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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED OCTOBER 29, 1994
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 NO. 1-7819
ANALOG DEVICES, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2348234
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE TECHNOLOGY WAY, NORWOOD, MA 02062-9106
(Address of principal executive offices) (Zip Code)
(617) 329-4700
(Registrant's telephone number, including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT:
COMMON STOCK $.16 2/3 PAR VALUE NEW YORK STOCK EXCHANGE
Title of Each Class Name of Each Exchange on
Which Registered
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
NONE
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. [ ]
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 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
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $1,695,071,277 based on the closing price of
the Common Stock on the New York Stock Exchange Composite Tape reporting system
on December 30, 1994.
Indicate the number of shares outstanding of each class of Common Stock:
75,383,933 shares of $.16 2/3 par value Common Stock as of December 30, 1994.
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DOCUMENTS INCORPORATED BY REFERENCE
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DOCUMENT DESCRIPTION 10-K PART
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<S> <C>
Portions of the Registrant's Proxy Statement for the Annual
Meeting of Stockholders to be held March 14, 1995 ................ III
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PART I
ITEM 1. BUSINESS
Analog Devices, Inc. ("Analog" or the "Company") designs, manufactures and
markets a broad line of high-performance linear, mixed-signal and digital
integrated circuits ("ICs") that address a wide range of real-world signal
processing applications. The Company's principal products include
special-purpose linear and mixed-signal ICs ("SPLICs"), digital signal
processing ICs ("DSP ICs") and general-purpose, standard-function linear and
mixed-signal ICs ("SLICs"). The Company also manufactures and markets devices
using assembled product technology, the largest portion of which are hybrid
ICs, which combine unpackaged IC chips and other chip-level components in a
single package.
Nearly all of the Company's products are components, which are typically
incorporated by original equipment manufacturers (OEMs) in a wide range of
equipment and systems for use in computer, telecommunication, industrial,
instrumentation, military/aerospace and high-performance consumer electronics
applications. The Company sells its products worldwide; approximately 44% of
the Company's fiscal 1994 net sales were made to customers in North America,
while most of the balance was to customers in Western Europe and the Far East.
INDUSTRY OVERVIEW
Real-world phenomena, such as temperature, pressure, sound, images, speed,
acceleration, position and rotation angle, are inherently analog in nature,
consisting of continuously varying information. This information can be
detected and measured using analog sensors, which represent real-world
phenomena by generating continuously varying voltages and currents. The signals
from these sensors are initially processed using analog methods, e.g.,
amplification, filtering and shaping. They are then usually converted to
digital form for input to a microprocessor, which is used to manipulate, store
or display the information. In many cases the signals are further processed
after conversion to digital form using a technology called "digital signal
processing." In addition, digital signals are frequently converted to analog
form to provide signals for analog display, sound, or control functions. These
manipulations and transformations are collectively known as "real-world signal
processing."
Significant advances in semiconductor technology over the past ten to fifteen
years have led to substantial increases in the performance and functionality of
ICs used for signal processing applications. Key among these advances is the
ability to create VLSI (Very Large Scale Integration) mixed-signal ICs that
contain both high-performance analog circuitry and large amounts of high-
density digital circuitry. The analog circuitry portion of the IC is used for
manipulating real-world signals while still in analog form and for converting
analog signals into digital form (or vice versa), and the digital portion is
used for further processing analog signals subsequent to their conversion to
digital form. The ICs resulting from these advances are used as components in
equipment and systems to achieve more effective interaction with natural
phenomena and the human senses.
TRENDS IN THE COMPANY'S BUSINESS
Analog has long been a leader in the development, production and marketing of
linear and mixed-signal ICs, particularly technology-driven, high-performance,
general-purpose, standard-function ICs (or SLICs). Building on its core
technical competencies, Analog believes that it is a leading worldwide supplier
of data converters and operational amplifiers and that data converters and
operational amplifiers collectively account for approximately half of the
semiconductor industry's total SLIC sales. SLICs are sold to a very large
customer base for a wide variety of applications. Early markets for these
products were primarily manufacturers of equipment and systems for the
industrial, instrumentation and military/aerospace markets, and these markets
still account for a significant part of the Company's business.
As linear IC technology has evolved within the industry, it has been employed
to develop market-driven, special-purpose linear and mixed-signal ICs (or
SPLICs) tailored to specific high-volume applications. Early-generation SPLICs
were generally low-performance devices for applications in automotive,
computer, consumer and certain communications applications. These devices were
subject to commodity-like pricing pressures, and the Company therefore chose
initially not to compete in this area. However, the emerging demand for the
highest levels of performance in many high-volume applications has provided the
Company an opportunity to leverage its expertise by diversifying into SPLICs
and DSP ICs for selected applications in these market segments. Products for
such applications must also have a high level of functionality (i.e., many
functions on one chip) to satisfy OEMs' requirements for low cost per function.
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Over the past four years, Analog has been engaged in a transition from being
primarily a supplier of SLICs (and to a lesser extent, assembled products)
serving a very fragmented market to a company whose strategy is to balance its
traditionally stable, profitable SLIC business with the growth opportunities
available for SPLICs and DSP ICs, which are typically sold in high volume to a
relatively small number of customers. Toward this end, the Company has
refocused much of its direct sales force and marketing resources on the needs
of SPLIC and DSP IC customers and moved a significant portion of its
traditional SLIC business into the distribution sales channel to better serve
the fragmented customer base characteristic of the instrumentation, industrial
and military/aerospace markets.
PRINCIPAL PRODUCTS
The Company operates predominantly in one industry segment: the design,
manufacture and marketing of a broad line of high-performance linear,
mixed-signal and digital integrated circuits that address a wide range of
real-world signal processing applications. Analog's products can be divided
into three classifications: standard-function linear and mixed-signal ICs
(SLICs); special-purpose linear and mixed-signal ICs (SPLICs) and digital
signal processing ICs (DSP ICs); and assembled products.
A substantial portion of the Company's products are proprietary (available only
from Analog), while equivalents to most of its other products are available
from a limited number of other suppliers. Many of the Company's products tend
to be less price sensitive than other types of ICs, such as DRAM (Dynamic
Random Access Memory) ICs, primarily because there are fewer suppliers and
because OEMs, in many cases, after qualifying one manufacturer's
high-performance linear or mixed-signal IC for a specific application, are
reluctant to switch manufacturers due to the risk of degradation in the
performance of their product and/or the effort required to qualify additional
suppliers.
The following table sets forth the approximate percentage of revenue
attributable to each of the Company's product groups for the past three fiscal
years:
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PRODUCTS 1994 1993 1992
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SLICs 59% 60% 64%
SPLICs and DSP ICs 30 26 18
Assembled Products 11 14 18
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SLICS
SLICs have been the foundation of the Company's business for more than 20
years, and the Company expects that they will continue to be its core products
for much of the 1990s. Analog believes that it is currently one of the world's
largest suppliers of SLIC products. The Company's SLIC products are primarily
high-performance, single-function devices. The majority of the Company's SLIC
revenue is attributable to data converters (analog-to-digital and
digital-to-analog) and amplifiers. Other products within this category with
significant sales are analog signal-processing devices (such as analog
multipliers), voltage references and comparators. The Company is currently
expanding its SLIC product offerings in areas where it traditionally has had
limited focus, principally interface circuits and power management ICs. It is
also expanding its SLIC product line to include a much larger number of
products designed to operate from single-supply 3- or 5-volt power sources to
better meet the needs of customers designing portable, battery-operated
equipment.
Analog's SLIC products tend to be general purpose in nature, which allows
customers to incorporate them in a wide variety of equipment and systems.
Analog's product portfolio includes several hundred SLICs, any one of which can
have as many as several hundred customers. The Company's SLIC customers include
both OEMs and customers who build equipment for their own use. Historically,
most SLICs have been purchased by OEMs which serve the industrial and
military/aerospace markets, but they are now also being used for applications
in personal computers (PCs), peripheral equipment used with PCs and computers,
and commercial and consumer communications equipment.
Design engineers employed by the Company's OEM customers typically select SLIC
products based on information in the Company's catalogs, datasheets and other
promotional materials. By using standard, high-performance, readily available,
off-the-shelf components in their designs, Analog's customers can reduce the
time required to develop and bring new products to market. Given the high cost
of developing customized ICs, SLICs usually provide the most cost-
effective solutions for low- to medium-volume applications. In addition,
combinations of SLICs connected together on a printed circuit board can provide
functionality that cannot currently be implemented with a single-chip device.
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SPLICS AND DSP ICS
SPLICs and DSP ICs, which are collectively referred to as system-level ICs, are
multi-function devices that feature high levels of functional integration on a
single chip. Most SPLICs are mixed-signal devices (some of which include DSP
capability) and the balance are linear-only devices. SPLICs are almost always
designed to the requirements of a specific application, and the design process
often includes significant input from one or more potential key customers.
Market demand for SPLICs is driven by the benefits that result from using one
of these devices rather than a combination of SLICs and other ICs. These
benefits include higher performance, lower cost per function, smaller size,
lower weight, fewer parts, decreased power consumption, easier design-ins and
faster time to market. These benefits are becoming more important to the
Company's OEM customers as they increase their focus on high-performance,
small, lightweight products, many of which are battery powered. Many of the
products they are designing could not be developed without these types of ICs.
The Company's DSP ICs are designed to efficiently execute specialized programs
(algorithms) associated with processing real-time, real-world data. The
Company's fixed-point and floating-point DSP ICs share a common architecture
and code compatibility, which allows system designers to make cost, performance
and time-to-market trade-offs. By reducing the manufacturing cost of its fixed-
point DSP ICs, the Company has been able to reduce the selling prices of these
devices, which has made it possible to incorporate them in mass-market products
such as PCs and modems. Analog's DSP ICs are supported with specialized
applications and easy-to-use, low-cost design tools, which reduce product
development cost and time to market. The Company's DSP IC revenue growth has
been aided by the availability of analog and mixed-signal "front-end" ICs such
as data converters from the Company.
The Company's DSP IC revenues are derived from both digital-only devices and
mixed-signal ICs that include a DSP core along with data conversion and analog
signal processing circuitry. Demand for system-level ICs that incorporate both
DSP functionality and sophisticated mixed-signal capability is expected to
increase as customers continue to demand as much functionality as possible from
a single chip.
ASSEMBLED PRODUCTS
The Company's assembled products consist primarily of hybrid products (devices
with several IC chips mounted and wired together on a substrate) and modules
(ICs and other components soldered to a small printed circuit board, which is
mounted inside a small plastic case). These are primarily older products, which
include devices such as amplifiers and data converters used in data acquisition
applications. Revenue from this product group began declining in fiscal 1989,
due in part to the deliberate obsolescence of certain products (in conjunction
with a manufacturing consolidation program implemented by the Company) and
their replacement with newer- generation ICs from the Company. Assembled
products revenue is expected to continue declining at a moderate rate. However,
given the proprietary nature of the majority of the products in this line, the
Company expects that these products will continue providing a positive
contribution to cash flow and profits.
PRINCIPAL MARKET AND APPLICATIONS
The Company's principal market is comprised of original equipment manufacturers
(OEMs) that incorporate the Company's products in equipment, instruments and
systems sold to end users for a wide variety of applications, including
computers and computer peripherals; communications equipment; engineering,
medical and scientific instruments; industrial automation equipment;
military/aerospace equipment; and high-end consumer electronics products. The
Company's growth has been aided both by the expansion of the markets
represented by these end-use applications and by the increasing use of computer
technology in the equipment and systems offered for sale in these markets.
Analog believes that for fiscal 1994 its 20 largest customers accounted for
approximately 27% of the Company's net sales. The largest single customer
represented less than 5% of net sales. Sales of the Company's products are not
highly seasonal.
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Listed below are some of the characteristics of each of the Company's major
served markets:
INSTRUMENTATION--includes manufacturers of engineering, medical and scientific
instruments. These products are usually designed using the highest performance
SLICs available, where the end product must be substantially more accurate than
the equipment or phenomena it is expected to measure, and where production
volumes generally do not warrant custom or application-specific ICs. The
Company's products sold into this market usually have long product life cycles.
INDUSTRIAL AUTOMATION--includes data acquisition systems, automatic process
control systems, robotics, environmental control systems and automatic test
equipment (ATE). These products generally require ICs that offer performance
greater than that available from commodity-level ICs, but generally do not have
production volumes that warrant custom or application-specific ICs.
Combinations of SLICs are therefore usually employed to achieve the necessary
functionality (ATE being an exception, where the high level of electronic
circuitry required per tester has created opportunities for SPLICs). ICs sold
into this market tend to have long product life cycles.
MILITARY/AEROSPACE--includes the military, commercial avionics and space
markets, all of which require high-performance ICs that meet rigorous
environmental and reliability specifications. Nearly all of the Company's SLICs
can be supplied in versions that meet the requirements of MIL-STD-883C, Class
B, and many can be supplied to Class S, an even more stringent specification
that governs ICs used for spaceflight applications. Most of the Company's
products sold into this market are derived from standard commercial grade ICs,
although the Company sometimes develops products expressly for
military/aerospace applications.
COMPUTERS AND COMPUTER PERIPHERALS--includes high-performance personal
computers, workstations and peripheral devices such as hard disk drives. The
Company currently supplies a variety of ICs used in this market for functions
such as graphic displays; interfaces between PCs and peripherals such as modems
and printers; power and battery management; processing analog signals from a
hard disk drive's read head and positioning the read head over a hard disk
drive platter; and providing enhanced sound input and output capability for
business and entertainment applications. This market is characterized by
rapidly developing technology.
COMMUNICATIONS--includes data and fax modems, digital cellular telephones and
portable, wireless communications equipment. The need for ever higher speed,
coupled with more reliable, more bandwidth-efficient communications is creating
increasing demand for systems that include both digital and analog signal
processing capability. Demand for signal processing ICs for this market is also
being driven by the equipment manufacturers' need for components that enable
them to develop cost-effective products that feature high performance, small
size, low weight and minimal power consumption.
CONSUMER ELECTRONICS--The emergence of high-performance consumer products, such
as compact disc players, digital VCRs, digital audio tape equipment and digital
camcorders, has led to the need for high-performance SPLICs with a high level
of functionality. Although the Company's revenue from this market is not
currently significant, the Company expects to supply ICs for sophisticated
products used by consumers for computing, communications and entertainment
applications, and believes that many of these applications will involve digital
signal processing.
In addition to the above markets, Analog is pursuing the automotive market.
Although this market has historically been served with low-cost,
low-performance ICs, demand has developed for higher performance devices for a
wide range of applications. In response, Analog is developing products
specifically for the automotive market. The Company began shipments of its
first automotive product, a micromachined IC employed as a crash sensor in
airbag systems, in 1993. In 1994 the Company began shipments of this device to
Delco for airbag systems in several 1995 model-year General Motors "W body"
cars, including the Pontiac Grand Prix, Oldsmobile Cutlass and Buick Century.
Revenues from this device were not significant in 1994, but are expected to
increase substantially beginning in 1995.
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NEW PRODUCTS
Analog's revenue growth is driven by a continuing flow of new products. More
than 40% of the Company's orders in fiscal 1994 were for products introduced
within the preceding five years. Among the key new products introduced and/or
first actively marketed in 1994 were:
SHARC 32-BIT, FLOATING-POINT DSP--A high-performance 32-bit, floating-point
digital signal processor (DSP), with 40 MIPS (millions of instructions/second)
capability. It is available in two versions: the ADSP-21060 with 4 Mb of
on-board static memory and the ADSP-21062 with 2 Mb. This device achieved a
broad range of design-ins during 1994, and is well suited for applications such
as digital mobile radio base stations, speech processing, graphics and imaging
systems and high-performance arcade games.
ADSP-2171 HIGH-PERFORMANCE 16-BIT, FIXED-POINT DSP--Analog's
highest-performance fixed-point DSP. Because of its low power, high MIPS and
added functionality, this device is particularly well suited for handling
speech coding requirements for digital radio communications. It is also well
suited for PC applications for processing real-time signals such as those used
in voice, audio and telephone applications.
AD899 COMPLETE READ CHANNEL--A fully integrated read-channel IC for hard disk
drives. It replaces multiple-chip solutions with a single device that
significantly reduces power and space requirements, as well as overall function
cost, while supporting data transfer rates of up to 32 Mbits per second.
AD8001 HIGH-SPEED, LOW-POWER AMPLIFIER--A very fast general-purpose operational
amplifier. It provides operation at 800 MHz while consuming only 50 mW of
power. The AD8001 is well suited for use as an A/D converter driver, in
numerous video applications, and in the RF (radio frequency) section of
receivers.
AD1845/46 STEREO CODECS--Third-generation 16-bit codec ICs that provide
low-cost, single-chip audio solution for business audio and multimedia
applications for both computer motherboard and add-in card implementations.
Both devices are compatible with the Windows Sound System (a trademark of
Microsoft Corp.). The AD1846 provides a parallel computer interface, while the
AD1845 has an asynchronous interface and includes sample rate conversion
technology, which permits audio signals digitized at different sample rates to
be used in the same system.
AD20MSP815 PERSONAL SOUNDCOMM CHIPSET--A five-chip chipset for implementing
many popular PC functions, including 14.4 Kbps fax and data modem capability,
industry-standard 16-bit audio capability, and telephone functions such as
answering machine and speaker phone capability. The chipset consists of a DSP
IC, a stereo audio codec IC, a complete, high-performance analog front-end and
two custom logic chips. A complete design guide is also available that greatly
simplifies the customer's design-in task.
ADM663/666 VOLTAGE REGULATORS--Five-volt regulators used for power management
in end products such as communications equipment and computers. These products
are representative of Analog's increased focus on ICs designed expressly for
power management applications.
AD835 MULTIPLIER AND AD831 MIXER --These two analog ICs are used as building
blocks for RF (radio frequency) front-ends in receivers. They are among the
first parts introduced by Analog aimed specifically at RF front-end
applications for products such as digital mobile radio base stations and
handsets, RF modems, and communications and aircraft receivers.
AD420 4-20 mA D/A CONVERTER--A serial-input 16-bit digital-to-analog converter
used to generate a 4-to-20 mA analog output signal that is proportional to its
digital input signal. It provides a high-precision, fully integrated, low-cost,
single-chip solution for generating the industry-standard control loop signals
required in industrial automation systems.
LOW VOLTAGE, LOW POWER ICs--During 1994 Analog Devices introduced a substantial
number of ICs designed to operate from single-supply 3- and 5-volt power
sources. Some of these products represent new functionality, while many are
lower-voltage, lower-power versions of existing products. They are much better
suited for many emerging computer and communication applications in
battery-powered portable products where power consumption is a primary concern.
Products in this catergory included amplifiers, data converters and DSPs.
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RESEARCH AND DEVELOPMENT
The markets served by Analog are characterized by rapid technological changes
and advances. Accordingly, the Company makes substantial investments in the
design and development of new products and processes, and for significant
improvement of existing products and processes. Analog spent $106.9 million
during fiscal 1994 for the design, development and improvement of new and
existing products and processes, compared to $94.1 million during fiscal 1993
and $88.2 million during 1992.
In fiscal 1994, approximately half of the Company's R&D expenditures were
devoted to the design and development of SPLICs and DSP ICs, and the
development and improvement of processes used for these products. The Company
believes that it will be able to leverage its core technological competencies
and leadership position in linear and DSP technology to design and develop a
wide range of highly integrated, high-performance, cost-effective mixed-signal
SPLICs, many of which will include DSP capability. At the same time, however,
the Company expects to continue developing new and improved SLIC products to
increase its share of the SLIC market.
As of December 1, 1994, the Company owned 262 U.S. patents and had 91 patent
applications on file with the United States patent office. The Company believes
that while its patents may provide some advantage, its competitive position is
largely determined by such factors as the knowledge, ability and experience of
the Company's personnel, new product development, market recognition and
ongoing marketing efforts, customer service and technical support.
SALES CHANNELS
Analog sells its products in both North America and internationally through a
direct sales force, third-party distributors and independent sales
representatives. Approximately 44% of fiscal 1994 revenue was derived from
customers in North America. As of December 1, 1994, the Company had 17 sales
offices in the United States, and its third-party distribution channel
consisted of nine national and regional third-party distributors and several
independent sales representatives with numerous locations throughout the U.S.
and Canada.
Approximately 26% of the Company's fiscal 1994 revenue was derived from sales
to customers in Europe; 17% to customers in Japan; and 13% to customers in
other international markets. As of December 1, 1994, the Company had direct
sales offices in Austria, Belgium, Denmark, France, Germany, Hong Kong, India,
Israel, Italy, Japan, Korea, The Netherlands, Sweden, Switzerland, Taiwan and
the United Kingdom. The Company also had sales representatives and/or
distributors in approximately 25 countries outside North America, including
countries where the Company also has direct sales offices.
Approximately one-third of Analog's fiscal 1994 revenue was derived from sales
made through distributors. The Company's distributors typically maintain an
inventory of Analog products. Some of these distributors also sell products
competitive with the Company's products, including those for which the Company
is an alternate source. Sales to distributors are made under agreements which
provide protection to the distributors for their inventory of Company products
against price reductions and products that are slow-moving or have been
discontinued by the Company. These agreements generally contain a provision for
the return of the products to the Company in the event the relationship with
the distributor is terminated.
Sales to North American distributors are not recognized until the products are
resold by distributors to their customers. Sales made to distributors outside
North America are recognized upon shipment to the distributor, but the Company
provides specific reserves for possible returns and allowances.
The Company's worldwide sales efforts are supported by an extensive promotional
program that includes editorial coverage and paid advertising in trade
publications; direct mail programs; promotional brochures; technical seminars;
and participation in trade shows. The Company publishes and distributes
full-length databooks, short-form catalogs, applications guides, technical
handbooks and detailed data sheets for individual products. The Company also
maintains a staff of application engineers who aid customers in incorporating
Analog's products into their products during their product development cycles.
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PRODUCTION AND RAW MATERIALS
Monolithic integrated circuit components are manufactured in a sequence of
production steps that include wafer fabrication, wafer testing, cutting the
wafer into individual "chips" (or dice), assembly of the dice into packages and
electrical testing of the devices in final packaged form. The raw materials
used to manufacture these devices include silicon wafers, processing chemicals
(including liquefied gases), precious metals, ceramic packages and plastic used
for plastic packaging.
In addition to using industry-standard bipolar and CMOS wafer fabrication
processes, Analog employs a number of Company-developed proprietary processes
specifically tailored for use in fabricating high-performance linear and
mixed-signal SLICs and SPLICs.
Analog's IC products are fabricated both at the Company's production facilities
and by third-party wafer fabricators. Assuming that the Company can continue to
maintain favorable relationships with its third-party wafer fabricators, it
intends to continue using such suppliers for meeting most of its needs for
wafers that can be fabricated using industry-standard digital processes. The
Company intends to meet most of its needs for wafers fabricated with linear and
mixed-signal processes with wafers fabricated at the Company's production
facilities.
Hybrid products are manufactured by mounting and connecting together several
integrated circuit chips in a single package. Some of the chips used in the
Company's hybrids are manufactured by the Company and some are purchased from
outside suppliers. The production process for modular components, subsystems
and systems consists primarily of assembly, packaging and testing. Some of the
Company's assembled products are assembled and tested within the Company's U.S.
manufacturing facilities, while others are assembled and tested at
Company-owned facilities outside the United States or by subcontractors,
principally in the Far East.
In general, the Company uses standard supplies and components in the
manufacture of its products and most are available from a number of suppliers.
Certain items are made to the Company's specifications and are available from a
limited number of suppliers. However, the Company believes that, if necessary,
alternative sources of supply for these items could be developed, and that any
delays in obtaining alternative sources would be temporary and would not have a
material adverse effect on the Company's business.
WORKING CAPITAL REQUIREMENTS
The Company manufactures and sells a wide variety of products, a significant
portion of which are standard products delivered from inventory on a current
basis. As a result, the Company generally maintains finished goods inventories
sufficient to meet customer delivery requirements within a short time following
receipt of an order.
BACKLOG
The Company defines its backlog at any point in time as those orders for which
customers have requested shipment within the next 13 weeks. The quantities of
the Company's products to be delivered and their delivery schedules, as covered
by customer purchase orders, are frequently revised by customers to reflect
changes in their needs. As is customary in the semiconductor industry, most
such orders can be canceled or deliveries delayed by the customer without
significant penalty.
Backlog at the end of fiscal 1994 was approximately $152.8 million; it was
approximately $127.1 million at the end of the prior fiscal year. In the past,
backlog at the end of one quarter has typically represented about 60% to 70% of
the next quarter's sales. For example, the backlog at the end of the third
quarter of fiscal 1994 was approximately $140.1 million; sales for the fourth
quarter of fiscal 1994 were $203.3 million. Standard products, which are
typically delivered from current inventory, usually account for much of the
difference between one quarter's ending backlog and the next quarter's sales.
Agreements between the Company and its third-party stocking distributors
provide price protection for the distributors and certain rights of return for
merchandise unsold by the distributors; as a result, sales to domestic
distributors are not recognized until the products are resold by the
distributors to their customers. For these reasons, and the previously
mentioned ability of customers to cancel orders or delay deliveries without
significant penalty, the Company believes that its backlog is not necessarily a
reliable indicator of future revenue.
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GOVERNMENT CONTRACTS
The Company estimates that approximately 15% of its total worldwide revenue is
attributable to sales to the U.S. government and government contractors and
subcontractors. Analog's government contract-related business is predominantly
in the form of negotiated, firm fixed-priced subcontracts. All such contracts
and subcontracts contain standard provisions related to termination at the
election of the United States government. The Company expects that the U.S.
government's intention to further reduce U.S. military spending will result in
a continuing gradual reduction in the percentage of the Company's total sales
going to governmental users and contractors.
