursuant to this Section 13.1 is 25 percent of the
value of his ESOP Sub-Account attributable to employer securities acquired by
the ESOP after 1986. The portion of the qualified participant's ESOP Sub-
Account attributable to employer securities acquired by the ESOP after 1986
shall be determined by multiplying the number of shares of employer securities
held in the ESOP Sub-Account by a fraction, the numerator of which is the number
of shares acquired by the ESOP after 1986 and the denominator of which is the
total number of shares held by the ESOP or this Plan on the date the individual
became a qualified participant. A withdrawal under this Section may be made at
any time within 90 days after the last day of each Plan Year during the 6-year
period beginning with the Plan Year in which the qualified participant first
becomes a qualified participant. The minimum total withdrawal that a
Participant may make under this Section 13.1 is $500.
13.2. Withdrawals of Rollover Contributions
A Participant who is employed by an Employer or a Related Company and has
attained age 59 1/2 or is determined by the Administrator to have incurred a
hardship as defined in this Article may elect in writing, subject to the
limitations and conditions prescribed in this Article, to make a cash withdrawal
or a withdrawal in the form of a qualified joint and survivor annuity as
provided in Article XVI from his Rollover Contributions Sub-Account.
13.3. Withdrawals of Employer Contributions
A Participant who is employed by an Employer or a Related Company and has
attained age 59 1/2 or is determined by the Administrator to have incurred a
hardship as defined in this Article may elect in writing, subject to the
limitations and conditions prescribed in this Article to make a cash withdrawal
or a withdrawal in the form of a qualified joint and survivor annuity as
provided in Article XVI from his vested interest in his Employer Contributions
Sub-Account.
13.4. Withdrawals of Tax-Deferred Contributions
A Participant who is employed by an Employer or a Related Company and who has
attained age 59 1/2 or is determined by the Administrator to have incurred a
hardship as defined in this Article may elect in writing, subject to the
limitations and conditions prescribed in this Article, to make a cash withdrawal
or a withdrawal in the form of a qualified joint and survivor annuity as
provided in Article XVI from his Tax-Deferred Contributions Sub-Account. The
maximum amount that a Participant may withdraw pursuant to this Section because
of a hardship is the
(36)
<PAGE>
balance of his Tax-Deferred Contributions Sub-Account, exclusive of any earnings
credited to such Sub-Account as of a date that is after December 31, 1988.
13.5. Limitations on Withdrawals Other than Hardship Withdrawals
Withdrawals made pursuant to this Article, other than hardship withdrawals,
shall be subject to the following conditions and limitations:
A Participant must file a written withdrawal application with the Administrator
such number of days prior to the date as of which it is to be effective as the
Administrator shall prescribe.
Withdrawals may be made effective as soon as reasonably practicable following
the Administrator's receipt of the Participant's directions.
A Participant's spouse must consent in writing to any withdrawal hereunder.
13.6. Conditions and Limitations on Hardship Withdrawals
A Participant must file a written application for a hardship withdrawal with the
Administrator such number of days prior to the date as of which it is to be
effective as the Administrator may prescribe. Hardship withdrawals may be made
effective as soon as reasonably practicable following the Administrator's
receipt of the Participant's directions. A Participant's spouse must consent to
any withdrawal hereunder. The Administrator shall grant a hardship withdrawal
only if it determines that the withdrawal is necessary to meet an immediate and
heavy financial need of the Participant. An immediate and heavy financial need
of the Participant means a financial need on account of:
(a) expenses previously incurred by or necessary to obtain for the
Participant, the Participant's spouse, or any dependent of the
Participant (as defined in Section 152 of the Code) medical care
described in Section 213(d) of the Code;
(b) costs directly related to the purchase (excluding mortgage payments) of a
principal residence for the Participant;
(c) payment of tuition, related educational fees, and room and board expenses
for the next 12 months of post-secondary education for the Participant,
the Participant's spouse, or any dependent of the Participant; or
(d) the need to prevent the eviction of the Participant from his principal
residence or foreclosure on the mortgage of the Participant's principal
residence.
A withdrawal shall be deemed to be necessary to satisfy an immediate and heavy
financial need of a Participant only if all of the following requirements are
satisfied:
The withdrawal is not in excess of the amount of the immediate and heavy
financial need of the Participant.
(37)
<PAGE>
The Participant has obtained all distributions, other than hardship
distributions, and all non-taxable loans currently available under all
plans maintained by an Employer or any Related Company.
The Participant's Tax-Deferred Contributions and the Participant's
elective tax-deferred contributions and employee after-tax contributions
under all other tax-qualified plans maintained by an Employer or any
Related Company shall be suspended for at least twelve months after his
receipt of the withdrawal.
The Participant shall not make Tax-Deferred Contributions or elective
tax-deferred contributions under any other tax-qualified plan maintained
by an Employer or any Related Company for the Participant's taxable year
immediately following the taxable year of the withdrawal in excess of the
applicable limit under Section 402(g) of the Code for such next taxable
year less the amount of the Participant's Tax-Deferred Contributions and
elective tax-deferred contributions under any other plan maintained by an
Employer or any Related Company for the taxable year of the withdrawal.
The minimum hardship withdrawal that a Participant may make is $1,000. The
amount of hardship withdrawal may include any amounts necessary to pay any
Federal, state, or local income taxes or penalties reasonably anticipated to
result from the distribution. A Participant shall not fail to be treated as an
Eligible Employee for purposes of applying the limitations contained in Article
VII of the Plan merely because his Tax-Deferred Contributions are suspended in
accordance with this Section.
13.7. Order of Withdrawal from a Participant's Sub-Accounts
Distribution of a withdrawal amount shall be made from a Participant's Sub-
Accounts, to the extent necessary, in the order prescribed by the Administrator,
which order shall be uniform with respect to all Participants and non-
discriminatory. If the Sub-Account from which a Participant is receiving a
withdrawal is invested in more than one Investment Fund, the withdrawal shall be
charged against the Investment Funds as directed by the Administrator.
(38)
<PAGE>
ARTICLE XIV
TERMINATION OF EMPLOYMENT AND SETTLEMENT DATE
14.1. Termination of Employment and Settlement Date
A Participant's Settlement Date shall occur on the date he terminates employment
with an Employer and all Related Companies because of death, disability,
retirement, or other termination of employment. Written notice of a
Participant's Settlement Date shall be given by the Administrator to the
Trustee.
(39)
<PAGE>
ARTICLE XV
DISTRIBUTIONS
15.1. Distributions to Participants
A Participant whose Settlement Date occurs shall receive distribution of his
vested interest in his Separate Account in the form provided under Article XVI
beginning as soon as reasonably practicable following his Settlement Date or the
date his application for distribution is filed with the Administrator, if later.
In addition, a Participant who continues in employment with an Employer or a
Related Company after his Normal Retirement Date may elect to receive
distribution of all or any portion of his Separate Account in the form provided
under Article XVI at any time following his Normal Retirement Date.
15.2. Distributions to Beneficiaries
If a Participant dies prior to the date distribution of his vested interest in
his Separate Account begins under this Article, his Beneficiary shall receive
distribution of the Participant's vested interest in his Separate Account in the
form provided under Article XVI beginning as soon as reasonably practicable
following the date the Beneficiary's application for distribution is filed with
the Administrator. Unless distribution is to be made over the life or over a
period certain not greater than the life expectancy of the Beneficiary,
distribution of the Participant's entire vested interest shall be made to the
Beneficiary no later than the end of the fifth calendar year beginning after the
Participant's death. If distribution is to be made over the life or over a
period certain no greater than the life expectancy of the Beneficiary,
distribution shall commence no later than:
(a) If the Beneficiary is not the Participant's spouse, the end of the first
calendar year beginning after the Participant's death; or
(b) If the Beneficiary is the Participant's spouse, the later of (i) the end
of the first calendar year beginning after the Participant's death or
(ii) the end of the calendar year in which the Participant would have
attained age 70 1/2.
If distribution is to be made to a Participant's spouse, it shall be made
available within a reasonable period of time after the Participant's death that
is no less favorable than the period of time applicable to other distributions.
If a Participant dies after the date distribution of his vested interest in his
Separate Account begins under this Article, but before his entire vested
interest in his Separate Account is distributed, his Beneficiary shall receive
distribution of the remainder of the Participant's vested interest in his
Separate Account beginning as soon as reasonably practicable following the
Participant's date of death in a form that provides for distribution at least as
rapidly as under the form in which the Participant was receiving distribution.
15.3. Cash Outs and Participant Consent
Notwithstanding any other provision of the Plan to the contrary, if a
Participant's vested interest in his Separate Account does not exceed $3,500,
distribution of such vested interest shall be
(40)
<PAGE>
made to the Participant in a single sum payment as soon as reasonably
practicable following his Settlement Date. If a Participant's vested interest in
his Separate Account exceeds $3,500, distribution shall not commence to such
Participant prior to his Normal Retirement Date without the Participant's
written consent and the written consent of his spouse if payment is not made
through the purchase of a qualified joint and survivor annuity. If at the time
of a distribution or deemed distribution to a Participant from his Separate
Account, the Participant's vested interest in his Separate Account exceeded
$3,500, then for purposes of this Section, the Participant's vested interest in
his Separate Account on any subsequent date shall be deemed to exceed $3,500.
15.4. Required Commencement of Distribution
Notwithstanding any other provision of the Plan to the contrary, distribution of
a Participant's vested interest in his Separate Account shall commence to the
Participant no later than the earlier of:
(a) 60 days after the close of the Plan Year in which (i) the Participant's
Normal Retirement Date occurs, (ii) the 10th anniversary of the year in
which he commenced participation in the Plan occurs, or (iii) his
Settlement Date occurs, whichever is latest; or
(b) the April 1 following the close of the calendar year in which he attains
age 70 1/2, whether or not his Settlement Date has occurred, except that
if a Participant attained age 70 1/2 prior to January 1, 1988, and was
not a five-percent owner (as defined in Section 416 of the Code) at any
time during the five-Plan-Year period ending within the calendar year in
which he attained age 70 1/2, distribution of such Participant's vested
interest in his Separate Account shall commence no later than the April 1
following the close of the calendar year in which he attains age 70 1/2
or retires, whichever is later.
Distributions required to commence under this Section shall be made in the form
provided under Article XVI and in accordance with Section 401(a)(9) of the Code
and regulations issued thereunder, including the minimum distribution incidental
benefit requirements.
15.5. Reemployment of a Participant
If a Participant whose Settlement Date has occurred is reemployed by an Employer
or a Related Company, he shall lose his right to any distribution or further
distributions from the Trust arising from his prior Settlement Date and his
interest in the Trust shall thereafter be treated in the same manner as that of
any other Participant whose Settlement Date has not occurred.
15.6. Restrictions on Alienation
Except as provided in Section 401(a)(13) of the Code relating to qualified
domestic relations orders and Section 1,401(a)-13(b)(2) of Treasury regulations
relating to Federal tax levies and judgments, no benefit under the Plan at any
time shall be subject in any manner to anticipation, alienation, assignment
(either at law or in equity), encumbrance, garnishment, levy, execution, or
other legal or equitable process; and no person shall have power in any manner
to anticipate,
(41)
<PAGE>
transfer, assign (either at law or in equity), alienate or subject to
attachment, garnishment, levy, execution, or other legal or equitable process,
or in any way encumber his benefits under the Plan, or any part thereof, and any
attempt to do so shall be void.
15.7. Facility of Payment
If the Administrator finds that any individual to whom an amount is payable
hereunder is incapable of attending to his financial affairs because of any
mental or physical condition, including the infirmities of advanced age, such
amount (unless prior claim therefor shall have been made by a duly qualified
guardian or other legal representative) may, in the discretion of the
Administrator, be paid to another person for the use or benefit of the
individual found incapable of attending to his financial affairs or in
satisfaction of legal obligations incurred by or on behalf of such individual.
The Trustee shall make such payment only upon receipt of written instructions to
such effect from the Administrator. Any such payment shall be charged to the
Separate Account from which any such payment would otherwise have been paid to
the individual found incapable of attending to his financial affairs and shall
be a complete discharge of any liability therefor under the Plan.
15.8. Inability to Locate Payee
If any benefit becomes payable to any person, or to the executor or
administrator of any deceased person, and if that person or his executor or
administrator does not present himself to the Administrator within a reasonable
period after the Administrator mails written notice of his eligibility to
receive a distribution hereunder to his last known address and makes such other
diligent effort to locate the person as the Administrator determines, that
benefit will be forfeited. However, if the payee later files a claim for that
benefit, the benefit will be restored.
15.9. Distribution Pursuant to Qualified Domestic Relations Orders
Notwithstanding any other provision of the Plan to the contrary, if a qualified
domestic relations order so provides, distribution may be made to an alternate
payee pursuant to a qualified domestic relations order, as defined in Section
414(p) of the Code, regardless of whether the Participant's Settlement Date has
occurred or whether the Participant is otherwise entitled to receive a
distribution under the Plan.
(42)
<PAGE>
ARTICLE XVI
FORM OF PAYMENT
16.1. Definitions
For purposes of this Article, the following terms have the following meanings:
(a) A Participant's "annuity starting date" means the first day of the first
period for which an amount is paid as an annuity or any other form.
(b) The "automatic annuity form" means the form of annuity that will be
purchased on a Participant's behalf unless the Participant elects another
form of annuity.
(c) A "qualified election" means an election that is made during the
qualified election period. A qualified election of a form of payment
other than a qualified joint and survivor annuity or designating a
Beneficiary other than the Participant's spouse to receive amounts
otherwise payable as a qualified preretirement survivor annuity must
include the written consent of the Participant's spouse, if any. A
Participant's spouse will be deemed to have given written consent to the
Participant's election if the Participant establishes to the satisfaction
of a Plan representative that spousal consent cannot be obtained because
the spouse cannot be located or because of other circumstances set forth
in Section 401(a)(11) of the Code and regulations issued thereunder. The
spouse's written consent must acknowledge the effect of the Participant's
election and must be witnessed by a Plan representative or a notary
public. In addition, the spouse's written consent must either (i) specify
the form of payment selected instead of a joint and survivor annuity, if
applicable, and that such form may not be changed (except to a qualified
joint and survivor annuity) without written spousal consent and specify
any non-spouse Beneficiary designed by the Participant, if applicable,
and that such Beneficiary may not be changed without written spousal
consent or (ii) acknowledge that the spouse has the right to limit
consent as provided in clause (i), but permit the Participant to change
the form of payment selected or the designated Beneficiary without the
spouse's further consent. Any written consent given or deemed to have
been given by a Participant's spouse hereunder shall be irrevocable and
shall be effective only with respect to such spouse and not with respect
to any subsequent spouse.
(d) The "qualified election period" with respect to the automatic annuity
form means the 90 day period ending on a Participant's annuity starting
date. The "qualified election period" with respect to a qualified
preretirement survivor annuity means the period beginning on the first
day of the Plan Year in which the Participant attains age 35 or, if he
terminates employment prior to such date, the day he terminates
employment with his Employer and all Related Companies. A Participant
whose employment has not terminated may make a qualified election
designating a Beneficiary other than his spouse prior to the Plan Year in
which he attains age 35; provided, however, that such election shall
cease to be effective as of the first day of the Plan Year in which the
Participant attains age 35.
(43)
<PAGE>
(e) A "qualified joint and survivor annuity" means an immediate annuity
payable at earliest retirement age under the Plan, as defined in
regulations issued under Section 401(a)(11) of the Code, for the life of
a Participant with a survivor annuity payable for the life of the
Participant's spouse that is equal to at least 50 percent of the amount
of the annuity payable during the joint lives of the Participant and his
spouse, provided that the survivor annuity shall not be payable to a
Participant's spouse if such spouse is not the same spouse to whom the
Participant was married on his annuity starting date.