COMPETITION
Analog competes with a large number of semiconductor companies in markets that
are highly competitive. The Company believes it is one of the largest suppliers
of high-performance linear and mixed-signal signal-processing components. These
types of products fall into both the SLIC and SPLIC product categories.
Competitors for the Company's linear and mixed-signal products include
Brooktree Corp., Burr-Brown Corp., Cirrus Logic Inc., Exar Corp., Harris Corp.,
Linear Technology Corp., Maxim Integrated Products, Inc., National
Semiconductor Corp., Sierra Semiconductor Corp., Siliconix Inc., Silicon
Systems (a subsidiary of TDK Corp), Texas Instruments, Inc. and others.
Sales of DSP ICs represent a growing percentage of the Company's total sales.
Analog's competitors for DSP ICs include AT&T, Integrated Device Technology,
Inc., Motorola Semiconductor Products and Texas Instruments, Inc.
Many other companies offer components that compete with Analog's products; some
also offer other electronic products, and some have financial resources
substantially larger than Analog's. Also, some formerly independent competitors
have been purchased by larger companies (which in some cases may be viewed as a
means by which the acquiring company gains in-house capability). However, to
the Company's knowledge, no manufacturer competes with Analog across all of the
product types offered by the Company in its signal-processing components
product line.
Analog believes that competitive performance in the marketplace for real-world
signal-processing components depends upon several factors, including product
price, technical innovation, product quality and reliability, range of
products, customer service and technical support. Analog believes its
aggressive technical innovation emphasizing product performance and
reliability, supported by its commitment to strong customer service and
technical support, will allow the Company to continue to compete successfully
in its chosen markets against both foreign and domestic semiconductor
manufacturers.
ENVIRONMENT
Analog's manufacturing facilities are subject to numerous environmental laws
and regulations, particularly with respect to industrial waste and emissions.
Compliance with these laws and regulations has not had a material impact on the
Company's capital expenditures, earnings or competitive position.
EMPLOYEES
As of October 29, 1994, the Company employed approximately 5,400 persons. The
Company believes that relations with its employees are good.
INTERNATIONAL OPERATIONS
Analog has direct sales offices in 16 countries outside the United States. In
addition, the Company has manufacturing facilities in Ireland, Japan, the
Philippines and Taiwan. The Company also has arrangements with subcontractors,
principally in the Far East, for the wafer fabrication, assembly and testing of
certain products. The majority of Analog's international sales in the past
fiscal year were made through its direct international sales offices while the
balance, approximately one-third of the total, were made through distributors.
8
<PAGE> 10
A significant portion of Analog's revenues and operating profits are derived
from international operations, and the Company is therefore subject to the
economic and political risks inherent in international operations generally,
including expropriation, air transportation disruptions, currency controls and
changes in currency exchange rates, tax and tariff rates and freight rates. The
Company has taken steps it deems prudent in its international operations to
diversify and otherwise insure and protect against these risks. Financial
information concerning domestic and international operations appears in Notes
1(f), 1(g) and 2 in the Notes to Consolidated Financial Statements included as
part of this report.
9
<PAGE> 11
ITEM 2. PROPERTIES
The Company's corporate headquarters is located in Norwood, Massachusetts.
Manufacturing and other operations are carried on in several locations
worldwide. The following tables provide certain information as to the Company's
principal general offices and manufacturing facilities:
<TABLE>
<CAPTION>
PLANT LOCATION
--------------
OWNED: USE FLOOR SPACE
------ ---- -----------
<S> <C> <C>
Wilmington, Wafer fabrication, components assembly and testing, engineering 245,200 sq. ft.
Massachusetts and administrative offices
Wilmington, Components engineering, marketing and administrative offices 67,200 sq. ft.
Massachusetts
Limerick, Wafer fabrication, components assembly and testing, engineering 236,200 sq. ft.
Ireland and administrative offices
Greensboro, Components and board assembly and testing, engineering and 90,000 sq. ft.
North Carolina administrative offices
Manila, Philippines Components assembly and testing, engineering and administrative 81,800 sq. ft.
offices
Tokyo, Japan Components assembly and testing, engineering and administrative 69,200 sq. ft.
offices
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL LEASE
--------- ------
PROPERTIES USE FLOOR SPACE EXPIRATION RENEWALS
---------- --- ----------- ---------- --------
LEASED (FISCAL YEAR)
------
<S> <C> <C> <C> <C>
Norwood, Corporate headquarters, engineering, components 135,000 sq. ft. 2007 3, five-yr.
Massachusetts assembly and sales and marketing offices periods
(1)
Westwood, Components and subsystems assembly and testing, 100,400 sq. ft. 1996 2, ten-yr.
Massachusetts engineering and administrative offices periods
(2)
Santa Clara, Wafer fabrication, components assembly and 72,800 sq. ft. 1995 3, five-yr.
California testing, engineering and administrative offices periods
Santa Clara, Administrative offices and engineering 43,500 sq. ft. 1995 3, five-yr.
California periods
Wilmington, Engineering, systems assembly and 91,000 sq. ft. 1995 -
Massachusetts administrative offices
Taipei, Components testing, engineering and 27,700 sq. ft. 1997 3 to 5 yr.
Taiwan administrative offices option to
extend
<FN>
(1) See Note 6 - "Commitments and Contingencies" in the Notes to Consolidated
Financial Statements for information regarding contingent liabilities
related to the lease of the Norwood, Massachusetts property.
(2) The Westwood, Massachusetts facility is subject to a 25-year capital lease
with an option to purchase.
</TABLE>
10
<PAGE> 12
In addition to the principal leased properties listed above, the Company also
leases sales offices and other premises at 24 locations in the United States
and 26 locations overseas under operating lease agreements. These leases expire
at various dates through the year 2010.
See Note 5 - "Lease Commitments" in the Notes to Consolidated Financial
Statements for information concerning the Company's obligations under all
operating and capital leases.
The Company believes that its existing and planned facilities are adequate and
suitable for the manufacture and sale of its products, and have sufficient
productive capacity to meet its current and anticipated requirements. In
addition, the Company anticipates no difficulty in retaining occupancy of any
of its manufacturing, office or sales facilities through lease renewals prior
to expiration or through month-to-month occupancy, or in replacing them with
equivalent facilities.
11
<PAGE> 13
ITEM 3. LEGAL PROCEEDINGS
TEXAS INSTRUMENTS LITIGATION
The Company is a defendant in a lawsuit brought by Texas Instruments, Inc.
("TI") on July 9, 1990 in the United States District Court for the Western
District of Texas (Dallas Division). The complaint alleges that certain plastic
encapsulation processes conducted by the Company's subsidiaries in Ireland and
the Philippines infringe two TI patents (both of which had expired by August
1994) and seeks an injunction and unspecified damages. The alleged infringement
of one of these patents was also the subject matter of a proceeding brought by
TI against the Company before the International Trade Commission (the "ITC") on
July 9, 1990 seeking an injunction preventing the Company from importing
allegedly infringing products into the United States.
Following a hearing in May 1991, the ITC upheld the validity of the TI patent,
determined that certain types of encapsulation processes practiced by the
Company's subsidiaries infringed the TI patent and found that alternative
encapsulation processes used by the Company's subsidiaries did not infringe the
TI patent. The ITC also determined that, upon the merger of Precision
Monolithics, Inc. ("PMI") into the Company in November 1990, the Company
acquired the benefit of a license from TI to PMI for the TI patent. Pursuant
to such license, the Company obtained what it believed was the right to import
annually up to $94 million of integrated circuits using the patented
encapsulation process. The decision of the ITC was upheld on appeal by the
United States Court of Appeals for the Federal Circuit. Even if the Company's
ability to utilize the full amount of the PMI license is upheld by the District
Court, TI could seek damages for sales of allegedly infringing products between
February 1989 and the November 1990 merger with PMI.
On January 10, 1994, the ITC brought an enforcement proceeding against the
Company alleging that the Company had violated the ITC's cease and desist
order of February 1992, as modified in July 1993. The ITC is seeking
substantial penalties against the Company for these alleged violations. The
Company has denied that it violated either of these orders. An initial hearing
in this proceeding is scheduled to begin on February 13, 1995.
On June 19, 1992, the Company commenced a lawsuit in the United States District
Court for the District of Massachusetts alleging that certain TI digital signal
processors infringed a patent owned by the Company. TI has filed counterclaims
in this action alleging that certain of the Company's products infringe four TI
patents relating to digital signal processing and electrostatic discharge
protection in integrated circuits. In its counterclaim, TI seeks an injunction
against the Company from violating the TI patents and unspecified damages. The
Company has denied the essential allegations in the TI counterclaims. A trial
in this case is currently scheduled for June 1995.
MAXIM LITIGATION
The Company is a defendant in a suit brought by Maxim Integrated Products, Inc.
("Maxim") on November 11, 1992 in the United States District Court for the
Northern District of California. The complaint alleges violations of federal
antitrust law and pendant state claims in connection with distribution
arrangements between the Company and certain distributors. Maxim alleged that a
number of these distributors ceased doing business with Maxim as a result of
the distribution arrangements between the distributors and the Company. Maxim
claims that those agreements have improperly restricted its access to channels
by which it distributes its products. Maxim seeks, among other things,
injunctive relief and actual, consequential and punitive damages. In a
pre-trial submission dated August 31, 1994, Maxim asserted actual and
consequential damages in the amount of $14.1 million. It also claims
restitution and punitive damages in an unspecified amount. Under applicable
law, Maxim would receive three times the amount of any actual damages suffered
as a result of any antitrust violation.
On September 7, 1994, the Northern District of California ruled in favor of the
Company on a summary judgment motion, dismissing all of Maxim's claim for lack
of evidence. Maxim has appealed this ruling to the Ninth Circuit Court of
Appeals, which has ordered that briefing of the appeal be concluded by
March 7, 1995.
For additional information concerning the above described lawsuits and the
potential impact of such suits upon the Company's financial condition and
results of operations, see Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
12
<PAGE> 14
OTHER
The Company has also received and made inquiries with regard to other possible
patent infringement claims. These inquiries have been referred to counsel and
are in various stages of discussion. If any infringements are determined to
exist, the Company may seek or extend licenses or settlements. In addition,
from time to time as a normal incidence of the nature of the Company's
business, various claims, charges and litigation are asserted or commenced
against the Company arising from or related to contractual relations, personal
injury, environmental matters and product liability. While the Company cannot
accurately predict the ultimate outcome of these other matters, at this time
management believes that the likelihood of an outcome resulting in a material
adverse effect on the Company's consolidated financial position, trends in
results of operations or cash flows is remote.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during
the last quarter of the fiscal year ended October 29, 1994.
13
<PAGE> 15
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth (i) the name and age of each present executive
officer of the Company; (ii) the position(s) presently held by each person
named; and (iii) the principal occupations held by each person named for at
least the past five years.
<TABLE>
<CAPTION>
EXECUTIVE OFFICER AGE POSITION BUSINESS EXPERIENCE
----------------- --- -------- -------------------
<S> <C> <C> <C>
Ray Stata . . . . . . . 60 Chairman of the Board and Chairman of the Board and Chief Executive
Chief Executive Officer Officer since 1973; President from 1971 to
November 1991.
Jerald G. Fishman . . . 49 President, Chief Operating President, Chief Operating Officer and
Officer and Director Director since November 1991; Executive
Vice President from 1988 to November 1991;
Group Vice President - Components from
1982 to 1988.
William A. Martin . . . 35 Treasurer Treasurer since March 1993; Assistant
. Treasurer from October 1991 to March 1993;
Manager of Treasury Finance from March
1987 to October 1991; Manager of
International Treasury from October 1985
to March 1987.
Brian P. McAloon . . . 44 Vice President, Sales Vice President, Sales since May 1992; Vice
President, Sales and Marketing - Europe
and Southeast Asia from 1990 to 1992;
General Manager, Analog Devices, B.V. -
Limerick, Ireland from 1987 to 1990.
Joseph E. McDonough . . 47 Vice President, Finance and Vice President, Finance and Chief
Chief Financial Officer Financial Officer since November 1991;
Vice President since 1988 and Treasurer
from 1985 to March 1993; Director of Taxes
from 1983 to 1985.
<FN>
There is no family relationship among the named officers.
</TABLE>
14
<PAGE> 16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the New York Stock Exchange under the
symbol ADI. The table below sets forth the high and low prices of the Common
Stock during the two most recent fiscal years.
<TABLE>
<CAPTION>
1994 1993
----------------------- ------------------------
PERIOD HIGH LOW HIGH LOW
------ ---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter $ 17.50 $ 12.88 $ 11.63 $ 7.75
Second Quarter $ 20.75 $ 16.38 $ 14.25 $ 10.38
Third Quarter $ 20.88 $ 16.38 $ 14.88 $ 11.88
Fourth Quarter $ 24.50 $ 17.63 $ 18.63 $ 13.13
</TABLE>
On November 30, 1994, the Company's Board of Directors authorized a
three-for-two stock split effected in the form of a 50% stock dividend
distributed on January 4, 1995 to stockholders of record December 12, 1994. All
stock prices in the table above have been restated to reflect the split.
The Company's $60,000,000 credit agreement restricts the aggregate of all cash
dividend payments declared or made subsequent to October 29, 1994 to an amount
not exceeding $85,147,000 plus 50% of the consolidated net income of the
Company for the period from October 30, 1994 through the end of the Company's
then most recent fiscal quarter. Although prior credit agreements may not have
restricted the payment of dividends, the Company has never paid any cash
dividends on its Common Stock.
The approximate number of holders of record of the Company's Common Stock at
December 30, 1994 was 4,417. This number does not include shareholders for whom
shares are held in a "nominee" or "street" name.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(thousands except per share amounts) 1994 1993 1992 1991 1990(2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Operations data:
Net sales................. $773,474 $666,319 $567,315 $537,738 $485,214
Net income (loss)......... 74,496 44,457 14,935 8,203 (12,913)
Net income (loss) per
share (1)............... .96 .59 .21 .12 (.18)
Balance Sheet data:
Total assets.............. $815,871 $678,492 $561,867 $503,317 $487,188
Long term obligations..... 80,061 100,297 70,632 36,819 24,129
- -------------------------------------------------------------------------------------------------------------------
<FN>
(1) All references to per share amounts have been restated to reflect the
three-for-two stock split effected in the form of a 50% stock dividend
distributed on January 4, 1995 to stockholders of record December 12, 1994.
(2) In the fourth quarter of fiscal 1990, the Company acquired Precision
Monolithics, Inc. (PMI). The Company's results include the results of
operations of PMI since August 8, 1990, the date of the acquisition.
</TABLE>
15
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1994 COMPARED TO FISCAL 1993
Net sales of $773.5 million for fiscal 1994 increased 16% from net sales of
$666.3 million for fiscal 1993. The sales increase was due principally to
higher sales volumes of both standard linear IC and system-level IC products
which together grew approximately 20% year-over-year to comprise approximately
90% of total sales for fiscal 1994.
Standard linear IC sales rose $54.3 million or approximately 14% to $455.3
million in fiscal 1994. This increase was primarily due to the combination of
increased penetration of the distribution channel coupled with well accepted
new product offerings. As a percentage of total sales, standard linear products
accounted for 59% in fiscal 1994 compared to 60% in fiscal 1993.
Sales of system-level IC products grew $59.6 million or approximately 34% to
$234.6 million in fiscal 1994. This growth was attributable largely to
increased demand for applications in personal computers and wireless
communications products, and the Company's broader participation in these
growing markets.
Sales of assembled products declined approximately 7% from fiscal 1993 to
fiscal 1994 and as a percentage of total sales decreased from 14% to 11% over
the same period. Despite the revenue declines in assembled products over the
past few years and lower gross margins associated with these products, this
product grouping remained profitable in 1994.
Sales to North American customers increased 18% over 1993 levels to
$343.9 million with much of this increase coming from the distributor channel
as sales through North American distributors increased 36% from the prior year.
Sales to international customers grew 15% led by sales increases of
approximately 27% and 35% in Japan and Southeast Asia, respectively. Sales
growth in Japan was mainly attributable to increased demand for standard
linear IC products, aided in part by the translation of yen-denominated sales
to a weaker average U.S. dollar. The sales increase in Southeast Asia
represented continued strength in sales of personal computer products.
European sales of $197.9 million for fiscal 1994 were flat compared to the
prior year due to weaker European industrial economies as compared to fiscal
1993. Sales growth in Europe resumed in the fourth quarter of fiscal 1994,
growing again after weakness in the first nine months of the year as the
European economy showed improvement, particularly Germany. As a percentage of
total net sales, North American and international sales remained at 44% and
56%, respectively, which are comparable to fiscal 1993.
Gross margin improved to 49.0% of sales for fiscal 1994 compared to 47.3% for
fiscal 1993. This increase resulted principally from a significant improvement
in gross margin for system-level IC products as variable manufacturing costs
declined and fixed costs were allocated over greater production volumes. Gross
margin for the Company's standard linear IC products remained at a high level
and gross margin on all IC products, which include both standard linear and
system-level ICs, was approximately 50% of sales. Overall gross margin for
fiscal 1995 will depend primarily on the gross margin from system-level IC
products and the relative mix of sales between standard linear and system-level
ICs. During fiscal 1995, the Company does not anticipate overall gross margin
to improve at the same rate of improvement as achieved in fiscal 1994.
Research and development expenses for fiscal 1994 increased 13.6% from fiscal
1993 as the Company continued to invest in new product development. As a
percentage of sales, R&D expenses were 13.8% compared to 14.1% for the prior
year. R&D expenses for fiscal 1995 are expected to increase approximately 15%
to 20% over fiscal 1994 levels as the Company expands its investments in
communications, digital signal processing and micromachining technology.
Selling, marketing, general and administrative (SMG&A) expenses grew 7.4%
compared to fiscal 1993, increasing at a lower rate than sales. As a result,
SMG&A as a percentage of sales decreased to 22.0% for fiscal 1994 from 23.8%
for fiscal 1993. The increase in SMG&A expenses related mostly to increased
strategic advertising and marketing expenses associated with many new product
launches and additional incentive expense associated with the Company's
improved performance.
16
<PAGE> 18
In total, operating expenses were reduced to 35.8% of sales, down from 37.9%
one year ago, consistent with the Company's emphasis on maintaining tight
control over all costs in order to gain better operating leverage on increases
in revenues. A key factor in controlling operating expenses has been holding
worldwide employment relatively flat at levels approximately equal to that of
1990, while revenues have grown significantly since that time.
Operating income reached 13.2% of sales for fiscal 1994, an increase of nearly
four percentage points from 9.4% of sales for fiscal 1993. This performance
gain reflected the higher sales level, improvement in gross margin as a percent
of sales and a slower rate of expense growth versus sales.
Nonoperating expenses decreased $2.3 million, benefiting from increased
interest income on a higher level of invested cash as net interest expense was
reduced from $5.8 million in fiscal 1993 to $2.0 million in fiscal 1994. Due to
the funding of fiscal 1995 planned capital expenditures with cash on hand and
expected operating cash flows, the Company expects interest income to decline
in fiscal 1995.
The effective income tax rate increased to 23% in fiscal 1994 from 20% in
fiscal 1993 due to a shift in the mix of worldwide income. In the first
quarter of fiscal 1994, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (FAS 109). The impact of
adopting FAS 109 was not material to the Company's consolidated financial
statements. See Note 1(k), "Income Taxes," in the Notes to Consolidated
Financial Statements for information concerning the adoption of FAS 109.
The growth in sales, improved operating performance and lower nonoperating
expenses resulted in a 68% rise in net income to $74.5 million or 9.6% of sales
compared to $44.5 million or 6.7% of sales in fiscal 1993.
The Company has not yet adopted Statement of Financial Accounting Standards
No. 112, "Employers' Accounting for Postemployment Benefits" and Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Adoption of these statements which is required in
fiscal year 1995 is not expected to have a material impact on the Company's
consolidated financial statements.
The impact of inflation on the Company's business during the past three years
has not been significant.
FISCAL 1993 COMPARED TO FISCAL 1992
Net sales rose 17% to $666.3 million for fiscal 1993, compared to fiscal 1992
sales of $567.3 million. Sales growth in fiscal 1993 was principally
attributable to increased sales volumes. Overall market demand for integrated
circuits remained strong throughout fiscal 1993, with the Company benefiting
from this demand both in its broad-based, standard-function linear IC business
and in its application specific, system-level IC business. Total IC sales,
including both standard linear IC and system-level IC products, increased $113
million or 24% in fiscal 1993 to comprise 87% of total sales. Sales of
assembled products declined approximately 14% in fiscal 1993.
Sales of standard linear IC products increased $38 million or approximately 10%
in fiscal 1993. As a percentage of sales, standard linear IC products accounted
for 60% in fiscal 1993 compared to 64% in fiscal 1992. Increased distribution
sales, which represented approximately 40% of total standard linear IC sales,
and new product offerings led to much of the growth in sales of standard linear
IC products.
Sales of system-level ICs grew by more than 70% to $175 million, or 26% of
total sales. This growth was fueled by increasing success in fast growing
sectors of the communications and computer markets in fiscal 1993.
Assembled product sales declined by $14 million or approximately 14% in fiscal
1993. Assembled products continued to decline as a percentage of total revenues
as well, falling to 14% of total sales in fiscal 1993. Despite the 14% decline
in revenues of assembled products, this product grouping was profitable for
fiscal 1993.
Sales in North America grew approximately 8% over the prior year to $292.1
million. The distributor channel in North America was a major contributor to
this growth with sales through distributors increasing approximately 24% in
fiscal 1993. Sales to all international customers increased 26% with sales in
Europe, Japan and export sales to Southeast Asia increasing 17%, 20% and 74%,
respectively. Much of the sales growth in Southeast Asia resulted from
design-ins achieved in the U.S. and Western Europe for applications in
personal computers. Sales growth in Europe was fueled largely by strong sales
of system-level ICs used in the GSM digital cellular phone network. Demand
showed renewed strength in Japan from the depressed levels in fiscal 1992 with
the fiscal 1993 sales increase mainly attributable to increased
17
<PAGE> 19
sales of standard linear IC products. A weaker average dollar exchange rate
year-to-year also contributed to some of the Japanese sales improvement. As a
percentage of total net sales, North American sales decreased from 47% in
fiscal 1992 to 44% in fiscal 1993 and international sales increased from 53%
in fiscal 1992 to 56% in fiscal 1993. This shift reflected a significant
increase in sales to customers in Southeast Asia.
Gross margin improved slightly to 47.3% of sales in fiscal 1993 from 46.8% in
fiscal 1992 due to continued control of manufacturing costs.
R&D expenses for fiscal 1993 grew approximately 7% over the prior year but as a
percentage of sales decreased to 14.1%, down from 15.5% of sales for fiscal
1992. This improvement was the result of continuing efforts to focus R&D on the
most promising opportunities where the Company can build a sustainable
competitive advantage and earn high return factors.
SMG&A expenses grew 5% in absolute dollars in fiscal 1993, increasing at a much
lower rate than sales. As a result, the SMG&A to sales ratio declined from
26.7% for fiscal 1992 to 23.8% for fiscal 1993. The 5% growth in SMG&A expenses
principally reflected normal increases for salaries and benefits and increased
incentive expense associated with the Company's performance.
Operating income for fiscal 1993 was $62.7 million or 9.4% of sales, more than
double the $26.2 million or 4.6% of sales for fiscal 1992. The significant
improvement in operating income was the result of increased sales, improved
gross margin performance and tight operating expense controls which allowed the
Company to gain strong operating leverage on increased revenues.
Interest expense for fiscal 1993 increased to $7.2 million from $6.0 million in
fiscal 1992. This increase resulted from a higher level of total borrowings in
fiscal 1993 which included the issuance of $80 million of long-term debt during
the year. Interest expense net of interest income was $5.8 million for fiscal
1993 compared to $5.1 million for fiscal 1992 as the increased interest expense
on a higher level of debt was offset to some degree by interest income earned
on a higher level of invested cash resulting from increased cash flows from
operations combined with the excess proceeds from the $80 million offering.
The effective income tax rate decreased slightly to 20% in fiscal 1993 from 21%
in fiscal 1992. The tax provisions for both fiscal 1993 and fiscal 1992 were
driven largely by the high proportion of income earned by the Company's Irish
operation for which earnings are taxed at a lower rate.
Net income was $44.5 million, or three times the $14.9 million earned in fiscal
1992. As a percentage of sales, net income was 6.7% in fiscal 1993 versus 2.6%
in fiscal 1992.
LIQUIDITY AND CAPITAL RESOURCES
At October 29, 1994, cash and cash equivalents and short-term investments
totaled $181.8 million, an increase of $101.1 million from $80.7 million at the
end of fiscal 1993. Increased cash and cash equivalents and short-term
investments resulted from a significant improvement in cash provided from
operations compared to fiscal 1993. During fiscal 1994, the Company invested
$72.7 million in short-term investments including commercial paper,
certificates of deposit and bankers' acceptances with maturities greater than
three months and less than one year.
Cash provided by operating activities was $183.3 million or 23.7% of sales for
fiscal 1994 compared to $89.5 million or 13.4% of sales for fiscal 1993. The
increase in operating cash flows in fiscal 1994 was mainly attributable to
higher net income together with a decrease in inventories and an increase in
accounts payable, which were offset in part by growth in accounts receivable.