(f) A "qualified preretirement survivor annuity" means an annuity payable to
the surviving spouse of a Participant in accordance with the provisions
of Section 16.6.
(g) A "single life annuity" means an annuity payable for the life of the
Participant.
16.2. Normal Form of Payment
Unless a Participant, or his Beneficiary, if the Participant has died, elects an
optional form of payment, distribution shall be made to the Participant, or his
Beneficiary, as the case may be, through the purchase of a single premium,
nontransferable annuity contract for such term and in such form as the
Participant, or his Beneficiary, if the Participant has died, shall select,
subject to the provisions of Section 16.5; provided, however, that a
Participant's Beneficiary may not elect to receive distribution of an annuity
payable over the joint lives of the Beneficiary and any other individual. The
terms of any annuity contract purchased hereunder and distributed to a
Participant or his Beneficiary shall comply with the requirements of the Plan.
16.3. Optional Forms of Payment
Subject to the provisions of Section 16.5, a Participant, or his Beneficiary, as
the case may be, may elect to receive distribution in one of the following
optional forms of payment:
(a) Single Sum Payment.
(b) Installment Payments - Distribution shall be made in a series of
installments over a period not exceeding the life expectancy of the
Participant, or the Participant's Beneficiary, if the Participant has
died, or a period not exceeding the joint life and last survivor
expectancy of the Participant and his Beneficiary. Each installment shall
be equal in amount except as necessary to adjust for any changes in the
value of the Participant's Separate Account. The determination of life
expectancies shall be made on the basis of the expected return multiples
in Tables V and VI of Section 1.72-9 of the Treasury regulations and
shall be calculated either once at the time installment payments begin or
annually for the Participant and/or his Beneficiary, if his Beneficiary
is his spouse, as determined by the Participant at the time installment
payments begin.
Distribution of the fair market value of the Participant's Separate Account
under an optional form of payment shall be made in cash or in kind, as elected
by the Participant.
(44)
<PAGE>
16.4. Change of Election
Subject to the provisions of Section 16.5, a Participant or Beneficiary who has
elected an optional form of payment or elected an annuity form of payment may
revoke or change his election at any time prior to his annuity starting date by
filing with the Administrator a written election in the form prescribed by the
Administrator.
16.5. Form of Annuity Requirements
Distribution shall be made to a Participant through the purchase of an annuity
contract that provides for payment in one of the following automatic annuity
forms, unless the Participant elects a different type of annuity or elects an
optional form of payment.
(a) The automatic annuity form for a Participant who is married on his
annuity starting date is the 50 percent qualified joint and survivor
annuity.
(b) The automatic annuity form for a Participant who is not married on his
annuity starting date is the single life annuity.
A Participant's election of an annuity other than the automatic annuity form or
of the optional form of payment shall not be effective unless it is a qualified
election; provided, however, that spousal consent shall not be required if the
form of payment elected by the Participant is a qualified joint and survivor
annuity. A Participant who has elected an optional form of payment can change
his election only pursuant to a qualified election.
16.6. Qualified Preretirement Survivor Annuity Requirements
If a married Participant dies before his annuity starting date, his spouse shall
receive distribution of the value of the Participant's vested interest in his
Separate Account through the purchase of an annuity contract that provides for
payment over the life of the Participant's spouse. A Participant's spouse may
elect to receive distribution under any one of the other forms of payment
available under this Article instead of in the qualified preretirement survivor
annuity form. A Participant can only designate a non-spouse Beneficiary to
receive distribution of that portion of his Separate Account otherwise payable
as a qualified preretirement survivor annuity pursuant to a qualified election.
16.7. Direct Rollover
Notwithstanding any other provision of the Plan to the contrary, in lieu of
receiving distribution in the form of payment provided under this Article, a
"qualified distributee" may elect in writing, in accordance with rules
prescribed by the Administrator, to have any portion or all of a distribution
made on or after January 1, 1993, that is an "eligible rollover distribution"
paid directly by the Plan to the "eligible retirement plan" designated by the
"qualified distributee"; provided, however, that this provision shall not apply
if the total distribution is less than $200 and that a "qualified distributee"
may not elect this provision with respect to a portion of a distribution that is
less than $500. Any such payment by the Plan to another "eligible retirement
(45)
<PAGE>
plan" shall be a direct rollover and shall be made only after all applicable
consent requirements are satisfied. For purposes of this Section, the following
terms have the following meanings:
(a) An "eligible retirement plan" means an individual retirement account
described in Section 408(a) of the Code, an individual retirement annuity
described in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in Section
401(a) of the Code that accepts rollovers; provided, however, that, in the
case of a direct rollover by a surviving spouse, an eligible retirement
plan does not include a qualified trust described in Section 401(a) of the
Code.
(b) An "eligible rollover distribution" means any distribution of all or any
portion of the balance of a Participant's Separate Account; provided,
however, that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic
payments made not less frequently than annually for the life or life
expectancy of the qualified distributee or the joint lives or joint life
expectancies of the qualified distributee and the qualified distributee's
designated beneficiary, or for a specified period of ten years or more; and
any distribution to the extent such distribution is required under Section
401(a)(9) of the Code.
(c) A "qualified distributee" means a Participant, his surviving spouse, or his
spouse or former spouse who is an alternate payee under a qualified
domestic relations order, as defined in Section 414(p) of the Code.
16.8. Notice Regarding Forms of Payment
The Administrator shall provide each Participant with a written explanation of
his right to defer distribution until his Normal Retirement Date, or such later
date as may be provided in the Plan, his right to make a direct rollover, and
(i) the terms and conditions of the automatic annuity form and the other forms
of payment available under the Plan, (ii) the Participant's right to choose a
form of payment other than the automatic annuity form or to revoke such choice,
and (iii) the rights of the Participant's spouse. The Administrator shall
provide such explanation within the 60 day period ending 30 days before the
Participant's annuity starting date. Notwithstanding the foregoing,
distribution of the Participant's Separate Account may commence less than 30
days after such explanation is provided to the Participant if (i) the
Administrator clearly informs the Participant of his right to consider his
election of whether or not to make a direct rollover or to receive a
distribution prior to his Normal Retirement Date and his election of a form of
payment for a period of at least 30 days following his receipt of the
explanation, (ii) the Participant, after receiving the explanation,
affirmatively elects an early distribution with his spouse's written consent, if
necessary, (iii) the Participant's annuity starting date is a date after the
date the explanation is provided to him, (iv) the Participant may revoke his
election at any time prior to the later of his annuity starting date or the
expiration of the seven-day period beginning the day after the date the
explanation is provided to him, and (v) distribution does not commence to the
Participant before such revocation period ends.
In addition, the Administrator shall provide such a Participant with a written
explanation of (i) the terms and conditions of the qualified preretirement
survivor annuity, (ii) the Participant's
(46)
<PAGE>
right to designate a non-spouse Beneficiary to receive distribution of that
portion of his Separate Account otherwise payable as a qualified preretirement
survivor annuity or to revoke such designation, and (iii) the rights of the
Participant's spouse. The Administrator shall provide such explanation within
one of the following periods, whichever ends last:
(a) the period beginning with the first day of the Plan Year in which the
Participant attains age 32 and ending on the last day of the Plan Year
preceding the Plan Year in which the Participant attains age 35; or
(b) the period beginning 12 calendar months before the date an individual
becomes a Participant and ending 12 calendar months after such date;
provided, however, that in the case of a Participant who separates from service
prior to attaining age 35, the explanation shall be provided to such Participant
within the period beginning 12 calendar months before the Participant's
separation from service and ending 12 calendar months after his separation from
service.
16.9. Reemployment
If a Participant is reemployed by an Employer or a Related Company prior to
receiving distribution of the entire balance of his vested interest in his
Separate Account, his prior election of a form of payment hereunder shall become
ineffective.
16.10. Distribution in the Form of Employer Stock
Notwithstanding any other provision of the Plan to the contrary, a Participant
may elect to receive distribution of the fair market value of his Separate
Account in the form of Employer stock.
(47)
<PAGE>
ARTICLE XVII
BENEFICIARIES
17.1. Designation of Beneficiary
A married Participant's Beneficiary shall be his spouse. A married Participant
may designate a non-spouse Beneficiary, but only pursuant to a qualified
election as provided in Article XVI.
A Participant may designate a Beneficiary on the form prescribed by the
Administrator. If no Beneficiary has been designated pursuant to the provisions
of this Section, or if no Beneficiary survives the Participant and he has no
surviving spouse, then the Beneficiary under the Plan shall be the Participant's
estate. If a Beneficiary dies after becoming entitled to receive a distribution
under the Plan but before distribution is made to him in full, and if no other
Beneficiary has been designated to receive the balance of the distribution in
that event, the estate of the deceased Beneficiary shall be the Beneficiary as
to the balance of the distribution.
(48)
<PAGE>
ARTICLE XVIII
ADMINISTRATION
18.1. Authority of the Sponsor
The Sponsor, which shall be the administrator for purposes of ERISA and the plan
administrator for purposes of the Code, shall be responsible for the
administration of the Plan and, in addition to the powers and authorities
expressly conferred upon it in the Plan, shall have all such powers and
authorities as may be necessary to carry out the provisions of the Plan,
including the power and authority to interpret and construe the provisions of
the Plan, to make benefit determinations, and to resolve any disputes which
arise under the Plan. The Sponsor may employ such attorneys, agents, and
accountants as it may deem necessary or advisable to assist in carrying out its
duties hereunder. The Sponsor shall be a "named fiduciary" as that term is
defined in Section 402(a)(2) of ERISA. The Sponsor may:
(a) allocate any of the powers, authority, or responsibilities for the
operation and administration of the Plan (other than trustee
responsibilities as defined in Section 405(c)(3) of ERISA) among named
fiduciaries; and
(b) designate a person or persons other than a named fiduciary to carry out any
of such powers, authority, or responsibilities;
except that no allocation by the Sponsor of, or designation by the Sponsor with
respect to, any of such powers, authority, or responsibilities to another named
fiduciary or a person other than a named fiduciary shall become effective unless
such allocation or designation shall first be accepted by such named fiduciary
or other person in a writing signed by it and delivered to the Sponsor.
18.2. Action of the Sponsor
Any act authorized, permitted, or required to be taken under the Plan by the
Sponsor and which has not been delegated in accordance with Section 18.1, may be
taken by a majority of the members of the board of directors of the Sponsor,
either by vote at a meeting, or in writing without a meeting, or by the employee
or employees of the Sponsor designated by the board of directors to carry out
such acts on behalf of the Sponsor. All notices, advice, directions,
certifications, approvals, and instructions required or authorized to be given
by the Sponsor as under the Plan shall be in writing and signed by either (i) a
majority of the members of the board of directors of the Sponsor or by such
member or members as may be designated by an instrument in writing, signed by
all the members thereof, as having authority to execute such documents on its
behalf, or (ii) the employee or employees authorized to act for the Sponsor in
accordance with the provisions of this Section.
18.3. Claims Review Procedure
Whenever a claim for benefits under the Plan filed by any person (herein
referred to as the "Claimant") is denied, whether in whole or in part, the
Sponsor shall transmit a written notice of
(49)
<PAGE>
such decision to the Claimant within 90 days of the date the claim was filed or,
if special circumstances require an extension, within 180 days of such date,
which notice shall be written in a manner calculated to be understood by the
Claimant and shall contain a statement of (i) the specific reasons for the
denial of the claim, (ii) specific reference to pertinent Plan provisions on
which the denial is based, and (iii) a description of any additional material or
information necessary for the Claimant to perfect the claim and an explanation
of why such information is necessary. The notice shall also include a statement
advising the Claimant that, within 60 days of the date on which he receives such
notice, he may obtain review of such decision in accordance with the procedures
hereinafter set forth. Within such 60-day period, the Claimant or his authorized
representative may request that the claim denial be reviewed by filing with the
Sponsor a written request therefor, which request shall contain the following
information:
(a) the date on which the Claimant's request was filed with the Sponsor;
provided, however, that the date on which the Claimant's request for review
was in fact filed with the Sponsor shall control in the event that the date
of the actual filing is later than the date stated by the Claimant pursuant
to this paragraph;
(b) the specific portions of the denial of his claim which the Claimant
requests the Sponsor to review;
(c) a statement by the Claimant setting forth the basis upon which he believes
the Sponsor should reverse the previous denial of his claim for benefits
and accept his claim as made; and
(d) any written material (offered as exhibits) which the Claimant desires the
Sponsor to examine in its consideration of his position as stated pursuant
to paragraph (c) of this Section.
Within 60 days of the date determined pursuant to paragraph (a of this Section
or, if special circumstances require an extension, within 120 days of such date,
the Sponsor shall conduct a full and fair review of the decision denying the
Claimant's claim for benefits and shall render its written decision on review to
the Claimant. The Sponsor's decision on review shall be written in a manner
calculated to be understood by the Claimant and shall specify the reasons and
Plan provisions upon which the Sponsor's decision was based.
18.4. Qualified Domestic Relations Orders
The Sponsor shall establish reasonable procedures to determine the status of
domestic relations orders and to administer distributions under domestic
relations orders which are deemed to be qualified orders. Such procedures shall
be in writing and shall comply with the provisions of Section 414(p) of the Code
and regulations issued thereunder.
18.5. Indemnification
In addition to whatever rights of indemnification the members of the board of
directors of the Sponsor or any employee or employees of the Sponsor to whom any
power, authority, or
(50)
<PAGE>
responsibility is delegated pursuant to Section 18.2, may be entitled under the
articles of incorporation or regulations of the Sponsor, under any provision of
law, or under any other agreement, the Sponsor shall satisfy any liability
actually and reasonably incurred by any such person or persons, including
expenses, attorneys' fees, judgments, fines, and amounts paid in settlement
(other than amounts paid in settlement not approved by the Sponsor), in
connection with any threatened, pending or completed action, suit, or proceeding
which is related to the exercising or failure to exercise by such person or
persons of any of the powers, authority, responsibilities, or discretion as
provided under the Plan, or reasonably believed by such person or persons to be
provided hereunder, and any action taken by such person or persons in connection
therewith, unless the same is judicially determined to be the result of such
person or persons' gross negligence or willful misconduct.
18.6. Actions Binding
Subject to the provisions of Section 18.3, any action taken by the Sponsor which
is authorized, permitted, or required under the Plan shall be final and binding
upon the Employers, the Trustee, all persons who have or who claim an interest
under the Plan, and all third parties dealing with the Employers or the Trustee.
(51)
<PAGE>
ARTICLE XIX
AMENDMENT AND TERMINATION
19.1. Amendment
Subject to the provisions of Section 19.2, the Sponsor may at any time and from
time to time, by action of its board of directors, or such officers of the
Sponsor as are authorized by its board of directors, amend the Plan, either
prospectively or retroactively. Any such amendment shall be by written
instrument executed by the Sponsor.
19.2. Limitation on Amendment
The Sponsor shall make no amendment to the Plan which shall decrease the accrued
benefit of any Participant or Beneficiary, except that nothing contained herein
shall restrict the right to amend the provisions of the Plan relating to the
administration of the Plan and Trust. Moreover, no such amendment shall be made
hereunder which shall permit any part of the Trust to revert to an Employer or
any Related Company or be used or be diverted to purposes other than the
exclusive benefit of Participants and Beneficiaries.
19.3. Termination
The Sponsor reserves the right, by action of its board of directors, to
terminate the Plan as to all Employers at any time (the effective date of such
termination being hereinafter referred to as the "termination date"). Upon any
such termination of the Plan, the following actions shall be taken for the
benefit of Participants and Beneficiaries:
(a) As of the termination date, each Investment Fund shall be valued and all
Separate Accounts and Sub-Accounts shall be adjusted in the manner provided
in Article XI, with any unallocated contributions or forfeitures being
allocated as of the termination date in the manner otherwise provided in
the Plan. The termination date shall become a Valuation Date for purposes
of Article XI. In determining the net worth of the Trust, there shall be
included as a liability such amounts as shall be necessary to pay all
expenses in connection with the termination of the Trust and the
liquidation and distribution of the property of the Trust, as well as other
expenses, whether or not accrued, and shall include as an asset all accrued
income.