Accounts receivable of $162.3 million at the end of fiscal 1994 increased $16.7
million or 11.4% from $145.7 million at the end of fiscal 1993. The primary
factors contributing to the increase in accounts receivable were the 14% growth
in fourth quarter sales between the two years and the translation of local
currency denominated receivables to a weaker U.S. dollar, particularly in
Japan. These increases were offset in part by improved collection of
receivables. Despite the increase in accounts receivable in dollars
year-to-year, accounts receivable as a percentage of annualized fourth quarter
sales decreased slightly to 20.0% at the end of fiscal 1994 compared to 20.3%
at the end of fiscal 1993.
18
<PAGE> 20
Inventories declined $19.7 million during fiscal 1994 to $130.7 million. As a
percentage of annualized fourth quarter sales, inventories were reduced from
21.0% to 16.1% which the Company believes is an appropriate level.
The increase in accounts payable compared to fiscal 1993 primarily reflected
fourth quarter fiscal 1994 expenditures associated with the expansion of the
Company's Irish facility as described below.
Net additions to property, plant and equipment of $90.9 million in fiscal 1994
were funded with internally generated cash flow from operations. Nearly half of
these expenditures occurred in the fourth quarter as expansion of the Company's
wafer fabrication facilities in Limerick, Ireland commenced. This expansion
will include the addition of 6-inch submicron wafer fabrication capability
intended primarily to meet the future demands associated with the Company's
growth. Capital expenditures for fiscal 1995 are currently expected to be
approximately $150 million, including approximately $65 million of capital
expenditures associated with the Limerick wafer fabrication expansion. The
Company expects to finance its planned fiscal 1995 capital additions with cash,
cash equivalents and short-term investments on hand, coupled with internally
generated cash flow from operations.
At October 29, 1994, substantially all of the Company's lines of credit were
unused, including its four-year, $60 million credit facility. In the first
quarter of fiscal 1995, the Company's 7.18%, $20.0 million loan matured. Upon
maturity, this loan was repaid in full with cash and cash equivalents on hand.
The Company believes that its strong financial condition, existing sources of
liquidity, available capital resources and cash expected to be generated from
operations leave it well positioned to obtain the funds required to meet its
current and future business requirements.
LITIGATION
As set forth in "Business-Legal Proceedings," the Company is engaged in patent
infringement litigation with Texas Instruments, Inc. ("TI") and antitrust
litigation with Maxim Integrated Products, Inc. ("Maxim"). See Item 3,
"Business - Legal Proceedings" for additional information concerning these
lawsuits.
If it is determined that the Company has violated the cease and desist order
entered by the ITC in February 1992, as modified in July 1993, the ITC
could seek to impose penalties of up to $100,000 per day or equal to twice the
value of the goods determined to be sold in violation of the order. If, in the
district court action, it is found that certain plastic encapsulation
processes used by the Company infringe TI's patents or that the Company did
not obtain from PMI valid license rights to import up to $94 million annually
of circuits using TI's patented process, the court could award TI substantial
damages. Even if the district court upholds the validity of the PMI license,
if it finds infringement by the Company, TI could seek damages for sales of
allegedly infringing products between February 1989 and the November 1990
merger with PMI.
The dismissal of Maxim's claims has been appealed. The Company believes it has
meritorious defenses to Maxim's antitrust allegations and intends to vigorously
defend the suit. If the dismissal is overturned on appeal and Maxim's claims
are upheld in a subsequent trial on the merits, in addition to potential damage
awards the Company may be required to modify its relationships with its
distributors.
Although the Company believes it should prevail in the matters described above,
the Company is unable to determine their ultimate outcome or estimate the
ultimate amount of liability, if any, at this time. An adverse resolution of
these matters could have a material adverse effect on the Company's
consolidated financial position or on its consolidated results of operations
or cash flows in the period in which the matters are resolved.
FACTORS AFFECTING FUTURE RESULTS
The Company's future results remain difficult to predict and may be affected by
a number of factors including business conditions within the semiconductor
industry and the world economies as a whole, competitive pressures and cyclical
market patterns. In addition, the Company's revenue growth is driven by a
continuing flow of new products; more than 40% of the orders received by the
Company in fiscal 1994 were for products introduced within the preceding five
years. The success of many of these products and the Company's growth
opportunities are dependent on successful penetration of new high volume
computer, communication, and automotive segments of the electronics market
where the Company has less experience and competition is substantial. No
assurance can be given that new products can be developed, or if developed,
will be successful; that market demand or customer acceptance will be realized;
that demand if achieved will be sustained; that competitors will not force
prices to an unacceptably low level or take market share from the Company;
19
<PAGE> 21
or that the Company can achieve or maintain profits in these markets. Also,
some of the customers in these markets are less well established which could
subject the Company to increased credit risk. Because of these and other
factors, past financial performance should not be considered an indicator of
future performance. Investors should not use historical trends to anticipate
future results and should be aware that the Company's stock price frequently
experiences significant volatility.
20
<PAGE> 22
ANALOG DEVICES, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED OCTOBER 29, 1994
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION
21
<PAGE> 23
ANALOG DEVICES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN ITEM 8:
Report of Independent Auditors............................................................... 23
Consolidated Statements of Income for the years ended October 29, 1994, October 30, 1993
and October 31, 1992....................................................................... 24
Consolidated Balance Sheets as of October 29, 1994, October 30, 1993 and October 31, 1992.... 25
Consolidated Statements of Stockholders' Equity for the years ended October 29, 1994,
October 30, 1993 and October 31, 1992...................................................... 26
Consolidated Statements of Cash Flows for the years ended October 29, 1994, October 30, 1993
and October 31, 1992....................................................................... 27
Notes to Consolidated Financial Statements................................................... 28
Supplementary Financial Information
(Quarterly Financial Information/1994 and 1993 - Unaudited)................................ 43
</TABLE>
22
<PAGE> 24
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Analog Devices, Inc.
We have audited the accompanying consolidated balance sheets of Analog Devices,
Inc. as of October 29, 1994, October 30, 1993 and October 31, 1992, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended October 29, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 consolidated financial position of Analog
Devices, Inc. at October 29, 1994, October 30, 1993 and October 31, 1992, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended October 29, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note 6 to the consolidated financial statements, claims and
actions have been brought against Analog Devices, Inc. and the ultimate outcome
of these claims and actions cannot presently be determined. Accordingly, no
provision for any liability, if any, that may result has been made in the
financial statements.
ERNST & YOUNG LLP
Boston, Massachusetts
November 29, 1994
23
<PAGE> 25
ANALOG DEVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended October 29, 1994, October 30, 1993 and October 31, 1992
(thousands except per share amounts) 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE Net sales................................... $ 773,474 $ 666,319 $ 567,315
COSTS AND Cost of sales............................... 394,448 350,852 301,678
---------- ---------- ----------
EXPENSES
Gross margin................................ 379,026 315,467 265,637
Operating expenses:
Research and development.................. 106,869 94,107 88,172
Selling, marketing, general...............
and administrative...................... 170,341 158,675 151,293
---------- ---------- ----------
277,210 252,782 239,465
---------- ---------- ----------
Operating income............................ 101,816 62,685 26,172
Nonoperating (income) expenses:
Interest expense.......................... 7,149 7,184 5,976
Interest income........................... (5,165) (1,417) (867)
Other..................................... 2,921 1,393 2,098
---------- ---------- ----------
4,905 7,160 7,207
---------- ---------- ----------
EARNINGS Income before income taxes.................. 96,911 55,525 18,965
Provision for (benefit from) income taxes:
Payable currently......................... 30,720 13,342 5,693
Deferred (prepaid)........................ (8,305) (2,274) (1,663)
--------- --------- ----------
22,415 11,068 4,030
---------- ---------- ----------
Net income.................................. $ 74,496 $ 44,457 $ 14,935
========== ========== ==========
Shares used to compute earnings per share... 77,271 75,695 71,624
========== ========== ==========
Earnings per share of common stock.......... $ .96 $ .59 $ .21
========== ========== ==========
<FN>
See accompanying notes.
</TABLE>
24
<PAGE> 26
<TABLE>
ANALOG DEVICES, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
October 29, 1994, October 30, 1993 and October 31, 1992
(thousands except share amounts)
<S> <C> <C> <C>
ASSETS 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
CURRENT Cash and cash equivalents.............................. $ 109,113 $ 80,668 $ 17,730
ASSETS Short-term investments................................. 72,652 - -
Accounts receivable less allowances of $6,403
($2,395 in 1993 and $2,138 in 1992).................. 162,337 145,663 111,732
Inventories............................................ 130,726 150,422 142,453
Prepaid income taxes................................... 25,587 22,207 20,549
Prepaid expenses....................................... 5,042 4,240 4,502
--------- --------- ---------
Total current assets................................... 505,457 403,200 296,966
--------- --------- ---------
PROPERTY, Land and buildings..................................... 111,857 81,110 77,909
PLANT AND Machinery and equipment................................ 477,339 451,248 402,722
EQUIPMENT, Office equipment....................................... 36,613 33,170 28,441
AT COST Leasehold improvements................................. 33,070 26,429 22,231
--------- --------- ---------
658,879 591,957 531,303
Less accumulated depreciation and amortization......... 377,064 343,527 293,880
--------- --------- ---------
Net property, plant and equipment...................... 281,815 248,430 237,423
--------- --------- ---------
OTHER Intangible assets, net................................. 19,262 21,306 23,387
ASSETS Deferred charges and other assets...................... 9,337 5,556 4,091
--------- --------- ---------
Total other assets..................................... 28,599 26,862 27,478
--------- --------- ---------
$ 815,871 $ 678,492 $ 561,867
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------------
CURRENT Short-term borrowings and current portion of
LIABILITIES long-term debt....................................... $ 22,917 $ 2,006 $ 2,376
Obligations under capital leases....................... 236 335 313
Accounts payable....................................... 74,506 48,779 43,315
Deferred income on shipments to domestic distributors.. 18,881 16,417 13,094
Income taxes payable................................... 29,425 15,405 1,655
Accrued liabilities.................................... 60,221 49,893 38,809
--------- --------- ---------
Total current liabilities.............................. 206,186 132,835 99,562
--------- --------- ---------
NONCURRENT Long-term debt......................................... 80,000 100,000 70,000
LIABILITIES Noncurrent obligations under capital leases............ 61 297 632
Deferred income taxes.................................. 3,225 8,540 12,657
Other noncurrent liabilities........................... 4,484 4,802 3,999
--------- --------- ---------
Total noncurrent liabilities........................... 87,770 113,639 87,288
--------- --------- ---------
Commitments and Contingencies
STOCKHOLDERS' Preferred stock, $1.00 par value, 500,000 shares
EQUITY authorized, none outstanding......................... - - -
Common stock, $.16 2/3 par value, 150,000,000
shares authorized, 75,252,112 shares issued
(50,924,637 in 1993 and 50,192,060 in 1992).......... 12,542 8,488 8,366
Capital in excess of par value, net of deferred compen-
sation of $4,757 ($3,223 in 1993 and $5,078 in 1992) 141,159 143,502 133,714
Retained earnings...................................... 362,194 287,698 243,241
Cumulative translation adjustment...................... 6,020 5,473 4,772
--------- --------- ---------
521,915 445,161 390,093
Less shares in treasury, at cost, none in 1994
(1,727,396 in 1993 and 2,067,226 in 1992)............ - 13,143 15,076
--------- --------- ---------
Total stockholders' equity............................. $ 521,915 $ 432,018 $ 375,017
--------- --------- ---------
$ 815,871 $ 678,492 $ 561,867
========= ========= =========
<FN>
See accompanying notes.
</TABLE>
25
<PAGE> 27
<TABLE>
ANALOG DEVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Years ended October 29, 1994,
October 30, 1993 and October 31, 1992 COMMON STOCK CAPITAL IN CUMULATIVE TREASURY STOCK
------------ EXCESS OF RETAINED TRANSLATION --------------
(thousands) SHARES AMOUNT PAR VALUE EARNINGS ADJUSTMENT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, November 2,
1991 49,840 $ 8,307 $130,899 $228,306 $4,696 (2,368) $(17,763)
- ------------------------------------------------------------------------------------------------------------------------
ACTIVITY Net income - 1992 14,935
IN FISCAL Proceeds from sales
1992 of shares through
employee stock plans
and other 352 59 2,815 301 2,687
Currency translation
adjustment 76
- ------------------------------------------------------------------------------------------------------------------------
Balance, October 31,
1992 50,192 8,366 133,714 243,241 4,772 (2,067) (15,076)
- ------------------------------------------------------------------------------------------------------------------------
ACTIVITY Net income - 1993 44,457
IN FISCAL Proceeds from sales
1993 of shares through
employee stock plans
and other 733 122 9,788 340 1,933
Currency translation
adjustment 701
- ------------------------------------------------------------------------------------------------------------------------
Balance, October 30,
1993 50,925 8,488 143,502 287,698 5,473 (1,727) (13,143)
- ------------------------------------------------------------------------------------------------------------------------
ACTIVITY Net income - 1994 74,496
IN FISCAL Proceeds from sales
1994 of shares through
employee stock plans,
tax benefit of $2.2
and other 470 78 11,293 501 3,483
Three-for-two stock
split 23,857 3,976 (13,636) 1,226 9,660
Currency translation
adjustment 547
- ------------------------------------------------------------------------------------------------------------------------
Balance, October 29,
1994 75,252 $12,542 $141,159 $362,194 $6,020 - $ -
========================================================================================================================
</TABLE>
See accompanying notes.
26
<PAGE> 28
<TABLE>
ANALOG DEVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years ended October 29, 1994, October 30, 1993 and October 31, 1992
(thousands) 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS Cash flows from operations:
Net income . . . . . . . . . . . . . . . . . . . . $ 74,496 $ 44,457 $ 14,935
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization . . . . . . . . . 61,284 59,813 54,950
Deferred income taxes . . . . . . . . . . . . . (5,398) (4,130) 1,003
Other noncash expenses . . . . . . . . . . . . 2,195 2,779 4,057
(Increase) in accounts receivable . . . . . . . (7,661) (35,598) (15,307)
(Increase) decrease in inventories . . . . . . 20,756 (6,268) (24,690)
(Increase) in prepaid income taxes . . . . . . (626) (1,718) (2,634)
(Increase) decrease in prepaid expenses . . . . (598) 224 (2,213)
(Increase) decrease in other assets . . . . . . (3,269) (1,406) 721
Increase in accounts payable,
deferred income and accrued liabilities . . . 28,939 16,617 5,523
Increase (decrease) in income taxes payable . . 14,063 13,922 (3,317)
Increase (decrease) in other liabilities . . . (839) 803 434
--------- --------- ----------
Total adjustments . . . . . . . . . . . . . . . . . 108,846 45,038 18,527
--------- --------- ----------
Net cash provided by operations . . . . . . . . . . . . 183,342 89,495 33,462
--------- --------- ----------
INVESTMENTS Cash flows from investments:
Additions to property, plant and equipment, net . . (90,856) (67,155) (65,654)
Purchase of short-term investments . . . . . . . . . (72,652) - -
--------- --------- ----------
Net cash used for investments . . . . . . . . . . . . . (163,508) (67,155) (65,654)
--------- --------- ----------
FINANCING Cash flows from financing activities:
ACTIVITIES Proceeds from employee stock plans . . . . . . . . . 9,821 9,995 3,243
Net increase (decrease) in variable rate borrowings. 485 (29,895) (7,020)
Payments on capital lease obligations . . . . . . . (335) (313) (376)
Proceeds from issuance of long-term debt . . . . . . - 80,000 -
Payments on fixed rate borrowings . . . . . . . . . - (20,194) (12,194)
Proceeds from issuance of short-term, fixed rate
borrowings . . . . . . . . . . . . . . . . . . . - - 50,000
--------- --------- ----------
Net cash provided by financing activities . . . . . . . 9,971 39,593 33,653
--------- --------- ----------
Effect of exchange rate changes on cash . . . . . . . . (1,360) 1,005 (263)
--------- --------- ----------
Net increase in cash and cash equivalents . . . . . . . 28,445 62,938 1,198
Cash and cash equivalents at beginning of year . . . . 80,668 17,730 16,532
--------- --------- ----------
Cash and cash equivalents at end of year . . . . . . . $ 109,113 $ 80,668 $ 17,730
========= ========= ==========
SUPPLE- Cash paid during the year for:
MENTAL Income taxes . . . . . . . . . . . . . . . . . . . . $ 12,965 $ 4,084 $ 7,709
========= ========= ==========
INFORMATION Interest . . . . . . . . . . . . . . . . . . . . . . $ 6,923 $ 6,771 $ 5,468
========= ========= ==========
</TABLE>
See accompanying notes.
27
<PAGE> 29
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 29, 1994, OCTOBER 30, 1993 AND OCTOBER 31, 1992
(ALL TABULAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all of its wholly owned subsidiaries. All intercompany balances and
transactions are eliminated. The Company's fiscal year ends on the Saturday
closest to the last day in October. Fiscal years 1994, 1993 and 1992 were each
52-week years.
B. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash and cash equivalents are highly liquid investments with a maturity of
three months or less at the time of acquisition. Cash and cash equivalents are
stated at cost which approximates fair value.
Short-term investments consist of commercial paper, certificates of deposit and
bankers' acceptances with maturities greater than three months and less than
one year at the time of acquisition. The short-term investments are stated at
cost which approximates fair value due to the short maturity of these
instruments.
The Company is required to adopt Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities,"
(FAS 115) in fiscal 1995. Adoption of FAS 115 is not expected to have a
material impact on the Company's consolidated financial statements.
<TABLE>
C. INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out method) or
market. Inventories at October 29, 1994, October 30, 1993 and October 31, 1992
were as follows:
<CAPTION>
1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Raw materials $ 15,277 $ 18,645 $ 26,239
Work in process 69,771 80,418 73,604
Finished goods 45,678 51,359 42,610
- --------------------------------------------------------------------------------
Total inventories $130,726 $150,422 $142,453
================================================================================
</TABLE>
A director of the Company is also a director of a raw material supplier. Total
purchases from this supplier approximated $28,435,000 in 1994, $37,990,000 in
1993 and $21,984,000 in 1992. Accounts payable to this supplier at October 29,
1994, October 30, 1993 and October 31, 1992 approximated $1,090,000, $3,639,000
and $3,655,000, respectively. Another director of the Company was also a
director of a raw material supplier through June 1993. Total purchases from
this supplier approximated $1,510,000 in 1993 and $5,216,000 in 1992. Accounts
payable to this supplier at October 31, 1992 approximated $397,000. The Company
believes that the terms of these purchases were comparable to those available
from other suppliers.
D. PROPERTY, PLANT AND EQUIPMENT
The straight-line method of depreciation is used for all classes of assets for
financial statement purposes; both straight-line and accelerated methods are
used for income tax purposes. Capitalized leases and leasehold improvements are
amortized based upon the lesser of the term of the lease or the useful life of
the asset. Depreciation and amortization are based on the following useful
lives:
Buildings & Building Equipment Up to 25 years
Machinery & Equipment 3-10 years
Office Equipment 3-8 years
28
<PAGE> 30
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Total depreciation and amortization of property, plant and equipment was
$59,240,000, $57,732,000 and $52,858,000 in 1994, 1993 and 1992, respectively.
E. INTANGIBLE ASSETS
Intangible assets at October 29, 1994 consist of goodwill, patents and other
intangibles. Goodwill is being amortized on a straight-line basis over a
fifteen-year period. Patents and other intangibles are being amortized on a
straight-line basis over their estimated economic lives which range from four
to fifteen years. Amortization expense for all intangible assets was
$2,044,000, $2,081,000 and $2,092,000 in 1994, 1993 and 1992, respectively.
Accumulated amortization for all intangible assets was $8,636,000, $6,657,000
and $4,706,000 at October 29, 1994, October 30, 1993 and October 31, 1992,
respectively.
F. TRANSLATION OF FOREIGN CURRENCIES
The functional currency for the Company's foreign sales operations is the
applicable local currency. Gains and losses resulting from translation of these
foreign currencies into U.S. dollars are accumulated in a separate component of
stockholders' equity. Transaction gains and losses are included in income
currently, including those at the Company's principal foreign manufacturing
operations where the functional currency is the U.S. dollar.
G. FOREIGN CURRENCY INSTRUMENTS AND INTEREST RATE AGREEMENTS
The Company enters into forward foreign exchange contracts, foreign currency
option contracts and currency swap agreements to offset certain operational and
balance sheet exposures from changes in foreign currency exchange rates. Such
exposures result from the portion of the Company's operations, assets and
liabilities that are denominated in currencies other than the U.S. dollar.
These foreign exchange contract, option and swap transactions are entered into
to support normal recurring purchases, product sales and financing
transactions, and accordingly, are not speculative in nature.
Forward foreign exchange contracts are utilized to manage the risk associated
with currency fluctuations on certain firm purchase commitments, firm sales
commitments and certain non-U.S. dollar denominated asset and liability
positions. The forward foreign exchange contracts that relate to firm purchase
and sales commitments are designated as effective hedges of firm foreign
currency commitments, and accordingly, the gains and losses on these contracts
are deferred and included in the measurement of the related foreign currency
transaction. Gains and losses on forward foreign exchange contracts designated
to hedge foreign currency assets and liabilities are recognized in income as
the exchange rates change and offset the foreign currency gains and losses on
the related transactions. The face amounts of forward foreign exchange
contracts outstanding at October 29, 1994, October 30, 1993 and October 31,
1992 were $136.4 million, $107.9 million and $107.4 million, respectively.
Forward foreign exchange contracts outstanding at October 29, 1994 have
maturities of up to 14 months.
The Company also may periodically purchase foreign currency option contracts to
hedge certain probable anticipated, but not firmly committed, foreign currency
transactions related to the sale of product during the ensuing twelve months.
These foreign currency option contracts are designated as effective hedges of
such transactions, and accordingly, the costs and any gains associated with
these option contracts are deferred and included in the measurement of the
related foreign currency transaction. When the dollar strengthens significantly
against the foreign currencies, the decline in value of future foreign currency
cash flows is partially offset by the gains in the value of purchased currency
options designated as hedges. Conversely, when the dollar weakens, the increase
in the value of future foreign currency cash flows is reduced only by the
premium paid to acquire the options. The face amounts of foreign currency
option contracts outstanding at October 29, 1994, October 30, 1993 and October
31, 1992 were $28.6 million, $29.0 million and $27.3 million, respectively.
Purchased foreign currency options outstanding at October 29, 1994 have
maturities of up to 6 months.
29
<PAGE> 31
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Currency swap agreements are utilized to hedge the net investment in certain
foreign subsidiaries. Realized and unrealized gains and losses on such
agreements related to the net foreign investment being hedged are recognized in
the cumulative translation adjustment component of stockholders' equity. The
face amount of currency swap agreements outstanding at October 29, 1994 was
$10.0 million. Currency swap agreements outstanding at October 29, 1994 have
maturities of up to one year.
The Company enters into interest rate swap and cap agreements to partially
modify the interest characteristics of its financing arrangements from a fixed
to a floating rate basis. These agreements involve the receipt of fixed rate
amounts in exchange for floating rate interest payments over the life of the
agreement without an exchange of the underlying principal amounts. The
differential to be paid or received is accrued as interest rates change and
recognized as an adjustment to interest expense related to the financing
arrangement. The related amount payable to or receivable from counterparties is
included in liabilities or assets. The notional principal amounts of interest
rate swap and cap agreements outstanding at October 29, 1994 and October 30,
1993 were $50.5 million and $40.0 million, respectively. Interest rate swap and
cap agreements outstanding at October 29, 1994 have maturities of up to 12
years.
The cash requirements of the above-described foreign currency instruments and
interest rate swap and cap agreements approximate their fair value. Cash flows
associated with these financial instruments are classified consistent with the
cash flows from the transactions being hedged.
The foreign currency instruments and interest rate swap and cap agreements
involve, to a varying degree, elements of market and interest rate risk not
recognized in the consolidated financial statements. While the contract or
notional amounts are often used to express the volume of the above-described
instruments, the amounts potentially subject to credit risk are generally
limited to the amounts, if any, by which the counterparties' obligations under
the agreements exceed the obligations of the Company to the counterparties. The
Company controls credit risk through credit approvals, limits and monitoring
procedures including the use of high credit quality counterparties.
H. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of investments and trade accounts
receivable.
The Company maintains cash, cash equivalents and short-term investments with
high credit quality financial institutions and monitors the amount of credit
exposure to any one financial institution.
The Company sells its products to distributors and original equipment
manufacturers involved in a variety of industries including industrial
automation, instrumentation, military/aerospace, and to an increasing degree,
computers and peripherals, telecommunications and high performance consumer
electronics. The Company has adopted credit policies and standards to
accommodate growth into these markets. The Company believes that any risk of
accounting loss with respect to trade accounts receivable is limited due to the
diversity of its products, end customers and geographic sales areas. The
Company performs continuing credit evaluations of its customers financial
condition and although the Company generally does not require collateral,
letters of credit may be required from its customers in certain circumstances.
Due to the Company's credit evaluation and collection process, bad debt losses
have been insignificant.
30
<PAGE> 32
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
I. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of Financial
Accounting Standards No. 107, "Disclosures About Fair Value of Financial
Instruments."
The following estimated fair value amounts have been determined by the Company
using available market information and appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.