(b) All Separate Accounts shall then be disposed of to or for the benefit of
each Participant or Beneficiary in accordance with the provisions of
Article XV as if the termination date were his Settlement Date; provided,
however, that notwithstanding the provisions of Article XV, if the Plan
does not offer an annuity option and if neither his Employer nor a Related
Company establishes or maintains another defined contribution plan (other
than an employee stock ownership plan as defined in Section 4975(e)(7) of
the Code), the Participant's written consent to the commencement of
distribution shall not be required regardless of the value of the vested
portions of his Separate Account.
(52)
<PAGE>
(c) Notwithstanding the provisions of paragraph (b) of this Section, no
distribution shall be made to a Participant of any portion of the balance
of his Tax-Deferred Contributions Sub-Account prior to his separation from
service (other than a distribution made in accordance with Article XIII or
required in accordance with Section 401(a)(9) of the Code) unless (i)
neither his Employer nor a Related Company establishes or maintains another
defined contribution plan other than an employee stock ownership plan as
defined in Section 4975(e)(7) of the Code, a tax credit employee stock
ownership plan as defined in Section 409 of the Code, or a simplified
employee pension as defined in Section 408(k) of the Code) either at the
time the Plan is terminated or at any time during the period ending 12
months after distribution of all assets from the Plan; provided, however,
that this provision shall not apply if fewer than two percent of the
Eligible Employees under the Plan were eligible to participate at any time
in such other defined contribution plan during the 24-month period
beginning 12 months before the Plan termination, and (ii) the distribution
the Participant receives is a "lump sum distribution" as defined in Section
402(e)(4) of the Code, without regard to clauses (i), (ii), (iii), and (iv)
of sub-paragraph (A), sub-paragraph (B), or sub-paragraph (H) thereof.
Notwithstanding anything to the contrary contained in the Plan, upon any such
Plan termination, the vested interest of each Participant and Beneficiary in his
Employer Contributions Sub-Account shall be 100 percent; and, if there is a
partial termination of the Plan, the vested interest of each Participant and
Beneficiary who is affected by the partial termination in his Employer
Contributions Sub-Account shall be 100 percent. For purposes of the preceding
sentence only, the Plan shall be deemed to terminate automatically if there
shall be a complete discontinuance of contributions hereunder by all Employers.
19.4. Reorganization
The merger, consolidation, or liquidation of any Employer with or into any other
Employer or a Related Company shall not constitute a termination of the Plan as
to such Employer. If an Employer disposes of substantially all of the assets
used by the Employer in a trade or business or disposes of a subsidiary and in
connection therewith one or more Participants terminates employment but
continues in employment with the purchaser of the assets or with such
subsidiary, no distribution from the Plan shall be made to any such Participant
prior to his separation from service (other than a distribution made in
accordance with Article XIII or required in accordance with Section 401(a)(9) of
the Code), except that a distribution shall be permitted to be made in such a
case, subject to the Participant's consent (to the extent required by law), if
(i) the distribution would constitute a "lump sum distribution" as defined in
section 402(e)(4) of the Code, without regard to clauses (i), (ii), (iii), or
(iv) of sub-paragraph (A), sub-paragraph (B), or sub-paragraph (H) thereof, (ii)
the Employer continues to maintain the Plan after the disposition, (iii) the
purchaser does not maintain the Plan after the disposition, and (iv) the
distribution is made by the end of the second calendar year after the calendar
year in which the disposition occurred.
(53)
<PAGE>
19.5. Withdrawal of an Employer
An Employer other than the Sponsor may withdraw from the Plan at any time upon
notice in writing to the Administrator (the effective date of such withdrawal
being hereinafter referred to as the "withdrawal date"), and shall thereupon
cease to be an Employer for all purposes of the Plan. An Employer shall be
deemed automatically to withdraw from the Plan in the event of its complete
discontinuance of contributions, or, subject to Section 19.4 and unless the
Sponsor otherwise directs, it ceases to be a Related Company of the Sponsor or
any other Employer. Upon the withdrawal of an Employer, the withdrawing
Employer shall determine whether a partial termination has occurred with respect
to its Employees. In the event that the withdrawing Employer determines a
partial termination has occurred, the action specified in Section 19.3 shall be
taken as of the withdrawal date, as on a termination of the Plan, but with
respect only to Participants who are employed solely by the withdrawing
Employer, and who, upon such withdrawal, are neither transferred to nor
continued in employment with any other Employer or a Related Company. The
interest of any Participant employed by the withdrawing Employer who is
transferred to or continues in employment with any other Employer or a Related
Company, and the interest of any Participant employed solely by an Employer or a
Related Company other than the withdrawing Employer, shall remain unaffected by
such withdrawal; no adjustment to his Separate Accounts shall be made by reason
of the withdrawal; and he shall continue as a Participant hereunder subject to
the remaining provisions of the Plan.
(54)
<PAGE>
ARTICLE XX
ADOPTION BY OTHER ENTITIES
20.1. Adoption by Related Companies
A Related Company that is not an Employer may, with the consent of the Sponsor,
adopt the Plan and become an Employer hereunder by causing an appropriate
written instrument evidencing such adoption to be executed in accordance with
the requirements of its organizational authority. Any such instrument shall
specify the effective date of the adoption.
20.2. Effective Plan Provisions
An Employer who adopts the Plan shall be bound by the provisions of the Plan in
effect at the time of the adoption and as subsequently in effect because of any
amendment to the Plan.
(55)
<PAGE>
ARTICLE XXI
MISCELLANEOUS PROVISIONS
21.1. No Commitment as to Employment
Nothing contained herein shall be construed as a commitment or agreement upon
the part of any person to continue his employment with an Employer or Related
Company, or as a commitment on the part of any Employer or Related Company to
continue the employment, compensation, or benefits of any person for any period.
21.2. Benefits
Nothing in the Plan nor the Trust Agreement shall be construed to confer any
right or claim upon any person, firm, or corporation other than the Employers,
the Trustee, Participants, and Beneficiaries.
21.3. No Guarantees
The Employers, the Administrator, and the Trustee do not guarantee the Trust
from loss or depreciation, nor do they guarantee the payment of any amount which
may become due to any person hereunder.
21.4. Expenses
The expenses of administration of the Plan, including the expenses of the
Administrator and fees of the Trustee, shall be paid from the Trust as a general
charge thereon, unless the Sponsor elects to make payment. Notwithstanding the
foregoing, the Sponsor may direct that administrative expenses that are
allocable to the Separate Account of a specific Participant shall be paid from
that Separate Account and the costs incident to the management of the assets of
an Investment Fund or to the purchase or sale of securities held in an
Investment Fund shall be paid by the Trustee from such Investment Fund.
21.5. Precedent
Except as otherwise specifically provided, no action taken in accordance with
the Plan shall be construed or relied upon as a precedent for similar action
under similar circumstances.
21.6. Duty to Furnish Information
The Employers, the Administrator, and the Trustee shall furnish to any of the
others any documents, reports, returns, statements, or other information that
the other reasonably deems necessary to perform its duties hereunder or
otherwise imposed by law.
(56)
<PAGE>
21.7. Withholding
The Trustee shall withhold any tax which by any present or future law is
required to be withheld, and which the Administrator notifies the Trustee in
writing is to be so withheld, from any payment to any Participant or Beneficiary
hereunder.
21.8. Merger, Consolidation, or Transfer of Plan Assets
The Plan shall not be merged or consolidated with any other plan, nor shall any
of its assets or liabilities be transferred to another plan, unless, immediately
after such merger, consolidation, or transfer of assets or liabilities, each
Participant in the Plan would receive a benefit under the Plan which is at least
equal to the benefit he would have received immediately prior to such merger,
consolidation, or transfer of assets or liabilities (assuming in each instance
that the Plan had then terminated).
21.9. Back Pay Awards
The provisions of this Section shall apply only to an Employee or former
Employee who becomes entitled to back pay by an award or agreement of an
Employer without regard to mitigation of damages. If a person to whom this
Section applies was or would have become an Eligible Employee after such back
pay award or agreement has been effected, and if any such person who had not
previously elected to make Tax-Deferred Contributions pursuant to Section 4.1
shall within 30 days of the date he receives notice of the provisions of this
Section make an election to make Tax-Deferred Contributions in accordance with
such Section 4.1 (retroactive to any Enrollment Date as of which he was or has
become eligible to do so), then such Participant may elect that any Tax-Deferred
Contributions not previously made on his behalf but which, after application of
the foregoing provisions of this Section, would have been made under the
provisions of Article IV, shall be made out of the proceeds of such back pay
award or agreement. In addition, if any such Employee or former Employee would
have been eligible to participate in the allocation of Employer Contributions
under the provisions of Article VI for any prior Plan Year after such back pay
award or agreement has been effected, his Employer shall make an Employer
Contribution equal to the amount of the Employer Contribution which would have
been allocated to such Participant under the provisions of Article VI as in
effect during each such Plan Year. The amounts of such additional contributions
shall be credited to the Separate Account of such Participant. Any additional
contributions made by such Participant and by an Employer pursuant to this
Section shall be made in accordance with, and subject to the limitations of the
applicable provisions of Articles IV, VI, and VII.
21.10. Condition on Employer Contributions
Notwithstanding anything to the contrary contained in the Plan or the Trust
Agreement, any contribution of an Employer hereunder is conditioned upon the
continued qualification of the Plan under Section 401(a) of the Code, the exempt
status of the Trust under Section 501(a) of the Code, and the deductibility of
the contribution under Section 404 of the Code. Except as otherwise provided in
this Section and Section 21.11, however, in no event shall any portion of
(57)
<PAGE>
the property of the Trust ever revert to or otherwise inure to the benefit of an
Employer or any Related Company.
21.11. Return of Contributions to an Employer
Notwithstanding any other provision of the Plan or the Trust Agreement to the
contrary, in the event any contribution of an Employer made hereunder:
(a) is made under a mistake of fact, or
(b) is disallowed as a deduction under Section 404 of the Code,
such contribution may be returned to the Employer within one year after the
payment of the contribution or the disallowance of the deduction to the extent
disallowed, whichever is applicable. In the event the Plan does not initially
qualify under Section 401(a) of the Code, any contribution of an Employer made
hereunder may be returned to the Employer within one year of the date of denial
of the initial qualification of the Plan, but only if an application for
determination was made within the period of time prescribed under Section
403(c)(2)(B) of ERISA.
21.12. Validity of Plan
The validity of the Plan shall be determined and the Plan shall be construed and
interpreted in accordance with the laws of the State of Commonwealth in which
the Sponsor has its principal place of business, except as preempted by
applicable Federal law. The invalidity or illegality of any provision of the
Plan shall not affect the legality or validity of any other part thereof.
21.13. Trust Agreement
The Trust Agreement and the Trust maintained thereunder shall be deemed to be a
part of the Plan as if fully set forth herein and the provisions of the Trust
Agreement are hereby incorporated by reference into the Plan.
21.14. Parties Bound
The Plan shall be binding upon the Employers, all Participants and Beneficiaries
hereunder, and, as the case may be, the heirs, executors, administrators,
successors, and assigns of each of them.
21.15. Application of Certain Plan Provisions
A Participant's Beneficiary, if the Participant has died, or alternate payee
under a qualified domestic relations order shall be treated as a Participant for
purposes of directing investments as provided in Article X. For purposes of the
general administrative provisions and limitations of the Plan, a Participant's
Beneficiary or alternate payee under a qualified domestic relations order shall
be treated as any other person entitled to receive benefits under the Plan. Upon
any termination of the Plan, any such Beneficiary or alternate payee under a
qualified domestic
(58)
<PAGE>
relations order who has an interest under the Plan at the time of such
termination, which does not cease by reason thereof, shall be deemed to be a
Participant for all purposes of the Plan.
21.16. Leased Employees
Any leased employee, other than an excludable leased employee, shall be treated
as an employee of the Employer for which he performs services for all purposes
of the Plan; provided, however, that contributions to a qualified plan made on
behalf of a leased employee by the leasing organization that are attributable to
services for the Employer shall be treated as having been made by the Employer
and there shall be no duplication of benefits under this Plan. A "leased
employee" means any person who performs services for an Employer or a Related
Company (the "recipient") (other than an employee of the recipient) pursuant to
an agreement between the recipient and any other person (the "leasing
organization") on a substantially full-time basis for a period of at least one
year, provided that such services are of a type historically performed, in the
business field of the recipient, by employees. An "excludable leased employee"
means any leased employee of the recipient who is covered by a money purchase
pension plan maintained by the leasing organization which provides for (i) a
nonintegrated employer contribution on behalf of each participant in the plan
equal to at least ten percent of compensation, (ii) full and immediate vesting,
and (iii) immediate participation by employees of the leasing organization
(other than employees who perform substantially all of their services for the
leasing organization or whose compensation from the leasing organization in each
plan year during the four-year period ending with the plan year is less than
$1,000); provided, however, that leased employees do not constitute more than 20
percent of the recipient's nonhighly compensated work force. For purposes of
this Section, contributions or benefits provided to a leased employee by the
leasing organization that are attributable to services performed for the
recipient shall be treated as provided by the recipient.
21.17. Transferred Funds
If funds from another qualified plan are transferred or merged into the Plan,
such funds shall be held and administered in accordance with any restrictions
applicable to them under such other plan to the extent required by law and shall
be accounted for separately to the extent necessary to accomplish the foregoing.
(59)
<PAGE>
ARTICLE XXII
TOP-HEAVY PROVISIONS
22.1. Definitions
For purposes of this Article, the following terms shall have the following
meanings:
(a) The "compensation" of an employee means compensation as defined in Section
415 of the Code and regulations issued thereunder. In no event, however,
shall the compensation of a Participant taken into account under the Plan
for any Plan Year exceed (1) $200,000 for Plan Years beginning prior to
January 1, 1994, or (2) $150,000 for Plan Years beginning on or after
January 1, 1994 (subject to adjustment annually as provided in Section
401(a)(17)(B) and Section 415(d) of the Code; provided, however, that the
dollar increase in effect on January 1 of any calendar year, if any, is
effective for Plan Years beginning in such calendar year). If the
compensation of a Participant is determined over a period of time that
contains fewer than 12 calendar months, then the annual compensation
limitation described above shall be adjusted with respect to that
Participant by multiplying the annual compensation limitation in effect for
the Plan Year by a fraction the numerator of which is the number of full
months in the period and the denominator of which is 12; provided, however,
that no proration is required for a Participant who is covered under the
Plan for less than one full Plan Year if the formula for allocations is
based on Compensation for a period of at least 12 months. In determining
the compensation, for purposes of applying the annual compensation
limitation described above, of a Participant who is a five-percent owner or
one of the ten Highly Compensated Employees receiving the greatest
compensation for the Plan Year, the compensation of the Participant's
spouse and of his lineal descendants who have not attained age 19 as of the
close of the Plan Year shall be included as compensation of the Participant
for the Plan Year. If as a result of applying the family aggregation rule
described in the preceding sentence the annual compensation limitation
would be exceeded, the limitation shall be prorated among the affected
family members in proportion to each member's compensation as determined
prior to application of the family aggregation rules.
(b) The "determination date" with respect to any Plan Year means the last day
of the preceding Plan Year, except that the determination date with respect
to the first Plan Year of the Plan, shall mean the last day of such Plan
Year.
(c) A "key employee" means any Employee or former Employee who is a key
employee pursuant to the provisions of Section 416(i)(1) of the Code and
any Beneficiary of such Employee or former Employee.