<TABLE>
<CAPTION>
OCTOBER 29, 1994 OCTOBER 30, 1993
---------------- ----------------
CARRYING FAIR CARRYING FAIR
<S> <C> <C> <C> <C>
Amount Value Amount Value
- --------------------------------------------------------------------------------------------------------
Assets:
Cash and cash equivalents $ 109,113 $ 109,113 $ 80,668 $ 80,668
Short-term investments 72,652 72,652 - -
Liabilities:
Short-term borrowings (2,917) (2,917) (2,006) (2,006)
Long-term debt, including
current portion (100,000) (93,800) (100,000) (102,400)
Foreign Currency Instruments and
Interest Rate Agreements:
Interest rate swap
and cap agreements 5 (3,065) 98 89
Forward foreign currency
exchange contracts (1,458) 641 727 25
Foreign currency option
contracts 308 41 460 468
Currency swap agreement (853) (840)
- -
- --------------------------------------------------------------------------------------------------------
</TABLE>
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash, cash equivalents and short-term investments -The carrying amounts of
these items are a reasonable estimate of their fair value due to the short term
to maturity and readily available market for these types of investments.
Short-term borrowings-The carrying amounts of these variable-rate borrowings
approximate fair value due to the short period of time to maturity.
Long-term debt-The fair value of long-term debt is estimated based on current
interest rates available to the Company for debt instruments with similar
terms, degree of risk and remaining maturities.
Interest rate swap and cap agreements-The fair value of interest rate swap and
cap agreements are obtained from dealer quotes. These values represent the
estimated amount the Company would receive or pay to terminate the agreements
taking into consideration current interest rates.
Forward foreign currency exchange contacts-The estimated fair value of forward
foreign currency exchange contracts is based on the estimated amount at which
they could be settled based on market exchange rates.
31
<PAGE> 33
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Foreign currency option contracts and currency swap agreement-The fair values
of foreign currency option contracts and currency swap agreement are obtained
from dealer quotes. These values represent the estimated amount the Company
would receive or pay to terminate the agreements.
J. REVENUE RECOGNITION
Revenue from product sales to end users is recognized upon shipment. A portion
of the Company's sales are made to domestic distributors under agreements
allowing for price protection and certain rights of return on merchandise
unsold by the distributors. Because of the uncertainty associated with pricing
concessions and future returns, the Company defers recognition of such sales
and related gross margin until the merchandise is sold by the distributors. For
sales to international distributors, the Company recognizes the sale upon
shipment to the distributor, but provides specific reserves for possible
returns and allowances.
K. INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FAS
109). FAS 109 requires a change from the deferred method of accounting for
income taxes under APB Opinion 11 to the asset and liability method of
accounting for income taxes. Under the asset and liability method of FAS 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. 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. Under FAS 109, the effect
of a change in tax rates on deferred tax assets and liabilities is recognized
in income in the period that includes the enactment date.
Effective October 31, 1993 the Company adopted FAS 109. The adoption of FAS 109
was not material to the consolidated financial statements. As permitted by FAS
109, prior years' financial statements have not been restated.
Pursuant to the deferred method under APB Opinion 11, which was applied at
October 30, 1993 and in prior fiscal years, deferred income taxes are
recognized for income and expense items that are reported in different years
for financial reporting purposes and income tax purposes using the tax rate
applicable for the year of calculation. Under the deferred method, deferred
taxes are not adjusted for subsequent changes in tax rates.
L. STOCK SPLIT
On November 30, 1994, the Company's Board of Directors authorized a
three-for-two stock split effected in the form of a 50% stock dividend
distributed on January 4, 1995 to stockholders of record December 12, 1994. The
split was accomplished through the issuance of common stock and the reissuance
of treasury stock. All references to share and per share amounts have been
restated to reflect the split.
M. EARNINGS PER SHARE OF COMMON STOCK
Primary earnings per common share are computed based on the weighted average
number of common shares outstanding during the year, adjusted for incremental
shares assumed issued for dilutive common stock equivalents. Fully diluted
earnings per share do not differ materially from primary earnings per share.
N. RECLASSIFICATIONS
Certain amounts reported in previous years have been reclassified to conform to
the 1994 presentation.
32
<PAGE> 34
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. INDUSTRY AND GEOGRAPHIC SEGMENT INFORMATION
INDUSTRY
The Company operates predominantly in one industry segment: the design,
manufacture and marketing of a broad line of high-performance linear,
mixed-signal and digital integrated circuits that address a wide range of
real-world signal processing applications.
GEOGRAPHIC INFORMATION
The Company operates in three major geographic areas. information on the
Company's geographic operations is set forth in the table below. the
predominant countries comprising European operations are England, France,
Germany and Ireland. The predominant country comprising Asian operations is
Japan. For segment reporting purposes, sales generated by North American
operations in the table include export sales of $96,700,000, $71,542,000 and
$41,010,000 in 1994, 1993 and 1992, respectively; sales generated by European
operations include export sales of $1,267,000 in 1992. Transfers between
geographic areas are based on market comparables and are consistent with
prevailing tax regulations. Operating income reflects the allocation of
corporate expenses of $19,718,000, $17,174,000 and $14,901,000 in 1994, 1993
and 1992, respectively, to the appropriate geographic area based upon their
beneficial and causal relationship to each area. Corporate identifiable assets
consist of cash equivalents, short-term investments and intangible assets.
<TABLE>
<CAPTION>
GEOGRAPHIC SEGMENT INFORMATION 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales NORTH AMERICA, INCLUDING EXPORT . . . . $440,609 $363,671 $309,110
EUROPE . . . . . . . . . . . . . . . . . 198,000 196,310 169,330
ASIA . . . . . . . . . . . . . . . . . . 134,865 106,338 88,875
-------- -------- --------
TOTAL SALES . . . . . . . . . . . . . $773,474 $666,319 $567,315
======== ======== ========
Transfers NORTH AMERICA, INCLUDING EXPORT . . . . $192,442 $161,081 $129,030
Between EUROPE . . . . . . . . . . . . . . . . . 110,801 94,948 64,630
Areas ASIA . . . . . . . . . . . . . . . . . . 19,603 12,569 -
-------- -------- --------
TOTAL TRANSFERS BETWEEN AREAS . . . . $322,846 $268,598 $193,660
======== ======== ========
Operating NORTH AMERICA, INCLUDING EXPORT . . . . $ 52,706 $ 26,546 $ 5,679
Income EUROPE . . . . . . . . . . . . . . . . . 47,170 35,205 18,516
ASIA . . . . . . . . . . . . . . . . . . 1,940 934 1,977
-------- -------- --------
TOTAL OPERATING INCOME . . . . . . . . $101,816 $ 62,685 $ 26,172
======== ======== ========
Identifiable NORTH AMERICA, INCLUDING EXPORT . . . . $354,881 $367,347 $333,256
Assets EUROPE . . . . . . . . . . . . . . . . . 176,755 147,979 143,042
ASIA . . . . . . . . . . . . . . . . . . 95,988 78,215 48,182
CORPORATE . . . . . . . . . . . . . . . 188,247 84,951 37,387
-------- -------- --------
TOTAL ASSETS . . . . . . . . . . . . . $815,871 $678,492 $561,867
======== ======== ========
</TABLE>
33
<PAGE> 35
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
3. ACCRUED LIABILITIES
Accrued liabilities at October 29, 1994, October 30, 1993 and October 31, 1992 consisted of the following:
<CAPTION>
1994 1993 1992
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accrued compensation
and benefits $33,908 $31,652 $23,007
Other 26,313 18,241 15,802
- -----------------------------------------------------------------------------------------------
Total accrued liabilities $60,221 $49,893 $38,809
===============================================================================================
</TABLE>
4. DEBT AND CREDIT FACILITIES
6 5/8% NOTES
ON March 11, 1993, the Company completed a public offering of $80 million of
seven-year 6 5/8% notes due March 1, 2000 with semiannual interest payments on
March 1 and September 1. The net proceeds of the offering were approximately
$79 million after payment of the underwriting discounts and expenses of the
offering which were deferred and are being amortized to interest expense over
the term of the Notes. Approximately $60.0 million of the net proceeds was used
to repay in full outstanding U.S. dollar borrowings under the Company's
revolving credit agreement. Simultaneous with the sale of the Notes, the
Company entered into an interest rate swap and cap agreement for the term of
the Notes having a notional principal amount of $40 million whereby the
effective net interest rate on $40 million of the Notes will be the six-month
libor rate (up to a maximum of 7%) plus 1.4%. For the year ended October 29,
1994, the net effective interest rate on $40 million of the Notes was 6.6%
after giving effect to the interest rate swap agreement.
FIXED RATE TERM LOAN
The Company has an unsecured, three-year term loan with a bank in the amount of
$20,000,000 at a fixed interest rate of 7.18% per annum. Under this agreement,
the Company is generally subject to the same financial covenants as are
contained in the Revolving Credit Agreement described below. The Company was in
compliance with all covenants under this agreement at October 29, 1994. This
loan was repaid in full at maturity on November 14, 1994.
REVOLVING CREDIT AGREEMENT AND LINES OF CREDIT
The Company has a revolving credit agreement with several banks which commits
them to lend up to $60,000,000. The terms of the credit agreement provide that
interest on U.S. dollar borrowings may not exceed the greater of the prime rate
or the federal funds rate plus .50%. Under this agreement, the Company also has
the option to borrow both U.S. dollars and foreign currencies at interest rates
tied to various money market instruments, customarily below the prime rate.
Under the credit agreement, the Company is currently required to pay fees of
.05 of 1% per annum on the unused portion of the lending commitment and .15 of
1% per annum on the total amount of the committed facility. All borrowings
under the credit agreement are due no later than September 8, 1998. Borrowing
from banks not participating in the agreement is permitted as long as the
Company maintains certain required financial ratios. The credit agreement
requires the Company to maintain stated minimum net worth and current ratio
levels, plus a stated maximum ratio of total liabilities to net worth. In
addition, the credit agreement restricts the aggregate of all cash dividend
payments declared or made subsequent to October 29, 1994 to an amount not
exceeding $85,147,000 plus 50% of the consolidated net income of the Company
for the period from October 30, 1994 through the end of the Company's then most
recent fiscal quarter. At October 29, 1994, the Company was in compliance with
all covenants under the credit agreement. There are no compensating balance
requirements under the credit agreement. In addition to the credit agreement,
the Company also has various unsecured, uncommitted money market lines of
credit with its credit agreement and other banks which provide for short-term
borrowings.
34
<PAGE> 36
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The weighted average interest rates of U.S. dollar borrowings under the credit
agreement and the uncommitted money market lines of credit were 4.0% and 4.3%
during 1993 and 1992, respectively. The weighted average interest rate of U.S.
dollar borrowings under the credit agreement and the uncommitted money market
lines of credit was 4.1% at October 31, 1992. There were no variable rate U.S.
dollar borrowings under the credit agreement or the uncommitted money market
lines of credit during 1994 nor were there any such borrowings outstanding at
October 29, 1994 or October 30, 1993. The weighted average interest rates of
foreign currency borrowings under foreign lines of credit were 8.7%, 10.9% and
12.4% during 1994, 1993 and 1992, respectively. The weighted average interest
rates of foreign currency borrowings were 7.4%, 11.8% and 11.7% at October 29,
1994, October 30, 1993 and October 31, 1992, respectively. There were $2.9
million of foreign currency borrowings outstanding at October 29, 1994, which
were at prevailing money market rates for the respective currencies. Borrowings
under the Company's credit agreement and lines of credit are generally due
within six months. In 1992, however, a portion of these borrowings were
classified as long-term debt based on the Company's intention to refinance a
portion of these borrowings on a long-term basis and the ability to refinance
these borrowings under the credit agreement.
<TABLE>
Long-term debt, including current maturities, at October 29, 1994, October 30,
1993 and October 31, 1992 consisted of the following:
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6 5/8% Notes due 2000 $ 80,000 $ 80,000 $ -
7.18% term loan 20,000 20,000 20,000
Revolving credit agreement
and other lines of credit:
U.S. dollars - - 30,000
4.73% term loan - - 20,000
Other - - 194
- ------------------------------------------------------------------------------------------------------
100,000 100,000 70,194
Less current portion of
long term debt 20,000 - 194
- ------------------------------------------------------------------------------------------------------
Long term debt $ 80,000 $100,000 $70,000
======================================================================================================
</TABLE>
Aggregate principal payments on long-term debt and short-term borrowings for
the following fiscal years are: 1995-$22.9 million; 2000-$80.0 million.
35
<PAGE> 37
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LEASE COMMITMENTS
The Company leases certain of its facilities and equipment under various
operating and capital leases which expire at various dates through 2010. The
lease agreements frequently include renewal and purchase provisions and require
the Company to pay taxes, insurance and maintenance costs.
Total rental expense under operating leases was $9,985,000, $8,853,000 and
$9,268,000 in 1994, 1993 and 1992, respectively.
<TABLE>
The following is a schedule of future minimum lease payments under capital
leases and rental payments required under long-term operating leases at October
29, 1994:
<CAPTION>
OPERATING CAPITAL
FISCAL YEARS LEASES LEASES
- -------------------------------------------------------------------------------
<S> <C> <C>
1995 $ 7,893 $280
1996 4,444 47
1997 3,004 -
1998 2,618 -
1999 2,530 -
Later Years 19,231 -
- -------------------------------------------------------------------------------
Total $39,720 $327
=======
Less amount representing interest (30)
----
Present value of minimum lease payments $297
====
</TABLE>
<TABLE>
Net property, plant and equipment includes the following for capital leases:
<CAPTION>
1994 1993 1992
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Land and buildings $ 1,828 $ 1,828 $ 1,828
Machinery and equipment 829 829 10,012
- --------------------------------------------------------------------------------------------
2,657 2,657 11,840
Less accumulated amortization (2,468) (2,231) (11,173)
- --------------------------------------------------------------------------------------------
Net capital leases $ 189 $ 426 $ 667
============================================================================================
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
The Company is a defendant in a lawsuit brought by Texas Instruments,
Incorporated (TI) claiming damages for the Company's alleged infringement of
certain patents related to plastic encapsulation of semiconductor devices. The
lawsuit relates to sales of plastic encapsulated products sold between February
1989 and August 1994 when the patents expired. In January 1994, the
International Trade Commission (ITC) brought an enforcement proceeding against
the Company alleging that the Company had violated the terms of the
Commission's February 1992 cease and desist order (as modified in July 1993)
relating to the importation of plastic encapsulated products into the United
States from the Company's foreign subsidiaries. If the Company is found to be
in violation of the orders, it may be subject to substantial penalties. The
Company has denied the essential allegations in the complaints and believes
that it has meritorious defenses in each of these actions which it intends to
vigorously pursue. The Company also has a lawsuit pending against TI in which
the Company alleges that TI infringed one of its patents relating to digital
signal processing products, and TI has filed counterclaims.
36
<PAGE> 38
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is a defendant in a lawsuit brought by Maxim Integrated
Products, Inc. ("Maxim") seeking an injunction against, and claiming damages
for, alleged antitrust violations and unfair competition in connection with
distribution arrangements between the Company and certain distributors. Maxim
alleged that certain distributors ceased doing business with Maxim as a result
of the distribution arrangements between the distributors and the Company,
resulting in an improper restriction to Maxim's access to channels by which it
distributes its products. Maxim asserted actual and consequential damages in
the amount of $14.1 million and unspecified claims for restitution and punitive
damages. Under applicable law, Maxim would receive three times the amount of
any actual damages suffered as a result of any antitrust violation. On
September 7, 1994, Maxim's claim was dismissed for lack of evidence. Maxim has
appealed this ruling and briefing of the appeal is scheduled to be concluded by
March 7, 1995.
Although the Company believes it should prevail in the matters described in
the previous two paragraphs, the Company is unable to determine their ultimate
outcome or estimate the ultimate amount of liability, if any, at this time.
An adverse resolution of these matters could have a material adverse effect
on the Company's consolidated financial position or on its consolidated results
of operations or cash flows in the period in which the matters are resolved.
From time to time as a normal incidence of the nature of the Company's
business, various claims, charges and litigation are asserted or commenced
against the Company arising from or related to contractual relations, personal
injury, environmental matters and product liability. The Company has also
received and made inquiries with regard to other possible patent infringement
claims. These inquiries have been referred to counsel and are in various stages
of discussion. If any infringements are determined to exist, the Company may
seek or extend licenses or settlements. While the Company cannot accurately
predict the ultimate outcome of the matters referred to in this paragraph, at
this time management believes that the likelihood of an outcome resulting in a
material adverse effect on the Company's consolidated financial position,
trends in results of operations or cash flows is remote.
The Company's wholly owned manufacturing facility in the Republic of Ireland
has received operating and capital grants. A liability to repay up to
$19.2 million of the grants received by the Company would arise in the unlikely
event the Company should liquidate its Irish operation prior to the commitment
periods noted in the grant agreements which expire at various dates through
1999.
Under the terms of the lease agreement related to the Company's headquarters
facility in Norwood, Massachusetts, the Company has agreed to assume the note
related to the property in the case of default by the lessor. Assumption of the
note, which was $10.5 million at October 29, 1994, would entitle the Company to
a first lien on the property. In addition, the Company may be subject to an
incremental rent payment if the Company were to either default on the lease or
not exercise its option to extend the lease at the end of the current
fifteen-year term. This payment would be the present value of the balance of
the lessor's debt related to the property in excess of $6.5 million at the end
of the current lease term. As of October 29, 1994, the Company's unrecorded
financial risk of loss under this agreement was $1.5 million in the unlikely
event of default.
7. STOCKHOLDERS' EQUITY
COMMON STOCK
In December 1994, the Board of Directors authorized an amendment to the
Company's Articles of Organization to increase the authorized number of shares
of common stock from 150,000,000 to 300,000,000 subject to stockholder approval
in March 1995.
STOCK PLANS
The 1988 Stock Option Plan provides for the issuance of nonstatutory and
incentive stock options to purchase up to 10,350,000 shares of common stock.
Under this plan, options may be granted to key employees of the Company and its
subsidiaries at a price not less than 100% of the fair market value of the
underlying stock on the date of grant. The Company's 1980 Stock Option Plan was
terminated upon adoption of the 1988 Stock Option Plan; however, options
to purchase common stock remain outstanding under this plan.
37
<PAGE> 39
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under the 1992 Director Option Plan, each nonemployee director receives
nonstatutory options to purchase 15,000 shares of common stock at an exercise
price equal to the fair market value on the date of grant. A total of 150,000
shares of common stock may be issued under this plan. In December 1994, the
Board of Directors authorized the 1994 Director Option Plan under which
each nonemployee director will receive options to purchase 5,250 shares of
common stock annually at an exercise price equal to the fair market value on
the date of grant. These options vest ratably over a three-year period. A total
of 200,000 shares of common stock are reserved for issuance under the plan
which is subject to stockholder approval in March 1995. Upon adoption of the
1994 Director Option Plan by the stockholders, no additional options will
be granted under the 1992 Director Option Plan.
While the Company may grant options to employees which become exercisable at
different times or within different periods, the Company has generally granted
options which are exercisable in annual installments of 33.3% each during the
third, fourth and fifth years after the date of grant.
<TABLE>
Transactions under the Company's stock option plans are summarized in the table below:
<CAPTION>
OPTIONS OUTSTANDING
SHARES ---------------------------------
AVAILABLE OPTION PRICE AGGREGATE
STOCK OPTION ACTIVITY FOR GRANT NUMBER PER SHARE PRICE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, November 2, 1991 1,765 5,217 $2.90 to $12.25 $30,282
- ----------------------------------------------------------------------------------------------------------------
Options granted (1,735) 1,735 $5.00 to $6.83 11,171
Options exercised - (252) $2.90 to $5.35 (898)
Options cancelled (1) 268 (381) $2.90 to $10.50 (2,238)
- ----------------------------------------------------------------------------------------------------------------
Balance, October 31, 1992 298 6,319 $3.92 to $ 12.25 38,317
- ----------------------------------------------------------------------------------------------------------------
Additional shares authorized for 1988 Stock Option Plan 5,250 - - -
Shares authorized For 1992 Director Option Plan 150 - - -
Options granted (174) 174 $6.59 to $16.09 1,669
Options exercised - (1,066) $3.92 to $10.50 (7,695)
Options cancelled (1) 330 (384) $3.92 to $10.50 (2,224)
Shares cancelled upon termination of 1989
Director Stock Option Plan (45) - - -
- ----------------------------------------------------------------------------------------------------------------
Balance, October 30, 1993 5,809 5,043 $3.92 to $16.09 30,067
- ----------------------------------------------------------------------------------------------------------------
Options granted (2,061) 2,061 $14.09 to $20.00 30,482
Options exercised - (683) $3.92 to $12.25 (4,250)
Options cancelled (1) 123 (124) $3.92 to $17.17 (844)
- ----------------------------------------------------------------------------------------------------------------
Balance, October 29, 1994 3,871 6,297 $3.92 to $20.00 $55,455
================================================================================================================
Options exercisable at October 29, 1994 1,404 $3.92 to $10.50 $8,010
================================================================================================================
<FN>
(1) Options cancelled which were originally issued from the 1988 Stock Option
Plan are available for subsequent grants. The remaining options cancelled in
1994, 1993 and 1992 were issued from the 1980 Stock Option Plan which has
been terminated.
</TABLE>
The Company has a stock purchase plan that allows eligible employees to
purchase, through payroll deductions, shares of the Company's common stock at
85% of the fair market value at specified dates. Employees purchased 523,800
shares in 1994 (754,500 and 513,500 in 1993 and 1992, respectively) for $6.0
million ($4.2 million and $2.8 million in 1993 and 1992, respectively). At
October 29, 1994, 1,422,000 common shares remained available for issuance under
the plan.
38
<PAGE> 40
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Under the 1991 Restricted Stock Plan, a maximum of 1,050,000 shares of common
stock may be awarded by the Company to key employees for nominal consideration.
This plan succeeded the Company's 1978 Restricted Stock Plan which provided for
the issuance of up to 3,686,400 shares of common stock. Shares awarded from
both plans are restricted as to transfer, usually for a period of five years
and, under certain conditions, may be subject to repurchase by the Company at
the original purchase price per share. Shares awarded under the Company's
restricted stock plans, net of cancellations, for 1994, 1993 and 1992 were
243,000, 21,000 and 231,000, respectively. The fair market value of the shares
at the date of award was accounted for as deferred compensation and is being
amortized over the restricted period. During 1994, 1993 and 1992, $1,851,000,
$1,716,000 and $1,887,000, respectively, of such compensation was charged to
expense. At October 29, 1994, there were 275,250 shares of common stock
available for issuance under the 1991 Restricted Stock Plan.
WARRANTS
In 1990, the Company issued warrants for the purchase of 1,500,000 shares of
common stock. Each warrant entitles the holder to purchase one share of the
Company's common stock at an exercise price of $8 per share, subject to certain
adjustments, anytime prior to the expiration of the warrants on August 7, 1997.
At October 29, 1994, all of the warrants were outstanding.
As of October 29, 1994, a total of 13,365,000 common shares were reserved for
issuance under the company's stock plans and warrant agreement.
PREFERRED STOCK
The Company has 500,000 authorized shares of $1.00 par value Preferred Stock.
The Board of Directors is authorized to fix designations, relative rights,
preferences and limitations on the preferred stock at the time of issuance. The
Company had previously authorized 35,000 shares of such Preferred Stock as
Series A Convertible Preferred Stock, of which 28,066 shares were sold in prior
years. As of June 14, 1990, all of these shares had been fully converted to
common stock.
COMMON STOCK PURCHASE RIGHTS
In 1988, the Board of Directors adopted a Shareholder Rights Plan which
provides for a dividend distribution of one common stock purchase right for
each share of common stock outstanding on February 12, 1988. Under certain
circumstances, each right entitles the holder to purchase from the Company one
share of common stock at an exercise price of $40 per share.
The rights are not exercisable and cannot be transferred separately from the
common stock until ten days after a person acquires 20% or more or makes a
tender offer for 30% or more of the Company's common stock. If, after the
rights become exercisable, (i) any person becomes the owner of 20% or more of
the Company's common stock, or (ii) the Company is the surviving entity in a
merger with a 20% or more stockholder, or (iii) a 20% or more stockholder
engages in certain "self-dealing" transactions with the Company, each right not
owned by such person will entitle its holder to purchase, at the right's
exercise price, common stock having a value of two times the exercise price of
the right. In addition, if the Company is either (i) acquired in a merger or
other business combination in which the Company is not the surviving entity, or
(ii) sells or transfers 50% or more of its assets or earning power to another
party, each right will entitle its holder to purchase, upon exercise, common
stock of the acquiring Company having a value equal to two times the exercise
price of the right.
The rights expire on February 12, 1998 but may be redeemed by the Company for
$.0133 per right at any time prior to the tenth day following a person's
acquisition of 20% or more of the Company's common stock. So long as the rights
are not separately transferable, the Company will issue one right with each new
share of common stock issued.
39
<PAGE> 41
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. RETIREMENT PLANS
The Company and its subsidiaries have various savings and retirement plans
covering substantially all employees. The Company maintains defined
contribution plans for the benefit of its eligible United States employees.
These plans provide for Company contributions of up to 5% of each participant's
total eligible compensation. In addition, the Company contributes an amount
equal to each participant's contribution, if any, up to a maximum of 2% of each
participant's total eligible compensation. The Company also has various defined
benefit pension and other retirement plans for certain foreign employees that
are consistent with local statutes and practices. The total expense related to
all of the Company's retirement plans in 1994, 1993 and 1992 was $12.6 million,
$11.9 million and $10.9 million, respectively, which primarily consists of
costs related to domestic defined contribution plans. Also included in total
expense is pension expense related to foreign defined benefit plans of $2.5
million for 1994, $3.0 million for 1993 and $2.8 million for 1992. Summary data
related to these foreign plans at October 29, 1994 is as follows: accumulated
benefit obligation, substantially vested, of $18.4 million; projected benefit
obligation of $31.0 million; plan assets at fair value of $28.5 million;
discount rates ranging from 5.5% to 15%; compensation increase rates ranging
from 4.5% to 12% and expected rate of return on assets ranging from 5% to 15%.
In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" (FAS 112), which will become effective during fiscal
year 1995. FAS 112 requires that postemployment benefits, primarily salary
continuation and insurance continuation, be accrued for at the time the benefit
is earned by the employee. Adoption of FAS 112 is not expected to have a
material impact on the Company's consolidated financial statements.
<TABLE>
9. INCOME TAXES
As discussed in Note 1(k), the Company adopted FAS 109 as of October 31, 1993.
The reconciliation of income tax computed at the U.S. federal statutory rates
to income tax expense is as follows:
<CAPTION>
LIABILITY METHOD DEFERRED METHOD
---------------- ---------------
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal statutory tax rate 35.0% 34.8% 34%
Income tax provision reconciliation:
Tax at statutory rate $33,919 $19,322 $ 6,448
Irish income subject to lower tax rate (7,299) (7,951) (5,762)
Change in valuation allowance (4,265) - -
State income taxes, net of federal benefit 1,076 437 78
Research and development tax credits (1,074) 347 -
Foreign Sales Corporation (731) - -
Amortization of goodwill 503 500 489
Net foreign tax in excess of (less than)
U.S. federal statutory tax rate 247 (203) (338)
Foreign tax credits (utilized) unutilized - (1,444) 3,201
Other, net 39 60 (86)
- ------------------------------------------------------------------------------------------------------------------
Total income tax provision $22,415 $11,068 $ 4,030
==================================================================================================================
</TABLE>
<TABLE>
For financial reporting purposes, income before income taxes includes the following components:
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pretax income:
Domestic $35,621 $ 8,228 $(9,985)
Foreign 61,290 47,297 28,950
- ------------------------------------------------------------------------------------------------------------
$96,911 $55,525 $18,965
============================================================================================================
</TABLE>
40
<PAGE> 42
<TABLE>
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the provision for income taxes are as follows:
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $18,479 $ 3,884 $ 2,383
Foreign 10,576 8,788 3,181
State 1,665 670 129
- ------------------------------------------------------------------------------------------------------------
Total current $30,720 $13,342 $ 5,693
============================================================================================================
Deferred (prepaid):
Federal $(7,601) $(2,313) $(2,201)
Foreign (704) 39 538
- ------------------------------------------------------------------------------------------------------------
Total deferred (prepaid) $(8,305) $(2,274) $(1,663)
============================================================================================================
</TABLE>
<TABLE>
The significant components of the Company's deferred tax assets and liabilities as of
October 29, 1994 are as follows:
<CAPTION>
1994
- -----------------------------------------------------------------------------------
<S> <C>
Deferred tax assets:
Inventory reserves $ 12,261
Capital loss carryover 8,513
Deferred income on shipments to domestic distributors 5,254
Reserves for employee benefits 2,890
Restricted stock 2,123
Alternative Minimum Tax carryover 1,764
Intercompany profits in foreign inventories 1,709
Reserve for bad debts 1,650
Foreign tax credits 1,522
Other 3,314
- -----------------------------------------------------------------------------------
Total gross deferred tax assets 41,000
Valuation allowance for deferred tax assets (10,035)
- -----------------------------------------------------------------------------------
Total deferred tax assets $ 30,965
- -----------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation $ (8,603)
- -----------------------------------------------------------------------------------
Total gross deferred liabilities $ (8,603)
- -----------------------------------------------------------------------------------
Net deferred tax assets $ 22,362
===================================================================================
</TABLE>
The valuation allowance at the beginning of fiscal 1994 was $14,300. The net
change in the valuation allowance for the year ended October 29, 1994 was a
decrease of $4,265 from the utilization of general business and foreign tax
credits. The valuation allowance as of October 29, 1994 relates primarily to
capital loss carryovers and tax credits.
41
<PAGE> 43
ANALOG DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
The components of the provision for deferred income taxes for the fiscal years ended October 30, 1993 and
October 31, 1992 are as follows:
<CAPTION>
1993 1992
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Components of deferred (prepaid) tax provision (benefit):
Tax depreciation in excess of (less than) book depreciation $(2,064) $(2,428)
General business tax credits 1,814 (244)
Inventory reserves 878 (3,982)
Deferred income on shipments to domestic distributors (716) (2,877)
Restricted stock 583 (230)
Net decrease (increase) in intercompany profits in
foreign inventories (431) 926
Foreign tax credits (429) 4,977
Reserves for employee benefits (154) (274)
Restructuring reserves - 1,854
Other, net (1,755) 615
- ----------------------------------------------------------------------------------------------------
Total provision for deferred (prepaid) income taxes $(2,274) $(1,663)
====================================================================================================
</TABLE>
The Company's practice is to reinvest indefinitely the earnings of certain
international subsidiaries. Applicable U.S. Federal and state income taxes, net
of related foreign tax credits, are provided only on amounts planned to be
remitted. Accordingly, no U.S. Federal and state income taxes have been
provided for approximately $221,893,000 of unremitted earnings of international
subsidiaries.
42
<PAGE> 44
ANALOG DEVICES, INC.
SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
Quarterly financial information for 1994 and 1993 (thousands of dollars except as noted):
<CAPTION>
4Q94 3Q94 2Q94 1Q94 4Q93 3Q93 2Q93 1Q93
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales 203,301 197,058 192,027 181,088 179,000 173,104 162,912 151,303
- --------------------------------------------------------------------------------------------------------------------
Cost of sales 101,457 99,890 98,508 94,593 94,166 91,378 86,330 78,978
Gross margin 101,844 97,168 93,519 86,495 84,834 81,726 76,582 72,325
% of sales 50% 49% 49% 48% 47% 47% 47% 48%
- --------------------------------------------------------------------------------------------------------------------
Operating expenses:
Research and development 29,048 27,205 26,360 24,256 24,954 24,307 23,094 21,752
Selling, marketing, general
and administrative 43,807 43,333 42,204 40,997 41,075 40,184 38,745 38,671
- --------------------------------------------------------------------------------------------------------------------
Total operating expenses 72,855 70,538 68,564 65,253 66,029 64,491 61,839 60,423
% of sales 36% 36% 36% 36% 37% 37% 38% 40%
- --------------------------------------------------------------------------------------------------------------------
Operating income 28,989 26,630 24,955 21,242 18,805 17,235 14,743 11,902
% of sales 14% 14% 13% 12% 11% 10% 9% 8%
- --------------------------------------------------------------------------------------------------------------------
Nonoperating expenses (income):
Interest expense 1,694 1,796 1,829 1,830 1,886 2,005 1,766 1,527
Other (1,222) (891) (103) (28) (172) (31) (36) 215
- --------------------------------------------------------------------------------------------------------------------
Total nonoperating expenses 472 905 1,726 1,802 1,714 1,974 1,730 1,742
- --------------------------------------------------------------------------------------------------------------------
Income before income taxes 28,517 25,725 23,229 19,440 17,091 15,261 13,013 10,160
% of sales 14% 13% 12% 11% 10% 9% 8% 7%
- --------------------------------------------------------------------------------------------------------------------
Provision for income taxes 6,844 6,046 5,345 4,180 3,076 3,099 2,861 2,032
- --------------------------------------------------------------------------------------------------------------------
Net income 21,673 19,679 17,884 15,260 14,015 12,162 10,152 8,128
% of sales 11% 10% 9% 8% 8% 7% 6% 5%
Per share .28 .25 .23 .20 .18 .16 .14 .11
- --------------------------------------------------------------------------------------------------------------------
Shares used to compute
earnings per share 78,075 77,485 77,071 76,455 76,303 76,270 75,747 74,455
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE> 45
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this item is contained in part under the caption "EXECUTIVE
OFFICERS OF THE COMPANY" in Part I hereof, and the remainder is contained in
the Company's Proxy Statement for the Annual Meeting of Stockholders to be held
on March 14, 1995 (the "1995 Proxy Statement") under the caption "Election of
Directors" and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is contained in the Company's 1995 Proxy Statement
under the captions "Directors' Compensation," "Executive Compensation",
"Severance and Other Agreements" and "Approval of the 1994 Director Option
Plan," and is incorporated herein by reference. Information relating to
a delinquent filing of a Form 4 by an executive officer of the Company is
contained in the Company's 1995 Proxy Statement under the caption "Delinquent
Filing of Forms 4."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this item is contained in the Company's 1995 Proxy Statement
under the caption "Security Ownership of Certain Beneficial Owners and
Management" and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this item is contained in the Company's 1995 Proxy Statement
under the caption "Transactions with Directors," and is incorporated herein by
reference.
44
<PAGE> 46
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON Form 8-K
(A) 1. FINANCIAL STATEMENTS
The following consolidated financial statements are included in Item 8:
- Consolidated Statements of Income for the years ended October 29,
1994, October 30, 1993 and October 31, 1992
- Consolidated Balance Sheets as of October 29, 1994, October 30,
1993 and October 31, 1992
- Consolidated Statements of Stockholders' Equity for the years
ended October 29, 1994, October 30, 1993 and October 31, 1992
- Consolidated Statements of Cash Flows for the years ended October
29, 1994, October 30, 1993 and October 31, 1992
(A) 2. FINANCIAL STATEMENT SCHEDULES
No Financial Statement Schedules have been presented since the required
information is not present or not present in amounts sufficient to require
submission of the schedule, or because the information required is
included in the consolidated financial statements or the notes thereto.
(A) 3. LISTING OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C> <C>
3-1 Restated Articles of Organization of Analog Devices, Inc., as
amended, filed as an exhibit to the Company's Form 10-K
for the fiscal year ended October 31, 1992 and incorporated
herein by reference.
3-2 By-Laws of Analog Devices, Inc. as amended, filed as an exhibit
to the Company's Form 10-K for the fiscal year ended October
31, 1992 and incorporated herein by reference.
4-1 Rights Agreement, as amended, between Analog Devices, Inc.
and The First National Bank of Boston, as Rights Agent,
filed as an exhibit to a Form 8 filed on June 27, 1989 amending
the Registration Statement on Form 8-A relating to Common Stock
Purchase Rights, and incorporated herein by reference.
4-2 Indenture dated as of March 1, 1993 between Analog Devices, Inc.
and The First National Bank of Boston, filed herewith.
* 10-1 Bonus Plan of Analog Devices, Inc., filed herewith.
* 10-2 1978 Restricted Stock Plan of Analog Devices, Inc., as amended,
filed as an exhibit to the Company's Form 10-K for the fiscal
year ended November 3, 1990 and incorporated herein by reference.
* 10-3 1991 Restricted Stock Plan of Analog Devices, Inc., filed as an
exhibit to the Company's Form 10-K for the fiscal year ended
November 2, 1991 and incorporated herein by reference.
* 10-4 1980 Stock Option Plan of Analog Devices, Inc., as amended,
filed as an exhibit to the Company's Form 10-K for the fiscal
year ended October 29, 1988 and incorporated herein by reference.
</TABLE>
45
<PAGE> 47
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C> <C>
* 10-5 1988 Stock Option Plan of Analog Devices, Inc., as amended,
filed as an exhibit to the Company's Form 10-K for the
fiscal year ended October 31, 1992 and incorporated herein by
reference.
* 10-6 1989 Director Stock Option Plan of Analog Devices, Inc., as
amended, filed as an exhibit to the Company's Form 10-K for
the fiscal year ended November 2, 1991 and incorporated herein
by reference.
* 10-7 1992 Director Option Plan of Analog Devices, Inc., filed as an
exhibit to the Company's Form 10-K for the fiscal year
ended October 31, 1992 and incorporated herein by reference.
* 10-8 1994 Director Option Plan of Analog Devices, Inc., filed
herewith.
10-9 Lease agreement dated February 13, 1970 between Analog Devices,
Inc. and the trustees of Campanelli Investment Trust, relating
to the premises at 30 Perwal Street, Westwood, Massachusetts,
filed herewith.
10-10 Amended and restated lease agreement dated May 1, 1992 between
Analog Devices, Inc. and the trustees of Everett Street Trust
relating to the premises at 3 Technology Way, Norwood,
Massachusetts, filed as an exhibit to the Company's Form 10-K
for the fiscal year ended October 31, 1992 and incorporated
herein by reference.
10-11 Guaranty dated as of May 1, 1994 between Analog Devices, Inc.
and Metropolitan Life Insurance Company relating to the
premises at 3 Technology Way, Norwood, Massachusetts, filed as
an exhibit to the Company's Form 10-Q for the fiscal quarter
ended April 30, 1994 and incorporated herein by reference.
10-12 Letter Agreement dated as of May 18, 1994 between Analog
Devices, Inc. and Metropolitan Life Insurance Company
relating to the premises at 3 Technology Way, Norwood,
Massachusetts, filed as an exhibit to the Company's Form 10-Q
for the fiscal quarter ended April 30, 1994 and incorporated
herein by reference.
10-13 Reimbursement Agreement dated May 18, 1992 between Analog
Devices, Inc. and the Trustees of Everett Street Trust,
filed as an exhibit to the Company's Form 10-K for the fiscal
year ended October 31, 1992 and incorporated herein by
reference.
10-14 Lease Agreement dated August 8, 1990 between Precision
Monolithics, Inc. and Bourns, Inc. relating to the premises at
1525 Comstock Road, Santa Clara, California, filed as an
exhibit to the Company's Form 10-K for the fiscal year ended
November 3, 1990 and incorporated herein by reference.
10-15 Lease agreement dated August 8, 1990, as amended, between
Precision Monolithics, Inc. and Bourns, Inc. relating to
the premises at 1500 Space Park Drive, Santa Clara, California,
filed as an exhibit to the Company's Form 10-K for the fiscal
year ended November 3, 1990 and incorporated herein by
reference.
10-16 Credit Agreement dated as of March 12, 1993 among Analog
Devices, Inc. and Morgan Guaranty Trust Company of New York,
Bank of America National Trust and Savings Association,
Continental Bank, N.A., The First National Bank of Boston and
Morgan Guaranty Trust Company of New York, as Agent, filed as
an exhibit to the Company's Form 10-Q for the fiscal
quarter ended May 1, 1993 and incorporated herein by reference.
10-17 Amendment No. 1 dated as of May 18, 1993 to the Company's
Credit Agreement dated March 12, 1993, filed as an exhibit
to the Company's Form 10-Q for the fiscal quarter ended
July 31, 1993 and incorporated herein by reference.
</TABLE>
46
<PAGE> 48
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10-18 Amendment No. 2 dated as of September 8, 1994 to the Company's
Credit Agreement dated March 12, 1993, filed herewith.
10-19 Term loan agreement dated as of November 12, 1991 between Analog
Devices, Inc. and the First National Bank of Boston, filed as
an exhibit to the Company's Form 10-K for the fiscal year ended
November 2, 1991 and incorporated herein by reference.
* 10-20 Form of Employee Retention Agreement, as amended, filed as an
exhibit to the Company's Form 10-K for the fiscal year
ended October 31, 1992 and incorporated herein by reference.
* 10-21 Employee Change in Control Severance Policy of Analog Devices,
Inc., as amended, filed as an exhibit to the Company's 10-K for
the fiscal year ended October 30, 1993 and incorporated herein
by reference.
* 10-22 Senior Management Change in Control Severance Policy of Analog
Devices, Inc., as amended, filed as an exhibit to the Company's
10-K for the fiscal year ended October 30, 1993 and incorporated
herein by reference.
10-23 Warrant Agreement dated as of August 8, 1990 between Analog
Devices, Inc. and Bourns, Inc., filed as an exhibit to the
Company's Form 10-K for the fiscal year ended November 3, 1990
and incorporated herein by reference.
* 10-24 Description of Consulting Agreement between Analog Devices, Inc.
and John L. Doyle, filed as an exhibit to the Company's Form
10-K for the fiscal year ended November 2, 1991 and incorporated
herein by reference.
* 10-25 Letter Agreement between Analog Devices, Inc. and Jerald G.
Fishman dated December 15, 1994 relating to acceleration of
Stock options and restricted Stock awards upon termination of
employment, filed herewith.
21 Subsidiaries of the Company, filed herewith.
23 Consent of Ernst & Young, filed herewith.
27 Financial Data Schedule
- ---------------
* Management contract or compensation plan or arrangement required to be
filed as an exhibit pursuant to item 14(c) of Form 10-K.
(B) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K with the Securities and
Exchange Commission during the fiscal quarter ended October 29, 1994.
47
</TABLE>
<PAGE> 49
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.
ANALOG DEVICES, INC.
(Registrant)
By: /s/ Ray Stata By: /s/ Joseph E. McDonough
----------------------------- ---------------------------
Ray Stata Joseph E. McDonough
Chairman of the Board and Vice President-Finance
Chief Executive Officer and Chief Financial Officer
(Principal Executive Officer) (Principal Financial and
Accounting Officer)
Date: January 24, 1995 Date: January 24, 1995
---------------------------- ------------------------
<TABLE>
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Ray Stata Chairman of the Board and January 24, 1995
- ------------------------------ Chief Executive Officer ----------------
Ray Stata
/s/ Jerald G. Fishman President, January 24, 1995
- ------------------------------ Chief Operating Officer ----------------
Jerald G. Fishman and Director
/s/ Morris Chang Director January 24, 1995
- ------------------------------ ----------------
Morris Chang
/s/ John L. Doyle Director January 24, 1995
- ------------------------------ ----------------
John L. Doyle
Director
- ------------------------------ ----------------
Samuel H. Fuller
/s/ Philip L. Lowe Director January 24, 1995
- ------------------------------ ----------------
Philip L. Lowe
/s/ Gordon C. McKeague Director January 24, 1995
- ------------------------------ ----------------
Gordon C. McKeague
/s/ Joel Moses Director January 24, 1995
- ------------------------------ ----------------
Joel Moses
/s/ Lester C. Thurow Director January 24, 1995
- ------------------------------ ----------------
Lester C. Thurow
</TABLE>
48
<PAGE> 1
Exhibit 4-2
================================================================================
ANALOG DEVICES, INC.
AND
THE FIRST NATIONAL BANK OF BOSTON, Trustee
Indenture
Dated as of March 1, 1993
------------------
6-5/8% NOTES DUE 2000
===============================================================================
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
_____________
<CAPTION>
Page
----
<S> <C>
PARTIES............................................................. 1
RECITALS
Authorization of Indenture............................ 1
Form of Face of Security.............................. 1
Form of Reverse of Security........................... 2
Form of Trustee's Certificate of Authentication....... 5
Compliance with Legal Requirements.................... 5
Purpose of and Consideration for Indenture............ 5
ARTICLE ONE
DEFINITIONS.
SECTION 1.1. Certain Terms Defined...................... 6
Attributable Debt.......................... 6
Board of Directors......................... 7
Board Resolution........................... 7
Business Day............................... 7
Cash....................................... 7
Change in Control.......................... 7
Consolidated Net Tangible Assets........... 7
Corporate Trust Office..................... 7
Depository................................. 7
Event of Default........................... 8
Exempted Debt.............................. 8
Funded Indebtedness........................ 8
Global Security or Global Securities....... 8
Holder, holder of securities,
Securityholder........................... 8
Indebtedness............................... 8
Indenture.................................. 8
Issuer..................................... 9
Issuer Order............................... 9
Marketable Securities...................... 9
Officers' Certificate...................... 9
Opinion of Counsel......................... 9
Original issue date........................ 9
Outstanding................................ 9
Responsible Officer........................ 10
Security or Securities..................... 10
Senior Funded Indebtedness................. 10
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
Subsidiary.................................... 10
Trustee....................................... 10
Trust Indenture Act of 1939................... 10
ARTICLE TWO
ISSUE, EXECUTION, FORM AND
REGISTRATION OF SECURITIES.
SECTION 2.1. Authentication and Delivery of
Securities.................................. 11
SECTION 2.2. Execution of Securities....................... 11
SECTION 2.3. Certificate of Authentication................. 11
SECTION 2.4. Form, Denomination and Date of
Securities; Payments of Interest............ 12
SECTION 2.5. Registration, Transfer and Exchange........... 13
SECTION 2.6. Mutilated, Defaced, Destroyed, Los
and Stolen Securities....................... 14
SECTION 2.7. Cancellation of Securities;
Destruction Thereof......................... 15
SECTION 2.8. Temporary Securities.......................... 15
SECTION 2.9. Securities Issuable in Global Form............ 16
ARTICLE THREE
COVENANTS OF THE ISSUER AND THE TRUSTEE.
SECTION 3.1. Payment of Principal and Interest............. 18
SECTION 3.2. Offices for Payments, etc..................... 18
SECTION 3.3. Appointment to Fill a Vacancy in
Office of Trustee........................... 18
SECTION 3.4. Paying Agents................................. 18
SECTION 3.5. Certificate to Trustee........................ 19
SECTION 3.6. Securityholders' Lists........................ 20
SECTION 3.7. Reports by the Issuer......................... 20
SECTION 3.8. Reports by the Trustee........................ 20
SECTION 3.9. Limitation on Liens........................... 20
Section 3.10. Limitation on Sale and Leaseback.............. 23
Section 3.11. Change in Control............................. 23
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
ARTICLE FOUR
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT.
<S> <C> <C>
SECTION 4.1. Event of Default Defined; Acceleration
of Maturity; Waiver of Default.......... 26
SECTION 4.2. Collection of Indebtedness by Trustee;
Trustee May Prove Debt.................. 27
SECTION 4.3. Application of Proceeds................... 30
SECTION 4.4. Suits for Enforcement..................... 31
SECTION 4.5. Restoration of Rights on Abandonment
of Proceedings.......................... 31
SECTION 4.6. Limitations on Suits by
Securityholders......................... 31
SECTION 4.7. Powers and Remedies Cumulative;
Delay or Omission Not Waiver of
Default................................. 32
SECTION 4.8. Control by Securityholders................ 33
SECTION 4.9. Waiver of Past Defaults................... 33
ARTICLE FIVE
CONCERNING THE TRUSTEE.
SECTION 5.1. Duties and Responsibilities of the
Trustee; During Default; Prior to
Default................................. 34
SECTION 5.2. Certain Rights of the Trustee............. 35
SECTION 5.3. Trustee Not Responsible for Recitals,
Disposition of Securities or
Application of Proceeds Thereof......... 36
SECTION 5.4. Trustee and Agents May Hold
Securities; Collections, etc............ 37
SECTION 5.5. Moneys Held by Trustee.................... 37
SECTION 5.6. Compensation and Indemnification
of Trustee and Its Prior Claim.......... 37
SECTION 5.7. Right of Trustee to Rely on Officers'
Certificate, etc........................ 38
SECTION 5.8. Persons Eligible for Appointment
as Trustee.............................. 38
SECTION 5.9. Resignation and Removal; Appointment
of Successor Trustee.................... 38
SECTION 5.10. Acceptance of Appointment by
Successor Trustee....................... 40
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 5.11. Merger, Conversion, Consolidation or
Succession to Business of Trustee.................. 40
ARTICLE SIX
CONCERNING THE SECURITYHOLDERS.
SECTION 6.1. Evidence of Action Taken by
Securityholders.................................... 41
SECTION 6.2. Proof of Execution of Instruments
and of Holding of Securities;
Record Date........................................ 41
SECTION 6.3. Holders to Be Treated as Owners...................... 42
SECTION 6.4. Securities Owned by Issuer Deemed Not
Outstanding........................................ 42
SECTION 6.5. Right of Revocation of Action Taken.................. 43
ARTICLE SEVEN
SUPPLEMENTAL INDENTURES.
SECTION 7.1. Supplemental Indentures Without
Consent of Securityholders......................... 43
SECTION 7.2. Supplemental Indentures With Consent
of Securityholders................................. 44
SECTION 7.3. Effect of Supplemental Indenture..................... 46
SECTION 7.4. Documents to Be Given to Trustee..................... 46
SECTION 7.5. Notation on Securities in Respect of
Supplemental Indentures............................ 46
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE OR CONVEYANCE.
SECTION 8.1. Covenant Not to Merge, Consolidate,
Sell or Convey Property Except
Under Certain Conditions........................... 47
SECTION 8.2. Successor Corporation Substituted.................... 47
SECTION 8.3. Opinion of Counsel to Trustee........................ 48
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
ARTICLE NINE
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS.
<S> <C> <C>
SECTION 9.1. Satisfaction and Discharge of
Indenture............................... 48
SECTION 9.2. Application by Trustee of Funds
Deposited for Payment of Securities..... 49
SECTION 9.3. Repayment of Moneys Held by Paying
Agent................................... 49
SECTION 9.4. Return of Moneys Held by Trustee and
Paying Agent Unclaimed for
Three Years............................. 50
ARTICLE TEN
MISCELLANEOUS PROVISIONS.