(d) A "non-key employee" means any Employee who is not a key employee.
(e) A "permissive aggregation group" means those plans included in each
Employer's required aggregation group together with any other plan or plans
of the Employer, so long
(60)
<PAGE>
as the entire group of plans would continue to meet the requirements of
Sections 401(a)(4) and 410 of the Code.
(f) A "required aggregation group" means the group of tax-qualified plans
maintained by an Employer or a Related Company consisting of each plan in
which a key employee participates and each other plan that enables a plan
in which a key employee participates to meet the requirements of Section
401(a)(4) or Section 410 of the Code, including any plan that terminated
within the five-year period ending on the relevant determination date.
(g) A "super top-heavy group" with respect to a particular Plan Year means a
required or permissive aggregation group that, as of the determination
date, would qualify as a top-heavy group under the definition in paragraph
(i) of this Section with "90 percent" substituted for "60 percent" each
place where "60 percent" appears in the definition.
(h) A "super top-heavy plan" with respect to a particular Plan Year means a
plan that, as of the determination date, would qualify as a top-heavy plan
under the definition in paragraph (j) of this Section with "90 percent"
substituted for "60 percent" each place where "60 percent" appears in the
definition. A plan is also a "super top-heavy plan" if it is part of a
super top-heavy group.
(i) A "top-heavy group" with respect to a particular Plan Year means a required
or permissive aggregation group if the sum, as of the determination date,
of the present value of the cumulative accrued benefits for key employees
under all defined benefit plans included in such group and the aggregate of
the account balances of key employees under all defined contribution plans
included in such group exceeds 60 percent of a similar sum determined for
all employees covered by the plans included in such group.
(j) A "top-heavy plan" with respect to a particular Plan Year means (i), in the
case of a defined contribution plan (including any simplified employee
pension plan), a plan for which, as of the determination date, the
aggregate of the accounts (within the meaning of Section 416(g) of the Code
and the regulations and rulings thereunder) of key employees exceeds 60
percent of the aggregate of the accounts of all participants under the
plan, with the accounts valued as of the relevant valuation date and
increased for any distribution of an account balance made in the five-year
period ending on the determination date, (ii), in the case of a defined
benefit plan, a plan for which, as of the determination date, the present
value of the cumulative accrued benefits payable under the plan (within the
meaning of Section 416(g) of the Code and the regulations and rulings
thereunder) to key employees exceeds 60 percent of the present value of the
cumulative accrued benefits under the plan for all employees, with the
present value of accrued benefits to be determined under the accrual method
uniformly used under all plans maintained by an Employer or, if no such
method exists, under the slowest accrual method permitted under the
fractional accrual rate of Section 411(b)(1)(C) of the Code and including
the present value of any part of any accrued benefits distributed in the
five-year period ending on the determination date, and (iii) any plan
(including any simplified
(61)
<PAGE>
employee pension plan) included in a required aggregation group that is a
top-heavy group. For purposes of this paragraph, the accounts and accrued
benefits of any employee who has not performed services for an Employer or
a Related Company during the five-year period ending on the determination
date shall be disregarded. For purposes of this paragraph, the present
value of cumulative accrued benefits under a defined benefit plan for
purposes of top-heavy determinations shall be calculated using the
actuarial assumptions otherwise employed under such plan, except that the
same actuarial assumptions shall be used for all plans within a required or
permissive aggregation group. A Participant's interest in the Plan
attributable to any Rollover Contributions, except Rollover Contributions
made from a plan maintained by an Employer or a Related Company, shall not
be considered in determining whether the Plan is top-heavy. Notwithstanding
the foregoing, if a plan is included in a required or permissive
aggregation group that is not a top-heavy group, such plan shall not be a
top-heavy plan.
(k) The "valuation date" with respect to any determination date means the most
recent Valuation Date occurring within the 12-month period ending on the
determination date.
22.2. Applicability
Notwithstanding any other provision of the Plan to the contrary, the provisions
of this Article shall be applicable during any Plan Year in which the Plan is
determined to be a top-heavy plan as hereinafter defined.
22.3. Minimum Employer Contribution
If the Plan is determined to be a top-heavy plan, the Employer Contributions
allocated to the Separate Account of each non-key employee who is an Eligible
Employee and who is employed by an Employer or a Related Company on the last day
of such top-heavy Plan Year shall be no less than the lesser of (i) three
percent of his compensation or (ii) the largest percentage of compensation that
is allocated as an Employer Contribution and/or Tax-Deferred Contribution for
such Plan Year to the Separate Account of any key employee; except that, in the
event the Plan is part of a required aggregation group, and the Plan enables a
defined benefit plan included in such group to meet the requirements of Section
401(a)(4) or 410 of the Code, the minimum allocation of Employer Contributions
to each such non-key employee shall be three percent of the compensation of such
non-key employee. Any minimum allocation to a non-key employee required by this
Section shall be made without regard to any social security contribution made on
behalf of the non-key employee, his number of hours of service, his level of
compensation, or whether he declined to make elective or mandatory
contributions. Notwithstanding the minimum top-heavy allocation requirements of
this Section, if the Plan is a top-heavy plan, each non-key employee who is an
Eligible Employee and who is employed by an Employer or a Related Company on the
last day of a top-heavy Plan Year and who is also covered under a top-heavy
defined benefit plan maintained by an Employer or a Related Company will receive
the top-heavy benefits provided under the defined benefit plan in lieu of the
minimum top-heavy allocation under the Plan offset by the benefits provided
under the Plan.
(62)
<PAGE>
22.4. Adjustments to Section 415 Limitations
If the Plan is determined to be a top-heavy plan and an Employer maintains a
defined benefit plan covering some or all of the Employees that are covered by
the Plan, the defined benefit plan fraction and the defined contribution plan
fraction, described in Article VII, shall be determined as provided in Section
415 of the Code by substituting "1.0" for "1.25" each place where "1.25"
appears, except that such substitutions shall not be applied to the Plan if (i)
the Plan is not a super top-heavy plan, (ii) the Employer Contribution for such
top-heavy Plan Year for each non-key employee who is to receive a minimum top-
heavy benefit hereunder is not less than four percent of such non-key employee's
compensation, and (iii) the minimum annual retirement benefit accrued by a non-
key employee who participates under one or more defined benefit plans of an
Employer or a Related Company for such top-heavy Plan Year is not less than the
lesser of three percent times years of service with an Employer or a Related
Company or thirty percent.
(63)
<PAGE>
ARTICLE XXIII
EFFECTIVE DATE
23.1. Effective Date of Amendment and Restatement
This amendment and restatement is effective as of July 1, 1996.
EXECUTED AT , this day of , 1997.
------------------------- ----- -------
ALPHA INDUSTRIES, INC.
By:
------------------------
Title:
(64)
<PAGE>
EXHIBIT (10)(o)
August 23, 1996
Paul Vincent
10 Leary Drive
Tewksbury MA 01876
Re: Change in Control Agreement
Dear Paul:
This letter is to confirm the agreement that we reached with regard to your
employment with Alpha Industries, Inc. ("Alpha"). If: (i) a Change in Control
occurs within two years of the date of this letter, and (ii) your employment
with Alpha or a subsidiary of Alpha is involuntarily terminated within one year
thereafter, then Alpha will pay you up to one year of salary continuation in
accordance with the terms and conditions of this letter.
A "Change in Control" shall be deemed to have occurred if the Continuing
Directors shall have ceased for any reason to constitute a majority of the Board
of Directors of Alpha. For this purpose, a "Continuing Director" shall include
any member of the Board of Directors of Alpha as of the date of this letter and
any person nominated for election to the Board of Directors of Alpha by a
majority of the then Continuing Directors.
Salary continuation payments under this letter will be reduced by the amount of
any compensation that you receive from any person for services rendered during
the salary continuation period. For any period in which you either: (i) engage
in activities or enterprises (on behalf of yourself or others) that are directly
competitive with any business activity of Alpha Industries, Inc. or any of its
subsidiaries, or (ii) fail to actively seek gainful employment, you will not
receive any salary continuation payments.