SECTION 10.1. Incorporators, Stockholders, Officers
and Directors of Issuer Exempt from
Individual Liability.................... 50
SECTION 10.2. Provisions of Indenture for the Sole
Benefit of Parties and
Securityholders......................... 50
SECTION 10.3. Successors and Assigns of Issuer
Bound by Indenture...................... 50
SECTION 10.4. Notices and Demands on Issuer,
Trustee and Securityholders............. 51
SECTION 10.5. Officers' Certificates and Opinions
of Counsel; Statements to Be
Contained Therein....................... 51
SECTION 10.6. Payments Due on Saturdays, Sundays
and Holidays............................ 53
SECTION 10.7. Conflict of Any Provision of
Indenture with Trust Indenture
Act of 1939............................. 53
SECTION 10.8. Massachusetts Law to Govern............... 53
SECTION 10.9. Counterparts.............................. 53
SECTION 10.10. Effect of Headings........................ 53
TESTIMONIUM................................................ 54
SIGNATURES................................................. 54
ACKNOWLEDGMENTS............................................ 55
</TABLE>
-v-
<PAGE> 7
THIS INDENTURE, dated as of March 1, 1993 between ANALOG DEVICES, INC.,
a Massachusetts corporation (the "Issuer"), and THE FIRST NATIONAL BANK OF
BOSTON, a national banking association duly incorporated and existing under
the laws of the United States of America (the "Trustee"),
W I T N E S S E T H :
WHEREAS, the Issuer has duly authorized the issue of its 6-5/8% Notes
Due 2000 (the "Securities") and, to provide, among other things, for the
authentication, delivery and administration thereof, the Issuer has duly
authorized the execution and delivery of this Indenture; and
WHEREAS, the Securities and the Trustee's certificate of authentication
shall be in substantially the following form:
[FORM OF FACE OF SECURITY]
No. $
ANALOG DEVICES, INC.
6-5/8% NOTES DUE 2000
ANALOG DEVICES, INC., a Massachusetts corporation (the "Issuer", which
term includes any successor under the Indenture hereinafter referred to), for
value received hereby promises to pay to or registered
assigns the principal sum of Dollars at the Issuer's office
or agency for said purpose, maintained pursuant to said Indenture, on March 1,
2000, in such coin or currency of the United States of America as at the time
of payment shall be legal tender for the payment of public and private debts,
and to pay interest, semi-annually on March 1 and September 1 of each year, on
said principal sum in like coin or currency at the rate per annum set forth
above at said office or agency from the March 1 or the September 1, as the case
may be, next preceding the date of this Security to which interest on the
Securities has been paid or duly provided for, unless the date hereof is a date
to which interest on the Securities has been paid or duly provided for, in
which case from the date of this Security, or unless no interest has been paid
or duly provided for on the Securities, in which case from March 1, 1993 until
payment of said principal sum has been made or duly provided for.
Notwithstanding the foregoing, if the date hereof is after February 15 or
August 15, as the case may be, and before the following March 1 or September 1,
this Security shall bear interest from such March 1 or September 1; PROVIDED,
that if the Issuer shall default in the payment of interest due on
<PAGE> 8
such March 1 or September 1, then this Security shall bear interest from the
next preceding March 1 or September 1 to which interest on the Securities has
been paid or duly provided for, or, if no interest has been paid or duly
provided for on the Securities since the original issue date of this Security,
from March 1, 1993. The interest so payable on any March 1 or September 1
will, except as otherwise provided in the Indenture referred to on the reverse
hereof, be paid to the person in whose name this Security is registered at the
close of business on the February 15 or August 15 preceding such March 1 or
September 1, whether or not such day is a business day; PROVIDED that interest
may be paid, at the option of the Issuer, by mailing a check therefor payable
to the registered holder entitled thereto at his last address as it appears on
the Security register.
Reference is made to the further provisions set forth on the reverse
hereof. Such further provisions shall for all purposes have the same effect as
though fully set forth at this place.
This Security shall not be valid or obligatory until the certificate of
authentication hereon shall have been duly signed by the Trustee acting under
the Indenture.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed.
ANALOG DEVICES, INC.
Dated: By:
------------------ ----------------
ATTEST:
-------------------------
(FORM OF REVERSE OF SECURITY)
ANALOG DEVICES, INC.
6-5/8% NOTES DUE 2000
This Security is one of a duly authorized issue of debt securities of
the Issuer, limited to the aggregate principal amount of $80,000,000 (except as
otherwise provided in the Indenture mentioned below), issued or to be issued
pursuant to an indenture dated as of March 1, 1993, (the "Indenture"), duly
executed and delivered by the Issuer to The First National Bank of Boston,
Trustee (herein called the "Trustee"). Reference is
-2-
<PAGE> 9
hereby made to the Indenture and all indentures supplemental thereto
for a description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Issuer and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Securities.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all the Securities may be declared
due and payable, in the manner and with the effect, and subject to the
conditions, provided in the Indenture. The Indenture provides that in certain
events such declaration and its consequences may be waived by the holders of a
majority in aggregate principal amount of the Securities then outstanding and
that, prior to any such declaration, such holders may waive any past default
under the Indenture and its consequences except a default in the payment of
principal of or interest on any of the Securities. Any such consent or waiver
by the holder of this Security (unless revoked as provided in the Indenture)
shall be conclusive and binding upon such holder and upon all future holders
and owners of this Security and any Security which may be issued in exchange or
substitution herefor, whether or not any notation thereof is made upon this
Security or such other Securities.
Upon a Change in Control, as defined in the Indenture, the Issuer will
be required to offer to repurchase all or part of the Securities at 100% of
their principal amount plus accrued interest.
The Indenture permits the Issuer and the Trustee, with the consent of
the holders of not less than 66 2/3 percent in aggregate principal amount of
the Securities at the time outstanding, evidenced as in the Indenture provided,
to execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or modifying in any manner the rights of the holders of
the Securities; provided that no such supplemental indenture shall (a) extend
the final maturity of any Security, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, or impair or
affect the rights of any Securityholder to institute suit for the payment
thereof without the consent of the holder of each Security so affected; or (b)
reduce the aforesaid percentage of Securities, the consent of the holders of
which is required for any such supplemental indenture, without the consent of
the holders of all Securities then outstanding.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation
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<PAGE> 10
of the Issuer, which is absolute and unconditional, to pay the principal of
and interest on this Security at the place, times, and rate, and in the
currency, herein prescribed.
The Securities are issuable only as registered Securities without
coupons in denominations of $1,000 and any multiple of $1,000.
At the office or agency of the Issuer referred to on the face hereof
and in the manner and subject to the limitations provided in the Indenture,
Securities may be exchanged for a like aggregate principal amount of Securities
of other authorized denominations.
Upon due presentment for registration of transfer of this Security at
the above-mentioned office or agency of the Issuer, a new Security or
Securities of authorized denominations, for a like aggregate principal amount,
will be issued to the transferee as provided in the Indenture. No service
charge shall be made for any such transfer, but the Issuer may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto.
The Issuer, the Trustee, and any authorized agent of the Issuer or the
Trustee, may deem and treat the registered holder hereof as the absolute owner
of this Security (whether or not this Security shall be overdue and
notwithstanding any notation of ownership or other writing hereon made by
anyone other than the Issuer or the Trustee or any authorized agent of the
Issuer or the Trustee), for the purpose of receiving payment of, or on account
of, the principal hereof and, subject to the provisions on the face hereof,
interest hereon and for all other purposes, and neither the Issuer nor the
Trustee nor any authorized agent of the Issuer or the Trustee shall be affected
by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Security, for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture or any indenture
supplemental thereto, against any incorporator, shareholder, officer or
director, as such, past, present or future, of the Issuer or of any successor
corporation, either directly or through the Issuer or any successor
corporation, whether by virtue of any constitution, statute or rule of law or
by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.
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[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned
Indenture.
THE FIRST NATIONAL BANK OF BOSTON,
as Trustee
______________________________
Authorized Officer
OPTION TO ELECT REPURCHASE
UPON A CHANGE IN CONTROL
--------------------------
If you wish to elect to have this Note repurchased, in whole or in
part, by the Issuer pursuant to Section 3.11 of the Indenture, check this
box: [ ]
Principal amount to be purchased by the Issuer: $___________________
Date:______________________ Your Signature:_____________________
(Sign exactly as name appears on
front)
Signature Guarantee:
_______________________________________
Holder's Social Security or Tax I.D.
Number: _______________
AND WHEREAS, all things necessary to make the Securities, when executed
by the Issuer and authenticated and delivered by the Trustee as in this
Indenture provided, the valid, binding and legal obligations of the Issuer, and
to constitute these presents a valid indenture and agreement according to its
terms, have been done;
NOW, THEREFORE:
In consideration of the premises and the purchases of the Securities by
the holders thereof, the Issuer and the Trustee mutually covenant and agree for
the equal and proportionate
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<PAGE> 12
benefit of the respective holders from time to time of the Securities as
follows:
ARTICLE ONE
DEFINITIONS.
-----------
SECTION 1.1 CERTAIN TERMS DEFINED. The following terms (except as
otherwise expressly provided or unless the context otherwise clearly requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section. All other terms
used in this Indenture which are defined in the Trust Indenture Act of 1939 or
the definitions of which in the Securities Act of 1933 are referred to in the
Trust Indenture Act of 1939 (except as herein otherwise expressly provided or
unless the context otherwise clearly requires), shall have the meanings
assigned to such terms in said Trust Indenture Act and in said Securities Act
as in force at the date of this Indenture. All accounting terms used herein
and not expressly defined shall have the meanings given to them in accordance
with GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, and the term "generally accepted
accounting principles" shall mean such accounting principles which are
generally accepted at the date or time of any computation or at the date
hereof. The words "HEREIN", "HEREOF" and "HEREUNDER" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision. The terms defined in this Article
include the plural as well as the singular.
"ATTRIBUTABLE DEBT" when used in connection with a sale and leaseback
transaction referred to below shall mean, as of any particular time, the lesser
of (a) the fair value of the assets subject to such arrangement or (b) the
aggregate of present values (discounted at a rate per annum equal to the
interest borne by the Securities and compounded semi-annually) of the
obligations of the Issuer or any Subsidiary for net rental payments during the
remaining term of all leases (including any period for which such lease has
been extended or may, at the option of the lessor, be extended). The term "net
rental payments" under any lease of any period shall mean the sum of the rental
and other payments required to be paid in such period by the lessee thereunder,
not including, however, any amounts required to be paid by such lessee (whether
or not designated as rental or additional rental) on account of maintenance and
repairs, reconstruction, insurance, taxes, assessments, water rates or similar
charges required to be paid by such lessee thereunder or any amounts required
to be paid by such lessee thereunder contingent upon the amount of sales,
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<PAGE> 13
maintenance and repairs, reconstruction, insurance, taxes, assessments,
water rates or similar charges.
"BOARD OF DIRECTORS" means either the Board of Directors of the Issuer
or any committee of such Board duly authorized to act hereunder.
"BOARD RESOLUTION" means a copy of a resolution certified by the Clerk
or an Assistant Clerk of the Issuer to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"BUSINESS DAY" means a day which in the city (or in any of the cities,
if more than one) where amounts are payable in respect of the Securities, as
specified on the face of the form of Security recited above, is neither a legal
holiday nor a day on which banking institutions are authorized by law or
regulation to close.
"CASH" means all items classified as cash and cash equivalents on the
most recently available balance sheet of the Issuer and its Subsidiaries, in
accordance with generally accepted accounting principles.
"CHANGE IN CONTROL" means any event or condition specified as such in
Section 3.11.
"CONSOLIDATED NET TANGIBLE ASSETS" means the aggregate amount of assets
after deducting therefrom (a) all Cash and Marketable Securities, (b) all
current liabilities (excluding any thereof constituting Funded Indebtedness by
reason of being renewable or extendible) and (c) all goodwill, tradenames,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the most recent balance sheet of the Issuer
and its Subsidiaries and computed in accordance with generally accepted
accounting principles.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date as of which this
Indentures is dated, located at Blue Hills Office Park, 150 Royall Street,
Canton, Massachusetts 02021, Attention: Corporate Trust Division, Mail Stop
45-02-15.
"DEPOSITORY" means, unless otherwise specified by the Issuer pursuant
to Section 2.9, with respect to Securities issuable or issued as a Global
Security, The Depository Trust Company, New York, New York, or any successor
thereto registered as a clearing
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<PAGE> 14
agency under the Securities Exchange Act of 1934, as amended, or other
applicable statute or regulation.
"EVENT OF DEFAULT" means any event or condition specified as such in
Section 4.1 which shall have continued for the period of time, if any, therein
designated.
"EXEMPTED DEBT" means the sum of the following items outstanding as of
the date Exempted Debt is to be determined: (a) Indebtedness of the Issuer
and its Subsidiaries incurred after the date of the Indenture and secured by
liens not permitted to be created or assumed pursuant to Section 3.9 of the
Indenture, and (b) Attributable Debt of the Issuer and its Subsidiaries in
respect of every sale and leaseback transaction entered into after the date
of the Indenture, other than those leases expressly permitted by Section
3.10.
"FUNDED INDEBTEDNESS" means all Indebtedness having a maturity of more
than 12 months from the date as of which the amount thereof is to be determined
or having a maturity of less than 12 months but by its terms being renewable or
extendible beyond 12 months from such date at the option of the borrower.
"GLOBAL SECURITY" means a Security which is executed by the Issuer and
authenticated and delivered by the Trustee to the Depository or pursuant to the
Depository's instruction, all in accordance with this Indenture or any
indenture supplemental hereto or Board Resolution which shall be registered in
the name of the Depository or its nominee and which shall represent, and shall
be denominated in an amount equal to the aggregate principal amount of, all of
the Outstanding Securities or any portion thereof, in either case having the
same terms, including, without limitation, the same original issue date, date
or dates on which principal is due, and interest rate or method of determining
interest.
"HOLDER", "HOLDER OF SECURITIES", "SECURITYHOLDER" or other similar terms
means the registered holder of any Security.
"INDEBTEDNESS" means all items classified as indebtedness on the most
recently available balance sheet of the Issuer and its Subsidiaries, in
accordance with generally accepted accounting principles.
"INDENTURE" means this instrument as originally executed and delivered
or, if amended or supplemented as herein provided, as so amended or
supplemented.
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<PAGE> 15
"ISSUER" means (except as otherwise provided in Article Five) Analog
Devices, Inc., a Massachusetts corporation, and, subject to Article Eight, its
successors and assigns.
"ISSUER ORDER" means a written instruction signed in the name of the
Issuer by its Chairman of the Board, a Vice Chairman, its President or a Vice
President, and by its Treasurer, an Assistant Treasurer, its Clerk or an
Assistant Clerk, and delivered to the Trustee.
"MARKETABLE SECURITIES" means all items classified as marketable
securities on the most recently available balance sheet of the Issuer and its
Subsidiaries, in accordance with generally accepted accounting principles.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of
the Board of Directors or the President or any Vice President (whether or not
designated by a number or numbers or a word or words added before or after the
title "Vice President") and by the Treasurer or the Clerk or any Assistant
Clerk of the Issuer and delivered to the Trustee. Each such certificate shall
comply with Section 314 of the Trust Indenture Act of 1939 and include the
statements provided for in Section 10.5.
"OPINION OF COUNSEL" means an opinion in writing signed by legal
counsel who may be an employee of or counsel to the Issuer or who may be other
counsel satisfactory to the Trustee. Each such opinion shall comply with
Section 314 of the Trust Indenture Act and include the statements provided for
in Section 10.5, if and to the extent required hereby.
"ORIGINAL ISSUE DATE" of any Security (or portion thereof) means the
earlier of (a) the date of such Security or (b) the date of any Security (or
portion thereof) for which such Security was issued (directly or indirectly) on
registration of transfer, exchange or substitution.
"OUTSTANDING", when used with reference to Securities, shall, subject
to the provisions of Section 6.4, mean, as of any particular time, all
Securities authenticated and delivered by the Trustee under this Indenture,
except
(a) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(b) Securities, or portions thereof, for the payment of which
moneys in the necessary amount shall have been deposited in trust with
the Trustee or with any paying agent (other than the Issuer) or shall
have been set aside,
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<PAGE> 16
segregated and held in trust by the Issuer (if the Issuer
shall act as its own paying agent); and
(c) Securities in substitution for which other Securities
shall have been authenticated and delivered, or which shall have been
paid, pursuant to the terms of Section 2.6 (unless proof satisfactory
to the Trustee is presented that any of such Securities is held by a
person in whose hands such Security is a legal, valid and binding
obligation of the Issuer).
"RESPONSIBLE OFFICER" when used with respect to the Trustee means any
officer in the Corporate Trust Office of the Trustee or any other officer of
the Trustee customarily performing functions similar to those performed by the
persons who at the time shall be such officers, respectively, or to whom any
corporate trust matter is referred because of his knowledge of and familiarity
with the particular subject.
"SECURITY" or "SECURITIES" means any Note or Notes, as the case may be,
authenticated and delivered under this Indenture (including, without
limitation, any Global Security).
"SENIOR FUNDED INDEBTEDNESS" means any Funded Indebtedness of the
Company that is not subordinated in right of payment to any other Indebtedness
of the Company.
"SUBSIDIARY" means any corporation (i) of which at least a majority of
the outstanding stock having the voting power to elect a majority of the Board
of Directors of such corporation (irrespective of whether or not at the time
stock of any other class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by the Issuer, or by one or more of
the Subsidiaries, or by the Issuer and one or more Subsidiaries and (ii) whose
financial statements are consolidated with those of the Issuer in accordance
with generally accepted accounting principles.
"TRUSTEE" means the entity identified as "Trustee" in the first
paragraph hereof and, subject to the provisions of Article Five, shall also
include any successor trustee.
"TRUST INDENTURE ACT OF 1939" (except as otherwise provided in Sections
7.1 and 7.2) means the Trust Indenture Act of 1939 as in force at the date as
of which this Indenture was originally executed.
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<PAGE> 17
ARTICLE TWO
ISSUE, EXECUTION, FORM AND
REGISTRATION OF SECURITIES
--------------------------
SECTION 2.1 AUTHENTICATION AND DELIVERY OF SECURITIES. Upon the
execution and delivery of this Indenture, or from time to time thereafter,
Securities in an aggregate principal amount not in excess of the amount
specified in the form of Security hereinabove recited (except as otherwise
provided in Section 2.6) may be executed by the Issuer and delivered to the
Trustee for authentication, and the Trustee shall thereupon authenticate and
deliver said Securities to or upon the written order of the Issuer, signed by
both (a) its Chairman of the Board of Directors, or any Vice Chairman of the
Board of Directors, or its President or any Vice President (whether or not
designated by a number or numbers or a word or words added before or after the
title "Vice President") and (b) by its Treasurer or any Assistant Treasurer or
its Clerk or any Assistant Clerk without any further action by the Issuer.
SECTION 2.2 EXECUTION OF SECURITIES. The Securities shall be signed
on behalf of the Issuer by both (a) its Chairman of the Board of Directors or
any Vice Chairman of the Board of Directors or its President or any Vice
President (whether or not designated by a number or numbers or a word or words
added before or after the title "Vice President") and (b) by its Treasurer or
any Assistant Treasurer or its Clerk or any Assistant Clerk. Such signatures
may be the manual or facsimile signatures of the present or any future such
officers. Typographical and other minor errors or defects in any such
reproduction of any such signature shall not affect the validity or
enforceability of any Security which has been duly authenticated and delivered
by the Trustee.
In case any officer of the Issuer who shall have signed any of the
Securities shall cease to be such officer before the Security so signed shall
be authenticated and delivered by the Trustee or disposed of by the Issuer,
such Security nevertheless may be authenticated and delivered or disposed of as
though the person who signed such Security had not ceased to be such officer of
the Issuer; and any Security may be signed on behalf of the Issuer by such
persons as, at the actual date of the execution of such Security, shall be the
proper officers of the Issuer, although at the date of the execution and
delivery of this Indenture any such person was not such officer.
SECTION 2.3 CERTIFICATE OF AUTHENTICATION. Only such Securities as
shall bear thereon a certificate of authentication
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<PAGE> 18
substantially in the form hereinbefore recited, executed by the Trustee by
manual signature of one of its authorized officers, shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose. Such
certificate by the Trustee upon any Security executed by the Issuer shall be
conclusive evidence that the Security so authenticated has been duly
authenticated and delivered hereunder and that the holder is entitled to the
benefits of this Indenture.
SECTION 2.4 FORM, DENOMINATION AND DATE OF SECURITIES; PAYMENTS OF
INTEREST. The Securities and the Trustee's certificates of authentication
shall be substantially in the form recited above. The Securities shall be
issuable as registered securities without coupons and in denominations provided
for in the form of Security above recited. The Securities shall be numbered,
lettered, or otherwise distinguished in such manner or in accordance with such
plans as the officers of the Issuer executing the same may determine with the
approval of the Trustee.
The Securities shall be printed, lithographed or engraved or produced
by any combination of these methods on steel engraved borders or may be
produced in any other manner permitted by the rules of any securities exchange
or market on which the securities may be listed, all as determined by the
officers executing such Securities, as evidenced by their execution of such
Securities.
Any of the Securities may be issued with appropriate insertions,
omissions, substitutions and variations, and may have imprinted or otherwise
reproduced thereon such legend or legends, not inconsistent with the provisions
of this Indenture, as may be required to comply with any law or with any rules
or regulations pursuant thereto, or with the rules of any securities market in
which the Securities are admitted to trading, or to conform to general usage.
Each Security shall be dated the date of its authentication, shall bear
interest from the applicable date and shall be payable on the dates specified
on the face of the form of Security recited above.
The person in whose name any Security is registered at the close of
business on any record date with respect to any interest payment date shall be
entitled to receive the interest, if any, payable on such interest payment date
notwithstanding any transfer or exchange of such Security subsequent to the
record date and prior to such interest payment date, except if and to the
extent the Issuer shall default in the payment of the interest due on such
interest payment date, in which case such defaulted interest shall be paid to
the persons in whose names outstanding Securities
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<PAGE> 19
are registered at the close of business on a subsequent record date (which
shall be not less than five business days prior to the date of payment of such
defaulted interest) established by notice given by mail by or on behalf of the
Issuer to the holders of Securities not less than 15 days preceding such
subsequent record date. The term "record date" as used with respect to any
interest payment date (except a date for payment of defaulted interest) shall
mean if such interest payment date is the first day of a calendar month, the
fifteenth day of the next preceding calendar month and shall mean, if such
interest payment date is the fifteenth day of a calendar month, the first day
of such calendar month, whether or not such record date is a business day.
SECTION 2.5 REGISTRATION, TRANSFER AND EXCHANGE. The Issuer will
keep at each office or agency to be maintained for the purpose as provided
in Section 3.2 a register or registers in which, subject to such reasonable
regulations as it may prescribe, it will register, and will register the
transfer of, Securities as in this Article provided. Such register shall
be in written form in the English language or in any other form capable of
being converted into such form within a reasonable time. At all reasonable
times such register or registers shall be open for inspection by the Trustee.
Subject to Section 2.9, upon due presentation for registration of
transfer of any Security at each such office or agency, the Issuer shall
execute and the Trustee shall authenticate and deliver in the name of the
transferee or transferees a new Security or Securities in authorized
denominations for a like aggregate principal amount.
Subject to Section 2.9, any Security or Securities may be exchanged for
a Security or Securities in other authorized denominations, in an equal
aggregate principal amount. Securities to be exchanged shall be surrendered at
each office or agency to be maintained by the Issuer for the purpose as
provided in Section 3.2, and the Issuer shall execute and the Trustee shall
authenticate and deliver in exchange therefor the Security or Securities which
the Securityholder making the exchange shall be entitled to receive, bearing
numbers not contemporaneously outstanding.
All Securities presented for registration of transfer, exchange or
payment shall (if so required by the Issuer or the Trustee) be duly endorsed
by, or be accompanied by a written instrument or instruments of transfer in
form satisfactory to the Issuer and the Trustee duly executed by, the holder or
his attorney duly authorized in writing.
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The Issuer may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any exchange
or registration of transfer of Securities. No service charge shall be made for
any such transaction.
All securities issued upon any transfer or exchange of Securities shall
be valid obligations of the Issuer, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Securities surrendered upon such
transfer or exchange.
SECTION 2.6 MUTILATED, DEFACED, DESTROYED, LOST AND STOLEN SECURITIES.
In case any temporary or definitive Security shall become mutilated, defaced or
be apparently destroyed, lost or stolen, the Issuer in its discretion may
execute, and upon the written request of any officer of the Issuer, the Trustee
shall authenticate and deliver, a new Security, bearing a number not
contemporaneously outstanding, in exchange and substitution for the mutilated
or defaced Security, or in lieu of and substitution for the Security so
apparently destroyed, lost or stolen. In every case the applicant for a
substitute Security shall furnish to the Issuer and to the Trustee and any
agent of the Issuer or the Trustee such security or indemnity as may be
required by them to indemnify and defend and to save each of them harmless and,
in every case of destruction, loss or theft, evidence to their satisfaction of
the apparent destruction, loss or theft of such Security and of the ownership
thereof.
Upon the issuance of any substitute Security, the Issuer may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses (including the
fees and expenses of the Trustee) connected therewith. In case any Security
which has matured or is about to mature, shall become mutilated or defaced or
be apparently destroyed, lost or stolen, the Issuer may, instead of issuing a
substitute Security, pay or authorize the payment of the same (without
surrender thereof except in the case of a mutilated or defaced Security), if
the applicant for such payment shall furnish to the Issuer and to a the Trustee
and any agent of the Issuer or the Trustee such security or indemnity as any of
them may require to save each of them harmless from all risks, however remote,
and, in every case of apparent destruction, loss or theft, the applicant shall
also furnish to the Issuer and the Trustee and any agent of the Issuer or the
Trustee evidence to their satisfaction of the apparent destruction, loss or
theft of such Security and of the ownership thereof.
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<PAGE> 21
Every substitute Security issued pursuant to the provisions of this
Section by virtue of the fact that any Security is apparently destroyed, lost
or stolen shall constitute an additional contractual obligation of the Issuer,
whether or not the apparently destroyed, lost or stolen Security shall be at
any time enforceable by anyone and shall be entitled to all the benefits of
(but shall be subject to all the limitations of rights set forth in) this
Indenture equally and proportionately with any and all other Securities duly
authenticated and delivered hereunder. All Securities shall be held and owned
upon the express condition that, to the extent permitted by law, the foregoing
provisions are exclusive with respect to the replacement or payment of
mutilated, defaced, or apparently destroyed, lost or stolen Securities and
shall preclude any and all other rights or remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement or payment of negotiable instruments or other securities without
their surrender.