Please sign both copies of this letter and return it to Jim Nemiah. If you have
any questions, please feel free to call Jim or George LeVan.
Sincerely,
-----------------------------------
AGREED TO:
---------------------------------
David J. Aldrich Date:
Vice President ----------------------------
-----------------------------------
<PAGE>
EXHIBIT (10)(p)
August 23, 1996
James Nemiah
295 Concord Road
Bedford MA 01730
Re: Change in Control Agreement
Dear Jim:
This letter is to confirm the agreement that we reached with regard to your
employment with Alpha Industries, Inc. ("Alpha"). If: (i) a Change in Control
occurs within two years of the date of this letter, and (ii) your employment
with Alpha or a subsidiary of Alpha is involuntarily terminated within one year
thereafter, then Alpha will pay you up to one year of salary continuation in
accordance with the terms and conditions of this letter.
A "Change in Control" shall be deemed to have occurred if the Continuing
Directors shall have ceased for any reason to constitute a majority of the Board
of Directors of Alpha. For this purpose, a "Continuing Director" shall include
any member of the Board of Directors of Alpha as of the date of this letter and
any person nominated for election to the Board of Directors of Alpha by a
majority of the then Continuing Directors.
Salary continuation payments under this letter will be reduced by the amount of
any compensation that you receive from any person for services rendered during
the salary continuation period. For any period in which you either: (i) engage
in activities or enterprises (on behalf of yourself or others) that are directly
competitive with any business activity of Alpha Industries, Inc. or any of its
subsidiaries, or (ii) fail to actively seek gainful employment, you will not
receive any salary continuation payments.
Please sign both copies of this letter and return it to Jim Nemiah. If you have
any questions, please feel free to call Jim or George Levan.
Sincerely,
----------------------------------
AGREED TO:
----------------------------------
David J. Aldrich Date:
Vice President ----------------------------
----------------------------------
<PAGE>
EXHIBIT (10)(q)
April 30, 1996
Jean-Pierre Gillard
393 Bedford Road
Carlisle MA 01741
Re: Change in Control Agreement
Dear J.P.:
This letter is to confirm the agreement that we reached with regard to your
employment with Alpha Industries, Inc. (the "Company").
1. If: (i) a Change in Control occurs within two years of the date of this
letter, and (ii) your employment with the Company is voluntarily or
involuntarily terminated within one year thereafter, then the Company will
pay you up to one year of salary continuation in accordance with the terms
and conditions of this letter.
2. A "Change in Control" shall be deemed to have occurred if the Continuing
Directors shall have ceased for any reason to constitute a majority of the
Board of Directors of the Company. For this purpose, a "Continuing Director"
shall include any member of the Board of Directors of the Company as of the
date of this letter and any person nominated for election to the Board of
Directors of the Company by a majority of the then Continuing Directors.
3. If your employment with the Company is involuntarily terminated within two
years of the date of this letter without Cause, then the Company will pay
you up to one year of salary continuation in accordance with the terms and
conditions of this letter.
4. "Cause" shall mean: (a) deliberate dishonesty detrimental to the best
interests of the Company or any subsidiary, or (b) conduct constituting
moral turpitude, or (c) willful disloyalty to the Company or your refusal or
failure to obey the directions of your immediate supervisor or the Chief
Executive Officer of the Company, or (d) incompetent performance or
substantial or continuing inattention to or neglect of duties and
responsibilities assigned to you.
<PAGE>
Alpha Industries, Inc.
April 30, 1996
Page 2
5. Salary continuation payments under this letter will be reduced by the amount
of any compensation that you receive from any person for services rendered
during the salary continuation period. For any period in which you either:
(i) engage in activities or enterprises (on behalf of yourself or others)
that are directly competitive with any business activity of Alpha
Industries, Inc. or any of its subsidiaries, or (ii) fail to actively seek
gainful employment, you will not receive any salary continuation payments.
Please sign both copies of this letter and return it to Jim Nemiah. If you have
any questions, please feel free to call Jim or George Levan.
Sincerely,
----------------------------------
AGREED TO:
----------------------------------
Martin J. Reid
President and CEO Date:
-----------------------------
MJR/jcn
----------------------------------
<PAGE>
- ---------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ---------------------------------------
EXHIBIT 11
Computation Of Per Share Data
(In thousands, except per share dollar amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended
March 30, March 31, April 2,
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Primary Computation
Weighted average number of common
shares outstanding........................... 9,848 8,367 7,607
Weighted average number of common
stock equivalents............................ -- 388 275
-------- ------- -------
Weighted average number of common shares and
common share equivalents outstanding......... 9,848 8,755 7,882
======== ======= =======
Fully Diluted Computation
Weighted average number of common
shares outstanding........................... 9,848 8,367 7,607
Weighted average number of common
stock equivalents............................ -- 388 287
Weighted average number of common shares and -------- ------- -------
common share equivalents outstanding......... 9,848 8,755 7,894
======== ======= =======
Net income (loss) primary and fully diluted... $(15,572) $ 3,794 $ 2,847
======== ======= =======
Net income (loss) per common share primary
and fully diluted............................ $ (1.58) $ .43 $ .36
======== ======= =======
</TABLE>
Fiscal 1997 does not include common stock equivalents since the effect would
have been antidilutive. For fiscal 1996 and 1995 common stock equivalents
related to shares issuable under options outstanding did effect the per share
amount and, accordingly were included in the computation.
42
<PAGE>
---------------------------------------
Alpha Industries, Inc. and Subsidiaries
---------------------------------------
Exhibit 21
Subsidiaries Of The Registrant
<TABLE>
<CAPTION>
Name Jurisdiction Of Incorporation
- ---- -----------------------------
<S> <C>
Alpha Industries Limited England
Alpha Industries GmbH Germany
Alpha Securities Corporation Massachusetts
CFP Holding Company, Inc. Washington
Trans-Tech, Inc. Maryland
Trans-Tech Europe SARL France
</TABLE>
43
<PAGE>
- ---------------------------------------
Alpha Industries, Inc. and Subsidiaries
- ---------------------------------------
EXHIBIT 23
Consent of Independent Auditors
The Board of Directors
Alpha Industries, Inc.:
We consent to incorporation by reference in the registration statements (No. 33-
32957, No. 33-11356 and No. 33-47901) on Form S-8 of Alpha Industries, Inc. of
our report dated May 9, 1997 relating to the consolidated balance sheets of
Alpha Industries, Inc. and subsidiaries as of March 30, 1997 and March 31, 1996
and the related consolidated statements of operations, stockholders' equity, and
cash flows and related schedule for each of the years in the three-year period
ended March 30, 1997, which report appears in the March 30, 1997 annual report
on Form 10-K of Alpha Industries, Inc.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Boston, Massachusetts
June 27, 1997
44
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Alpha Industries, Inc. and Subsidiaries as of and for
the twelve months ended March 30, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-30-1997
<PERIOD-END> MAR-30-1997
<CASH> 5,815
<SECURITIES> 1,218
<RECEIVABLES> 17,540
<ALLOWANCES> 521
<INVENTORY> 10,267
<CURRENT-ASSETS> 35,176
<PP&E> 83,058
<DEPRECIATION> 54,450
<TOTAL-ASSETS> 65,253
<CURRENT-LIABILITIES> 16,767
<BONDS> 3,614
0
0
<COMMON> 2,531
<OTHER-SE> 40,855
<TOTAL-LIABILITY-AND-EQUITY> 65,253
<SALES> 85,253
<TOTAL-REVENUES> 85,253
<CGS> 68,519
<TOTAL-COSTS> 98,505
<OTHER-EXPENSES> 1,967
<LOSS-PROVISION> 206
<INTEREST-EXPENSE> 139
<INCOME-PRETAX> (15,572)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,572)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,572)
<EPS-PRIMARY> (1.58)
<EPS-DILUTED> (1.58)
</TABLE>