SECTION 2.7 CANCELLATION OF SECURITIES; DESTRUCTION THEREOF. All
Securities surrendered for payment, redemption, registration of transfer or
exchange, if surrendered to the Issuer or any agent of the Issuer or the
Trustee, shall be delivered to the Trustee for cancellation or, if surrendered
to the Trustee, shall be cancelled by it; and no Securities shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Indenture. The Trustee shall destroy cancelled Securities held by it and
deliver a certificate of destruction to the Issuer. If the Issuer shall
acquire any of the Securities, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Securities
unless and until the same are delivered to the Trustee for cancellation.
SECTION 2.8 TEMPORARY SECURITIES. Pending the preparation of
definitive Securities, the Issuer may execute and the Trustee shall
authenticate and deliver temporary Securities (printed, lithographed,
typewritten or otherwise reproduced, in each case in form satisfactory to the
Trustee). Temporary Securities shall be issuable as registered Securities
without coupons, of any authorized denomination, and substantially in the form
of the definitive Securities but with such omissions, insertions and variations
as may be appropriate for temporary Securities, all as may be determined by the
Issuer with the concurrence of the Trustee. Temporary Securities may contain
such reference to any provisions of this Indenture as may be appropriate.
Every temporary Security shall be executed by the Issuer and be authenticated
by the Trustee upon the same conditions and in substantially the same manner,
and with like effect, as the definitive Securities. Without unreasonable delay
the Issuer
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<PAGE> 22
shall execute and shall furnish definitive Securities and thereupon temporary
Securities may be surrendered in exchange therefor without charge at each
office or agency to be maintained by the Issuer for the purpose pursuant to
Section 3.2, and the Trustee shall authenticate and deliver in exchange for
such temporary Securities a like aggregate principal amount of definitive
Securities of authorized denominations. Until so exchanged the temporary
Securities shall be entitled to the same benefits under this Indenture as
definitive Securities.
SECTION 2.9. SECURITIES ISSUABLE IN GLOBAL FORM. (a) If the Company
shall establish that the Securities may be issued in global form, the Company
shall execute and the Trustee shall, in accordance with this Article Two and
the Issuer Order, authenticate and deliver one or more Global Securities which
(i) shall represent, and shall be denominated in an amount equal to, the
aggregate principal amount of all of the Securities to be issued hereunder,
(ii) shall be registered in the name of the Depository for such Global Security
or its nominee, (iii) shall be delivered by the Trustee to the Depository or
pursuant to the Depository's instructions, (iv) shall be substantially in the
form of the form of Security specified pursuant to Section 2.4, with such
changes therein as may be necessary to reflect that such Security is a Global
Security, and (v) each of which shall bear a legend substantially to the
following effect: "Unless and until it is exchanged in whole or in part for
Securities in definitive form, this Security may not be transferred except as a
whole by the Depository to a nominee of the Depository, or by a nominee of the
Depository to the Depository or another nominee of the Depository, or by the
Depository or any such nominee to a successor Depository or a nominee of such
successor Depository. Unless this certificate is presented by an authorized
representative of the Depository to the Issuer or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of the Depository or its nominee and any payment is made to the Depository
or its nominee, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof has an
interest herein."
(b) Notwithstanding any provisions of this Section 2.9 or of Section
2.5, unless and until a Global Security is exchanged for Securities in
definitive form, a Global Security may be transferred, in whole, but not in
part, and in the manner provided in Section 2.5, only by the Depository to a
nominee of such Depository or by a nominee of such Depository to such
Depository or another nominee to a successor Depository selected or approved by
the Issuer or to a nominee of such successor Depository or in the manner
specified in Section 2.9(c).
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(c) If at any time the Depository for any Securities represented by
one or more Global Securities notifies the Issuer that it is unwilling or
unable to continue as Depository of such Securities or if at any time the
Depository shall no longer be eligible as provided in the definition of the
term "Depository" in Article One and a successor Depository is not appointed by
the Issuer within 90 days after the Issuer receives such notice or becomes
aware of such condition, as the case may be, this Section 2.9 shall no longer
be applicable to the Securities and the Issuer will execute, and the Trustee
will authenticate and deliver, Securities in definitive form without coupons,
in authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Security or Securities then outstanding in
exchange for such Global Security or Securities. In addition, the Issuer may
at any time and in its sole discretion determine that the Securities shall no
longer be represented by Global Securities and that the provisions of this
Section 2.9 shall no longer apply to the Securities. In such event the Issuer
will execute, and the Trustee, upon receipt of an Issuer Order evidencing such
determination by the Issuer, will authenticate and deliver, Securities in
definitive form without coupons, in authorized denominations in exchange for
and in an aggregate principal amount equal to the principal amount of the
Global Security or Securities then Outstanding. Upon the exchange of the
Securities for such Securities in definitive form without coupons, in
authorized denominations, such Global Security or Securities shall be cancelled
by the Trustee. Such Securities in definitive form issued in exchange for the
Global Security or Securities pursuant to this Section 2.9(c) shall be
registered in such names, and in such authorized denominations as the
Depository, pursuant to instructions from its direct or indirect participants
or otherwise, shall instruct the Trustee. The Trustee shall deliver such
Securities to the persons in whose name such Securities are so registered.
(d) As long as the Securities Outstanding are represented by one or
more Global Securities, the Issuer shall pay or cause to be paid the principal
of, and interest on, such Global Securities to the Holder thereof or a single
nominee of the Holder, or, at the option of the Issuer, to such other persons
as the Holder thereof may designate on the date such payments are due.
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<PAGE> 24
COVENANTS
OF
THE ISSUER AND THE TRUSTEE
--------------------------
SECTION 3.1 PAYMENT OF PRINCIPAL AND INTEREST. The Issuer covenants
and agrees that it will duly and punctually pay or cause to be paid the
principal of, and interest on, each of the Securities at the place or places,
at the respective times and in the manner provided in the Securities. Each
instalment of interest on the Securities may be paid by mailing checks for such
interest payable to or upon the written order of the holders of Securities
entitled thereto as they shall appear on the registry books of the Issuer.
SECTION 3.2 OFFICES FOR PAYMENTS, ETC. So long as any of the
Securities remain outstanding, the Issuer will maintain in the Borough of
Manhattan, New York, New York, and in any other city in which the Corporate
Trust Office of the Trustee may be located, the following: (a) an office or
agency where the Securities may be presented for payment, (b) an office or
agency where the Securities may be presented for registration of transfer and
for exchange as in this Indenture provided and (c) an office or agency where
notices and demands to or upon the Issuer in respect of the Securities or of
this Indenture may be served. The Issuer will give to the Trustee written
notice of the location of any such office or agency and of any change of
location thereof. The Issuer hereby initially designates the Corporate Trust
Office of the Trustee as one office or agency for each such purpose and Banc
Boston Trust Company of New York as another such office or agency. In case the
Issuer shall fail to maintain any such office or agency or shall fail to give
such notice of the location or of any change in the location thereof,
presentations and demands may be made and notices may be served at the
Corporate Trust Office.
SECTION 3.3 APPOINTMENT TO FILL A VACANCY IN OFFICE OF TRUSTEE. The
Issuer, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 5.9, a Trustee, so that there
shall at all times be a Trustee hereunder.
SECTION 3.4 PAYING AGENTS. Whenever the Issuer shall appoint a paying
agent other than the Trustee, it will cause such paying agent to execute and
deliver to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section,
(a) that it will hold all sums received by it as such agent for the
payment of the principal of or interest on the Securities (whether such sums
have been paid to it by the
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Issuer or by any other obligor on the Securities) in trust for the
benefit of the holders of the Securities or of the Trustee,
(b) that it will give the Trustee notice of any failure by the
Issuer (or by any other obligor on the Securities) to make any payment
of the principal of or interest on the Securities when the same shall
be due and payable, and
(c) pay any such sums so held in trust by it to the Trustee upon
the Trustee's written request at any time during the continuance of
the failure referred to in clause (b) above.
The Issuer will, prior to each due date of the principal of or interest
on the Securities, deposit with the paying agent a sum sufficient to pay such
principal or interest, and (unless such paying agent is the Trustee) the Issuer
will promptly notify the Trustee of any failure to take such action.
If the Issuer shall act as its own paying agent, it will, on or before
each due date of the principal of or interest on the Securities, set aside,
segregate and hold in trust for the benefit of the holders of the Securities a
sum sufficient to pay such principal or interest so becoming due. The Issuer
will promptly notify the Trustee of any failure to take such action.
Anything in this Section to the contrary notwithstanding, the Issuer may
at any time, for the purpose of obtaining a satisfaction and discharge of this
Indenture or for any other reason, pay or cause to be paid to the Trustee all
sums held in trust by the Issuer or any paying agent hereunder, as required by
this Section, such sums to be held by the Trustee upon the trusts herein
contained.
Anything in this Section to the contrary notwithstanding, the agreement to
hold sums in trust as provided in this Section are subject to the provisions of
Sections 9.3 and 9.4.
SECTION 3.5 CERTIFICATE TO TRUSTEE. The Issuer will furnish to the
Trustee on or before January 31 in each year (beginning with 1994) a brief
certificate (which need not comply with Section 10.5) from the principal
executive, financial or accounting officer of the Company as to his or her
knowledge of the Company's compliance with all conditions and covenants under
the Indenture as of the end of the preceding fiscal year (such compliance to be
determined without regard to any period of grace or requirement of notice
provided under the Indenture).
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SECTION 3.6 SECURITYHOLDERS' LISTS. If and so long as the Trustee
shall not be the Security registrar, the Issuer will furnish or cause to be
furnished to the Trustee a list in such form as the Trustee may reasonably
require of the names and addresses of the holders of the Securities pursuant to
Section 312 of the Trust Indenture Act of 1939 (a) semi-annually not more than
15 days after each record date for the payment of semi-annual interest on the
Securities, as hereinabove specified, as of such record date, and (b) at such
other times as the Trustee may request in writing, within 30 days after receipt
by the Issuer of any such request as of a date not more than 15 days prior to
the time such information is furnished.
SECTION 3.7 REPORTS BY THE ISSUER. The Issuer covenants to file with
the Trustee, within 15 days after the Issuer is required to file the same with
the Commission, copies of the annual reports and of the information, documents,
and other reports which the Issuer may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934.
SECTION 3.8 REPORTS BY THE TRUSTEE. (a) On or about each July 15, the
Trustee shall transmit to Holders such reports, if any, dated as of May 15,
concerning the Trustee of its actions under this Indenture as may be required
pursuant to the Trust Indenture Act of 1939 in the manner provided pursuant
thereto.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Securities and Exchange Commission and with the
Issuer. The Issuer will notify the Trustee when any Securities are listed on
any stock exchange.
SECTION 3.9 LIMITATIONS ON LIENS. The Issuer will not create or
assume, and will not permit any Subsidiary to create or assume, any
Indebtedness for money borrowed which is secured by a mortgage, pledge,
security interest or lien ("liens") of or upon any assets, whether now owned or
hereafter acquired, of the Issuer or any such Subsidiary without equally and
ratably securing the Securities by a lien ranking ratably with and equal to (or
at the Issuer's option prior to) such secured Indebtedness. The foregoing
restriction, however, will not apply to:
(a) liens on any assets of any corporation existing at the
time such corporation becomes a Subsidiary;
(b) liens on any assets existing at the time of acquisition of
such assets by the Issuer or a Subsidiary, or
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liens to secure the payment of all or any part of the purchase price
of such assets upon the acquisition of such assets by the Issuer or
a Subsidiary or to secure any indebtedness incurred or guaranteed by
the Issuer or a Subsidiary prior to, at the time of, or within 18
months after such acquisition (or in the case of real property, the
completion of construction (including any improvements on an existing
asset or property)) or commencement of full operation of such asset,
whichever is later which indebtedness is incurred or guaranteed for
the purpose of financing all or any part of the purchase price thereof
or, in the case of real property, construction or improvements
thereon; PROVIDED, HOWEVER, that in the case of any such acquisition,
construction or improvement, the lien shall not apply to any assets
theretofore owned by the Issuer or a Subsidiary, other than, in the
case of any such construction or improvement, any real property on
which the property so constructed, or the improvement, is located;
(c) liens on any assets to secure indebtedness of a Subsidiary
to the Issuer or to another Subsidiary;
(d) liens on any assets of a corporation existing at the time
such corporation is merged into or consolidated with the Issuer or a
Subsidiary or at the time of a purchase, lease or other acquisition of
the assets of a corporation or firm as an entirety or substantially as
an entirety by the Issuer or a Subsidiary;
(e) liens on any assets of the Issuer or a Subsidiary in favor
of the United States of America or any State thereof, or any
department, agency or instrumentality or political subdivision of the
United States of America or any State thereof, or in favor of any
other country, or any political subdivision thereof, to secure
partial, progress, advance or other payments pursuant to any contract
or statute or to secure any indebtedness incurred or guaranteed for
the purpose of financing all or any part of the purchase price (or, in
the case of real property, the cost of construction), of the assets
subject to such liens (including, but not limited to, liens incurred
in connection with pollution control, industrial revenue or similar
financings);
(f) any extension, renewal or replacement (or successive
extensions, renewals or replacements) in whole or in part of any lien
referred to in the foregoing clauses (a) to (e), inclusive; PROVIDED,
HOWEVER, that the principal amount of indebtedness secured thereby
shall not exceed the principal amount of indebtedness so secured at
the time of
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such extension, renewal or replacement and that such extension, renewal or
replacement shall be limited to all or part of the assets which secured the
lien so extended, renewed or replaced (plus improvements and construction on
such real property);
(g) liens imposed by law, such as mechanics', work- men's,
repairmen's, materialmen's, carriers', warehousemen's, vendors' or other
similar liens arising in the ordinary course of business, or governmental
(federal, state or municipal) liens arising out of contracts for the sale of
products or services by the Issuer or any Subsidiary, or deposits or pledges to
obtain the release of any of the foregoing liens;
(h) pledges, liens or deposits under worker's compensation laws or
similar legislation and liens or judgments thereunder which are not
currently dischargeable, or in connection with bids, tenders,
contracts (other than for the payment of money) or leases to which the
Issuer or any Subsidiary is a party, or to secure public or statutory
obligations of the Issuer or any Subsidiary, or in connection with
obtaining or maintaining self-insurance or to obtain the benefits of
any law, regulation or arrangement pertaining to the unemployment
insurance, old age pensions, social security or similar matters, or to
secure surety, appeal or customs bonds to which the Issuer or any
Subsidiary is a party, or in litigation or other proceedings such as,
but not limited to, interpleader proceedings, and other similar
pledges, liens or deposits made or incurred in the ordinary course of
business;
(i) liens created by or resulting from any litigation or other
proceeding which is being contested in good faith by appropriate
proceedings, including liens arising out of judgments or awards
against the Issuer or any Subsidiary with respect to which the Issuer
or such Subsidiary is in good faith prosecuting an appeal or
proceedings for review or for which the time to make an appeal has not
yet expired; or final unappealable judgment liens which are satisfied
within 30 days of the date of judgment; or liens incurred by the
Issuer or any Subsidiary for the purpose of obtaining a stay or
discharge in the course of any litigation or other proceeding to which
the Issuer or such Subsidiary is a party; or
(j) liens for taxes or assessments or governmental charges or
levies not yet due or delinquent, or which can thereafter be paid
without penalty, or which are being contested in good faith by
appropriate proceedings;
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<PAGE> 29
landlord's liens on property held under lease; and any other liens
or charges incidental to the conduct of the business of the Issuer or
any Subsidiary or the ownership of the assets of any of them which
were not incurred in connection with the borrowing of money or the
obtaining of advances or credit and which do not, in the opinion of
the Issuer, materially impair the use of such assets in the operation
of the business of the Issuer or such Subsidiary or the value of such
assets for the purposes of such business.
Notwithstanding the restrictions set forth in the preceding paragraph,
the Issuer or any Subsidiary will be permitted to create or assume any
Indebtedness which is secured by a lien not permitted by the foregoing
subsections (a) through (j) without equally and ratably securing the
Securities, provided that at the time of such creation or assumption, and after
giving effect thereto, Exempted Debt does not exceed the aggregate sum of (i)
20% of Consolidated Net Tangible Assets, (ii) Cash and (iii) Marketable
Securities.
SECTION 3.10 LIMITATION ON SALE AND LEASE-BACK. The Issuer will not,
nor will it permit any Subsidiary to, enter into any sale and leaseback
transaction with respect to any assets, other than any such transaction
involving a lease for a term of not more than three years or involving a sale
and leaseback between the Company and any Subsidiary or between two or more
Subsidiaries, unless either (a) the Issuer or such Subsidiary would be entitled
to incur Indebtedness secured by a lien on the assets to be leased, in an
amount at least equal to the Attributable Debt with respect to such sale and
leaseback transaction, without equally and ratably securing the Securities,
pursuant to clauses (a) through (j) inclusive of Section 3.9, or (b) the
proceeds of the sale of the assets to be leased are at least equal to the fair
value of such assets (as determined by the Board of Directors of the Issuer)
and the proceeds are applied to the purchase or acquisition (or, in the case of
property, the construction) of assets or to the retirement (other than at
maturity or pursuant to a mandatory sinking fund or redemption provision) of
Senior Funded Indebtedness. This limitation, however, will not apply if at the
time the Issuer or any Subsidiary enters into such sale and leaseback
transaction, and after giving effect thereto, Exempted Debt does not exceed the
aggregate sum of (i) 20% of Consolidated Net Tangible Assets, (ii) Cash and
(iii) Marketable Securities.
SECTION 3.11 CHANGE IN CONTROL.
(a) If at any time (i) any person or any persons acting together which
would constitute a "group" for purposes of Section 13 or 14 of the Securities
Exchange Act of 1934 (a "Group") shall
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beneficially own (as defined in Rule 13d-3 promulgated pursuant to the
Securities Exchange Act of 1934) 50% or more of the outstanding shares of the
common stock of the Issuer or (ii) during any period of 12 consecutive calendar
months, individuals who at the beginning of such period were directors of the
Issuer shall cease to constitute a majority of the Board of Directors (other
than as a result of the death of one or more such individuals) (each such
occurrence, a "Change in Control"), each Securityholder shall have the right,
at such Securityholder's option, to require that the Issuer repurchase all or
any portion of such Securityholder's Securities at a purchase price in cash
equal to 100% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase, in accordance with the provisions of paragraph
(b) of this Section 3.11.
(b) Within 30 days after the occurrence of any Change in Control, the
Issuer shall mail a notice (the "Change in Control Notice") to the Trustee and
each Holder stating:
(1) that a Change in Control has occurred and that such holder
has the right to require the Issuer to repurchase all or any portion
of such Holder's Securities at a purchase price in cash equal to 100%
of the principal amount of the Securities, plus accrued and unpaid
interest, if any, to the date of purchase;
(2) the circumstances and relevant facts regarding such Change
in Control (including but not limited to information with respect to
pro forma historical income, cash flow and capitalization after giving
effect to such Change in Control);
(3) the purchase date (which shall be a date at least 30 days
but not more than 60 days after the date on which the Change in
Control Notice is mailed by the Issuer);
(4) that, to be effective, any Holder's election to have
Securities purchased must be received by the paying agent (if any, or
the Trustee if no paying agent has been appointed), by first class
mail, certified or registered with return receipt requested, postage
prepaid, at its address specified in the Change in Control Notice on
or prior to the date (which shall be specified in such Change in
Control Notice from the Issuer to the Holders) that is 10 days prior
to the purchase date;
(5) that, for any Security to be purchased, the Issuer must
receive at the office of the paying agent (if any, or the Trustee if
no paying agent has been appointed)
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not later than three Business Days prior to the purchase date,
such Security, with the form thereon entitled "Option to Elect
Repurchase" duly executed and completed;
(6) that any Security not tendered or not accepted for payment
will continue to accrue interest;
(7) that any Security accepted for payment shall cease to
accrue interest after the purchase date;
(8) that Holders will be entitled to withdraw their election if
the paying agent (if any, or the Trustee if no paying agent has been
appointed) receives, not later than three Business Days prior to the
purchase date a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the
Securities the Holder delivered or is expected to deliver for
redemption and a statement that Holder is withdrawing his election to
have Securities purchased.
At the Issuer's request, the Trustee shall give such notice in the
Issuer's name and at the Issuer's expense; provided, however, that the Issuer
shall deliver to the Trustee, at least 15 days prior to the date upon which
notice must be mailed to Holders (unless a shorter time shall be acceptable to
the Trustee), an Officer's Certificate setting forth the information to be
stated in such notice as provided in this Section 3.11. No failure of the
Issuer to give the foregoing notice shall limit any Securityholder's right to
exercise a purchase right.
(c) In the event a purchase right shall be exercised in accordance
with the terms hereof, the Issuer shall pay or cause to be paid the price
payable with respect to the Securities as to which the purchase right had been
exercised in cash to the Securityholder. In the event that a purchase right is
exercised with respect to less than the entire principal amount of a
surrendered Security, the Issuer shall execute and deliver to the Trustee and
the Trustee shall authenticate for issuance in the name of the Securityholder a
Security or Securities in the aggregate principal amount of the unpurchased
portion of such surrendered Security.
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ARTICLE FOUR
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
-------------------
SECTION 4.1 EVENT OF DEFAULT DEFINED; ACCELERATION OF MATURITY; WAIVER
OF DEFAULT. In case one or more of the following Events of Default (whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing,
that is to say:
(a) default in the payment of any installment of interest upon
any of the Securities as and when the same shall become due and
payable, and continuance of such default for a period of 30 days; or
(b) default in the payment of all or any part of the principal
on any of the Securities as and when the same shall become due and
payable either at maturity, by declaration or otherwise; or
(c) failure on the part of the Issuer duly to observe or
perform any other of the covenants or agreements on the part of the
Issuer in the Securities or in this Indenture for a period of 90 days
after the date on which written notice specifying such failure,
stating that such notice is a "Notice of Default" hereunder and
demanding that the Issuer remedy the same, shall have been given by
registered or certified mail, return receipt requested, to the Issuer
by the Trustee, or to the Issuer and the Trustee by the holders of at
least 25% in aggregate principal amount of the Securities at the time
outstanding; or
(d) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Issuer in an involuntary
case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of its property or ordering the
winding up or liquidation of its affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive
days; or
(e) the issuer shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law
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<PAGE> 33
now or hereafter in effect, or consent to the entry of an order
for relief in an involuntary case under any such law, or consent to
the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of
the Issuer or for any substantial part of its property, or make any
general assignment for the benefit of creditors;
then, and in each and every such case, unless the principal of all of the
Securities shall have already become due and payable, either the Trustee or
the holders of not less than 25% in aggregate principal amount of the
Securities then outstanding hereunder, by notice in writing to the Issuer (and
to the Trustee if given by Securityholders), may declare the entire principal
of all the Securities and the interest accrued thereon to be due and payable
immediately, and upon any such declaration the same shall become immediately
due and payable. This provision, however, is subject to the condition that (i)
if, at any time after the principal of the Securities shall have been so
declared due and payable, and before any judgment or decree for the payment of
the monies due shall have been obtained or entered as hereinafter provided, the
Issuer shall pay or shall deposit with the Trustee a sum sufficient to pay all
matured installments of interest upon all the Securities and the principal of
any and all Securities which shall have become due otherwise than by
acceleration (with interest upon such principal and, to the extent that payment
of such interest is enforceable under applicable law, on overdue installments
of interest, at the same rate as the rate of interest specified in the
Securities, to the date of such payment or deposit) and such amount as shall be
sufficient to cover reasonable compensation to the Trustee and each predecessor
Trustee, their respective agents, attorneys and counsel, and all other expenses
and liabilities incurred, and all advances made, by the Trustee and each
predecessor Trustee except as a result of negligence or bad faith, and (ii) if
any and all Events of Default under the Indenture, other than the non-payment
of the principal of Securities which shall have become due by acceleration,
shall have been cured, waived or otherwise remedied as provided herein -- then
and in every such case the holders of a majority in aggregate principal amount
of the Securities then outstanding, by written notice to the Issuer and to the
Trustee, may waive all defaults and rescind and annul such declaration and its
consequences, but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent default or shall impair any right consequent
thereon.
SECTION 4.2 COLLECTION OF INDEBTEDNESS BY TRUSTEE; TRUSTEE MAY PROVE
DEBT. The Issuer covenants that (a) in case default shall be made in the
payment of any installment of interest on any
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of the Securities when such interest shall have become due and payable, and
such default shall have continued for a period of 30 days or (b) in case
default shall be made in the payment of all or any part of the principal of any
of the Securities when the same shall have become due and payable, whether upon
maturity or by declaration or otherwise -- then upon demand of the Trustee, the
Issuer will pay to the Trustee for the benefit of the holders of the Securities
the whole amount that then shall have become due and payable on all such
Securities for principal or interest, as the case may be (with interest to the
date of such payment upon the overdue principal and, to the extent that payment
of such interest is enforceable under applicable law, on overdue installments
of interest at the same rate as the rate of interest specified in the
Securities); and in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including reasonable
compensation to the Trustee and each predecessor Trustee, their respective
agents, attorneys and counsel, and any expenses and liabilities incurred, and
all advances made, by the Trustee and each predecessor Trustee except as a
result of its negligence or bad faith.
Until such demand is made by the Trustee, the Issuer may pay the
principal of and interest on the Securities to the registered holders, whether
or not the Securities be overdue.
In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceedings to judgment or final decree, and may enforce any
such judgment or final decree against the Issuer or other obligor upon the
Securities and collect in the manner provided by law out of the property of the
Issuer or other obligor upon the Securities, wherever situated the moneys
adjudged or decreed to be payable.
In case there shall be pending proceedings relative to the Issuer or
any other obligor upon the Securities under Title 11 of the United States Code
or any other applicable Federal or state bankruptcy, insolvency or other
similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor, or in case of any other comparable judicial proceedings relative to
the Issuer or other obligor upon the Securities, or to the creditors or
property of the Issuer or such other obligor, the Trustee, irrespective of
whether the principal of the Securities shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of
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whether the Trustee shall have made any demand pursuant to the provisions of
this Section, shall be entitled and empowered, by intervention in such
proceedings or otherwise;
(a) to file and prove a claim or claims for the whole amount
of principal and interest owing and unpaid in respect of the
Securities, and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for reasonable compensation to the Trustee and
each predecessor Trustee, and their respective agents, attorneys and
counsel, and for reimbursement of all expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor
Trustee, except as a result of negligence or bad faith) and of the
Securityholders allowed in any judicial proceedings relative to the
Issuer or other obligor upon the Securities, or to the creditors or
property of the Issuer or such other obligor,
(b) unless prohibited by applicable law and regulations, to
vote on behalf of the holders of the Securities in any election of a
trustee or a standby trustee in arrangement, reorganization,
liquidation or other bankruptcy or insolvency proceedings or person
performing similar functions in comparable proceedings, and
(c) to collect and receive any moneys or other property
payable or deliverable on any such claims, and to distribute all
amounts received with respect to the claims of the Securityholders and
of the Trustee on their behalf; and any trustee, receiver, or
liquidator, custodian or other similar official is hereby authorized
by each of the Securityholders to make payments to the Trustee, and,
in the event that the Trustee shall consent to the making of payments
directly to the Securityholders, to pay to the Trustee such amounts as
shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and
counsel, and all other expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee except as a
result of negligence or bad faith.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any
Securityholder any plan or reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such
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proceeding except, as aforesaid, to vote for the election of a trustee
in bankruptcy or similar person.
All rights of action and of asserting claims under this Indenture, or
under any of the Securities, may be enforced by the Trustee without the
possession of any of the Securities or the production thereof on any trial or
other proceedings relative thereto, and any such action or proceedings
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Trustee, each predecessor
Trustee and their respective agents and attorneys, shall be for the ratable
benefit of the holders of the Securities.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the
holders of the Securities, and it shall not be necessary to make any holders of
the Securities parties to any such proceedings.
SECTION 4.3 APPLICATION OF PROCEEDS. Any moneys collected by the
Trustee pursuant to this Article shall be applied in the following order at the
date or dates fixed by the Trustee and, in case of the distribution of such
moneys on account of principal or interest, upon presentation of the several
Securities and stamping (or otherwise noting) thereon the payment, or issuing
Securities in reduced principal amounts in exchange for the presented
Securities if only partially paid, or upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses and any other
amounts due to the Trustee under Section 5.6, including reasonable
compensation to the Trustee and each predecessor Trustee and their
respective agents and attorneys and of all expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor
Trustee except as a result of negligence or bad faith;
SECOND: In case the principal of the Securities shall not have
become and be then due and payable, to the payment of interest in
default in the order of the maturity of the installments of such
interest, with interest (to the extent that such interest has been
collected by the Trustee) upon the overdue installments of interest at
the same rate as the rate of interest specified in the Securities,
such payments to be made ratably to the persons entitled thereto,
without discrimination or preference;
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THIRD: In case the principal of the Securities shall have
become and shall be then due and payable, to the payment of the whole
amount then owing and unpaid upon all the Securities for principal and
interest, with interest upon the overdue principal, and (to the extent
that such interest has been collected by the Trustee) upon overdue
installments of interest at the same rate as the rate of interest
specified in the Securities; and in case such moneys shall be
insufficient to pay in full the whole amount so due and unpaid upon
the Securities, then to the payment of such principal and interest,
without preference or priority of principal over interest, or of
interest over principal, or of any installment of interest or any
other installment of interest, or of any Security over any other
Security, ratably to the aggregate of such principal and accrued and
unpaid interest; and
FOURTH: To the payment of the remainder, if any, to the Issuer
or any other person lawfully entitled thereto.
SECTION 4.4 SUITS FOR ENFORCEMENT. In case an Event of Default has
occurred, has not been waived and is continuing, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.
SECTION 4.5 RESTORATION OF RIGHTS ON ABANDONMENT OF PROCEEDINGS. In
case the Trustee shall have proceeded to enforce any right under this Indenture
and such proceedings shall have been discontinued or abandoned for any reason,
or shall have been determined adversely to the Trustee, then and in every such
case the Issuer and the Trustee shall be restored respectively to their former
positions and rights hereunder, and all rights, remedies and powers of the
Issuer, the Trustee and the Securityholders shall continue as though no such
proceedings had been taken.
SECTION 4.6 LIMITATIONS ON SUITS BY SECURITYHOLDERS. No holder of any
Security shall have any right by virtue or by availing of any provision of this
Indenture to institute any action or proceeding at law or in equity or in
bankruptcy or otherwise upon or under or with respect to this Indenture, or for
the appointment of a trustee, receiver, liquidator, custodian or other similar
official or for any other remedy hereunder, unless
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such holder previously shall have given to the Trustee written notice of
default and of the continuance thereof, as hereinbefore provided, and unless
also the holders of not less than 25% in aggregate principal amount of the
Securities then outstanding shall have made written request upon the Trustee to
institute such action or proceedings in its own name as trustee hereunder and
shall have offered to the Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or thereby
and the Trustee for 60 days after its receipt of such notice, request and offer
of indemnity shall have failed to institute any such action or proceedings and
no direction inconsistent with such written request shall have been given to
the Trustee pursuant to Section 4.8; it being understood and intended, and
being expressly covenanted by the taker and holder of every Security with every
other taker and holder and the Trustee, that no one or more holders of
Securities shall have any right in any manner whatever by virtue or by availing
of any provision of this Indenture to affect, disturb or prejudice the rights
of any other holder of Securities, or to obtain or seek to obtain priority over
or preference to any other such holder or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all holders of Securities. For the protection and
enforcement of the provisions of this Section, each and every Securityholder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.
SECTION 4.7 POWERS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT
WAIVER OF DEFAULT. Except as provided in Section 2.6, no right or remedy
herein conferred upon or reserved to the Trustee or to the Securityholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
No delay or omission of the Trustee or of any holder of any of the
Securities to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power or
shall be construed to be a waiver of any such Event of Default or an
acquiescence therein; and, subject to Section 4.6, every power and remedy given
by this Indenture or by law to the Trustee or to the Securityholders may be
exercised from time to time, and as often as shall be deemed expedient, by the
Trustee or by the Securityholders.
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SECTION 4.8 CONTROL BY SECURITYHOLDERS. The holders of a majority in
aggregate principal amount of the Securities at the time outstanding shall have
the right to direct the time, method, and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee by this Indenture; PROVIDED that such direction shall
not be otherwise than in accordance with law and the provisions of this
Indenture and PROVIDED FURTHER that (subject to the provisions of Section 5.1)
the Trustee shall have the right to decline to follow any such direction if the
Trustee, being advised by counsel, shall determine that the action or
proceeding so directed may not lawfully be taken or if the Trustee in good
faith by its board of directors, the executive committee, or a trust committee
of directors or responsible officers of the Trustee shall determine that the
action or proceedings so directed would involve the Trustee in personal
liability or if the Trustee in good faith shall so determine that the actions
or forbearances specified in or pursuant to such direction shall be unduly
prejudicial to the interests of holders of the Securities not joining in the
giving of said direction, it being understood that (subject to Section 5.1) the
Trustee shall have no duty to ascertain whether or not such actions or
forbearances are unduly prejudicial to such holders.
Nothing in this Indenture shall impair the right of the Trustee in its
discretion to take any action deemed proper by the Trustee and which is not
inconsistent with such direction by Securityholders.
SECTION 4.9 WAIVER OF PAST DEFAULTS. Subject to and without limiting
Section 4.1, the Holders of a majority in aggregate principal amount of the
Securities at the time outstanding may on behalf of the holders of all the
Securities waive any past default or Event of Default hereunder and its
consequences, except a default (a) in the payment of principal of or interest
on any of the Securities or (b) in respect of a covenant or provision hereof
which cannot be modified or amended without the consent of the Holder of each
Security affected. In the case of any such waiver, the Issuer, the Trustee and
the holders of the Securities shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
Upon any such waiver, such default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured, and not to have occurred for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or
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other default or Event of Default or impair any right consequent thereon.
ARTICLE FIVE
CONCERNING THE TRUSTEE
----------------------
SECTION 5.1 DUTIES AND RESPONSIBILITIES OF THE TRUSTEE; DURING
DEFAULT; PRIOR TO DEFAULT. The Trustee, prior to the occurrence of an Event of
Default and after the curing or waiving of all Events of Default which may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture. In case an Event of Default has
occurred (which has not been cured or waived) the Trustee shall exercise such
of the rights and powers vested in it by this Indenture, and use the same
degree of care and skill in their exercise, as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default which may have
occurred:
(i) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture,
and the Trustee shall not be liable except for the performance
of such duties and obligations as are specifically set forth
in this Indenture, and no implied covenants or obligations shall
be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee,
the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein,
upon any statements, certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture;
but in the case of any such statements, certificates or opinions
which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to
the requirements of this Indenture;
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(b) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Responsible Officers of
the Trustee, unless it shall be proved that the Trustee was negligent
in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a majority in principal
amount of the Securities at the time outstanding relating to the time,
method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there shall be reasonable ground for believing that
the repayment of such funds or adequate indemnity against such liability is not
reasonably assured to it.
This Section 5.1 is in furtherance of and subject to Sections 315 and
316 of the Trust Indenture Act of 1939.
SECTION 5.2 CERTAIN RIGHTS OF THE TRUSTEE. In furtherance of and
subject to the Trust Indenture Act of 1939, and subject to Section 5.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate or
any other certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture, note, coupon, security or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Issuer
mentioned herein shall be sufficiently evidenced by an Officers'
Certificate (unless other evidence in respect thereof be herein
specifically prescribed); and any resolution of the Board of Directors
may be evidenced to the Trustee by a Board Resolution;
(c) the Trustee may consult with counsel and any advice or
Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken,
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suffered or omitted to be taken by it hereunder in good faith and in
accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
trusts or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted by
it in good faith and believed by it to be authorized or within the discretion,
rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Event of Default hereunder and after
the curing or waiving of all Events of Default, the Trustee shall not be bound
to make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, appraisal, bond, debenture, note, coupon, security, or other
paper or document unless requested in writing so to do by the Holders of not
less than a majority in aggregate principal amount of the Securities then
outstanding; PROVIDED that, if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it in
the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the terms
of this Indenture, the Trustee may require reasonable indemnity against such
expenses or liabilities as a condition to proceeding; the reasonable expenses
of every such examination shall be paid by the Issuer or, if paid by the
Trustee or any predecessor Trustee, shall be repaid by the Issuer upon demand;
and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys not regularly in its employ and the Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed with due care by it hereunder.
SECTION 5.3 TRUSTEE NOT RESPONSIBLE FOR RECITALS, DISPOSITION OF
SECURITIES OR APPLICATION OF PROCEEDS THEREOF. The recitals contained herein
and in the Securities, except the Trustee's certificates of authentication,
shall be taken as the statements of the Issuer, and the Trustee assumes no
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responsibility for the correctness of the same. The Trustee makes no
representation as to the validity or sufficiency of this Indenture or of the
Securities. The Trustee shall not be accountable for the use or application by
the Issuer of any of the Securities or of the proceeds thereof.
SECTION 5.4 TRUSTEE AND AGENTS MAY HOLD SECURITIES; COLLECTIONS, ETC.
The Trustee or any agent of the Issuer or the Trustee, in its individual or any
other capacity, may become the owner or pledgee of Securities with the same
rights it would have if it were not the Trustee or such agent and may otherwise
deal with the Issuer and receive, collect, hold and retain collections from the
Issuer with the same rights it would have if it were not the Trustee or such
agent.
SECTION 5.5 MONEYS HELD BY TRUSTEE. Subject to the provisions of
Section 9.4 hereof, all moneys received by the Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which they
were received, but need not be segregated from other funds except to the extent
required by mandatory provisions of law. Neither the Trustee nor any agent of
the Issuer or the Trustee shall be under any liability for interest on any
moneys received by it hereunder.
SECTION 5.6 COMPENSATION AND INDEMNIFICATION OF TRUSTEE AND ITS PRIOR
CLAIM. The Issuer covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable compensation (which
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) and the Issuer covenants and agrees to pay or
reimburse the Trustee and each predecessor Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by or on
behalf of it in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of
its counsel and of all agents and other persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith. The Issuer also covenants to indemnify the Trustee
and each predecessor Trustee for, and to hold it harmless against, any loss,
liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of this
Indenture or the trusts hereunder and its duties hereunder, including the costs
and expenses of defending itself against or investigating any claim of
liability in the premisses. The obligations of the Issuer under this Section
to compensate and indemnify the Trustee and each predecessor Trustee and to pay
or reimburse the Trustee and each predecessor Trustee for expenses,
disbursements and advances shall constitute additional indebtedness hereunder
and
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shall survive the satisfaction and discharge of this Indenture. Such
additional indebtedness shall be a senior claim to that of the Securities upon
all property and funds held or collected by the Trustee as such, except funds
held in trust for the benefit of the holders of particular Securities, and the
Securities are hereby subordinated to such senior claim.
SECTION 5.7 RIGHT OF TRUSTEE TO RELY ON OFFICERS' CERTIFICATE, ETC.
Subject to Section 5.1 and 5.2, whenever in the administration of the trusts of
this Indenture the Trustee shall deem it necessary or desirable that a matter
be proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under
the provisions of this Indenture upon the faith thereof.
SECTION 5.8 PERSONS ELIGIBLE FOR APPOINTMENT AS TRUSTEE. The Trustee
hereunder shall at all times be a corporation having a combined capital and
surplus of at least $25,000,000, and which is eligible in accordance with the
provisions of Section 310(a) of the Trust Indenture Act of 1939. If such
corporation publishes reports of condition at least annually, pursuant to law
or to the requirements of a Federal, State or District of Columbia supervising
or examining authority, then for the purposes of this Section, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.
SECTION 5.9 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR TRUSTEE.
(a) The Trustee may at any time resign by giving written notice of resignation
to the Issuer and by mailing notice thereof by first-class mail to holders of
Securities at their last addresses as they shall appear on the Security
register. Upon receiving such notice of resignation, the Issuer shall promptly
appoint a successor Trustee by written instrument in duplicate, executed by
authority of the Board of Directors, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to the successor Trustee. If
no successor Trustee shall have been so appointed and have accepted appointment
within 30 days after the mailing of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee, or any Securityholder who has been a bona fide holder of a
Security or
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Securities for at least six months may, on behalf of himself and all others
similarly situated, petition any such court for the appointment of a successor
Trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, appoint a successor Trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of
Section 310(b) of the Trust Indenture Act of 1939, after written
request therefor by the Issuer or by any Securityholder who has been
a bona fide holder of a Security or Securities for at least six
months; or
(ii) the Trustee shall cease to be eligible in accordance with
the provisions of Section 5.8 and shall fail to resign after written
request therefor by the Issuer or by any such Securityholder; or
(iii) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver or liquidator of the
Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation;
then, in any such case, the Issuer may remove the Trustee and appoint a
successor Trustee by written instrument, in duplicate, executed by order of the
Board of Directors of the Issuer, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor Trustee, or,
subject to Section 315(e) of the Trust Indenture Act of 1939, any
Securityholder who has been a bona fide Holder of a Security or Securities for
at least six months may on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, remove the Trustee and
appoint a successor Trustee.
(c) The Holders of a majority in aggregate principal amount of the
Securities at the time outstanding may at any time remove the Trustee and
appoint a successor Trustee by delivering to the Trustee so removed, to the
successor trustee so appointed and to the Issuer the evidence provided for in
Section 6.1 of the action in that regard taken by the Securityholders.
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(d) Any resignation or removal of the Trustee and any appointment
of a successor Trustee pursuant to any of the provisions of this Section 5.9
shall become effective upon acceptance of appointment by the successor Trustee
as provided in Section 5.10.
SECTION 5.10 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR TRUSTEE. Any
successor Trustee appointed as provided in Section 5.9 shall execute and
deliver to the Issuer and to its predecessor Trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor Trustee, without
any further act, deed or conveyance, shall become vested with all rights,
powers, duties and obligations of its predecessor hereunder with like effect as
if originally named as Trustee herein; but, neverthe- less, on the written
request of the Issuer or of the successor Trustee, upon payment of its charges
then unpaid, the Trustee ceasing to act shall, subject to Section 9.4, pay over
to the successor Trustee all moneys at the time held by it hereunder and shall
execute and deliver an instrument transferring to such successor Trustee all
such rights, powers, duties and obligations. Upon request of any such successor
Trustee, the Issuer shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor Trustee all
such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain
a prior claim upon all property or funds held or collected by such Trustee to
secure any amounts then due it pursuant to the provisions of Section 5.6.
Upon acceptance of appointment by a successor Trustee as provided in
this Section 5.10, the Issuer shall mail notice thereof by first-class mail to
the holders of Securities at their last addresses as they shall appear in the
Security register. If the acceptance of appointment is substantially
contemporaneous with the resignation, then the notice called for by the
preceding sentence may be combined with the notice called for by Section 5.9.
If the Issuer fails to mail such notice within 10 days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Issuer.
SECTION 5.11 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS OF TRUSTEE. Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder (provided that such
corporation shall be eligible under the provisions of
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Section 5.8) without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt
the certificate of authentication of any predecessor Trustee and deliver such
Securities so authenticated; and, in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor hereunder or
in the name of the successor Trustee; and in all such cases such certificate
shall have the full force which it is anywhere in the Securities or in this
Indenture provided that the Certificate of the Trustee shall have; PROVIDED,
that the right to adopt the certificate of authentication of any predecessor
Trustee or to authenticate Securities in the name of any predecessor Trustee
shall apply only to its successor or successors by merger, conversion or
consolidation.
ARTICLE SIX
CONCERNING THE SECURITYHOLDERS.
------------------------------
SECTION 6.1 EVIDENCE OF ACTION TAKEN BY SECURITYHOLDERS. Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Securityholders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Securityholders in person or by an agent duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Trustee. Proof of execution of any instrument or of a writing appointing any
such agent shall be sufficient for any purpose of this Indenture and (subject
to Sections 5.1 and 5.2) conclusive in favor of the Trustee and the Issuer, if
made in the manner provided in this Article.
SECTION 6.2 PROOF OF EXECUTION OF INSTRUMENTS AND OF HOLDING OF
SECURITIES; RECORD DATE. Subject to Sections 5.1 and 5.2, the execution of any
instrument by a Securityholder or his agent or proxy may be proved in
accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be satisfactory to the Trustee. The
holding of Securities shall be proved by the Security register or by a
certificate of the registrar thereof. The Issuer may set a record date for
purposes of determining the identity of holders of
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Securities entitled to vote or consent to any action referred to in Section
6.1, which record date may be set at any time or from time to time by notice
to the Trustee, for any date or dates (in the case of any adjournment or
resolicitation) not more than 60 days nor less than five days prior to the
proposed date of such vote or consent, and thereafter, notwithstanding any
other provisions hereof, only holders of Securities of record on such record
date shall be entitled to so vote or give such consent or to withdraw such vote
or consent.
SECTION 6.3 HOLDERS TO BE TREATED AS OWNERS. The Issuer, the Trustee
and any agent of the Issuer or the Trustee may deem and treat the person in
whose name any Security shall be registered upon the Security register as the
absolute owner of such Security (whether or not such Security shall be overdue
and notwithstanding any notation of ownership or other writing thereon) for the
purpose of receiving payment of or on account of the principal of and, subject
to the provisions of this Indenture, interest on such Security and for all
other purposes; and neither the Issuer nor the Trustee nor any agent of the
Issuer or the Trustee shall be affected by any notice to the contrary. All
such payments so made to any such person, or upon his order, shall be valid,
and, to the extent of the sum or sums so paid, effectual to satisfy and
discharge the liability for moneys payable upon any such Security.
No holder of any beneficial interest in any Global Security held on
behalf of such holder by a Depository shall have any rights under this
Indenture with respect to such Global Security, and such Depository may be
treated by the Issuer, the Trustee and any agent of the Company or the Trustee
as the owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall impair, as between a
Depository and such holders of beneficial interests, the operation of customary
practices governing the exercise of the rights of the Depository as holder of
any Security.
SECTION 6.4 SECURITIES OWNED BY ISSUER DEEMED NOT OUTSTANDING. In
determining whether the holders of the requisite aggregate principal amount of
Securities have concurred in any direction, consent or waiver under this
Indenture, Securities which are owned by the Issuer or any other obligor on the
Securities or by any person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Issuer or any other obligor
on the Securities shall be disregarded and deemed not to be outstanding for the
purpose of any such determination, except that for the purpose of determining
whether the Trustee shall be protected in relying on any such direction,
consent or waiver only Securities which the Trustee knows are so
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owned shall be so disregarded. Securities so owned which have been pledged
in good faith may be regarded as outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Issuer or any other obligor upon the
Securities or any person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Issuer or any other obligor on
the Securities. In case of a dispute as to such right, the advice of counsel
shall be full protection in respect of any decision made by the Trustee in
accordance with such advice. Upon request of the Trustee, the Issuer shall
furnish to the Trustee promptly an Officers' Certificate listing and
identifying all Securities, if any, known by the Issuer to be owned or held by
or for the account of any of the above-described persons; and, subject to
Sections 5.1 and 5.2, the Trustee shall be entitled to accept such Officers'
Certificate as conclusive evidence of the facts therein set forth and of the
fact that all Securities not listed therein are outstanding for the purpose of
any such determination.
SECTION 6.5 RIGHT OF REVOCATION OF ACTION TAKEN. At any time prior to
(but not after) the evidencing to the Trustee, as provided in Section 6.1, of
the taking of any action by the holders of the percentage in aggregate
principal amount of the Securities specified in this Indenture in connection
with such action, any holder of a Security the serial number of which is shown
by the evidence to be included among the serial numbers of the Securities the
holders of which have consented to such action may, by filing written notice at
the Corporate Trust Office and upon proof of holding as provided in this
Article, revoke such action so far as concerns such Security. Except as
aforesaid any such action taken by the holder of any Security shall be
conclusive and binding upon such holder and upon all future holders and owners
of such Security and of any Securities issued in exchange or substitution
therefor, irrespective of whether or not any notation in regard thereto is made
upon any such Security. Any action taken by the holders of the percentage in
aggregate principal amount of the Securities specified in this Indenture in
connection with such action shall be conclusively binding upon the Issuer, the
Trustee and the holders of all the Securities.
ARTICLE SEVEN
SUPPLEMENTAL INDENTURES.
SECTION 7.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF SECURITYHOLDERS.
The Issuer, when authorized by a Board Resolution, and the Trustee may from
time to time and at any time
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enter into an indenture or indentures supplemental hereto for one or more of
the following purposes:
(a) to convey, transfer, assign, mortgage or pledge to the Trustee as
security for the Securities any property or assets;
(b) to evidence the succession of another corporation to the Issuer,
or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Issuer
pursuant to Article Eight;
(c) to add to the covenants of the Issuer such further covenants,
restrictions, conditions or provisions as its Board of Directors and the
Trustee shall consider to be for the protection of the holders of
Securities, and to make the occurrence, or the occurrence and
continuance, of a default in any such additional covenants, restrictions,
conditions or provisions an Event of Default permitting the enforcement
of all or any of the several remedies provided in this Indenture as
herein set forth; PROVIDED, that in respect of any such additional
covenant, restriction, condition or provision such supplemental indenture
may provide for a particular period of grace after default (which period
may be shorter or longer than that allowed in the case of other defaults)
or may provide for an immediate enforcement upon such an Event of Default
or may limit the remedies available to the Trustee upon such a Event of
Default or may limit the right of the holders of a majority in aggregate
principal amount of the Securities to waive such an Event of Default;
(d) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any
supplemental indenture; or to make such other provisions in regard to
matters or questions arising under this Indenture or under any
supplemental indenture as the Board of Directors may deem necessary or
desirable and which shall not adversely affect the interests of the
holders of the Securities; and
(e) to provide for the issuance under this Indenture of Securities in
coupon form (including Securities registered as to principal only) and to
provide for exchangeability of such Securities with Securities issued
hereunder in fully registered form, and to make all appropriate changes
for such purpose.
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The Trustee is hereby authorized to join in the execution of any such
supplemental indenture, to make any further appropriate agreements and
stipulations which may be therein contained and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Trustee shall not be obligated to enter into any such supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
may be executed without the consent of the holders of any of the Securities at
the time outstanding, notwithstanding any of the provisions of Section 7.2.
SECTION 7.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF SECURITYHOLDERS.
With the consent (evidenced as provided in Article Six) of the Holders of not
less than 66 2/3 percent in aggregate principal amount of the Securities at the
time outstanding, the Issuer, when authorized by a Board Resolution, and the
Trustee may, from time to time and at any time, enter into an indenture of
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture
or of any supplemental indenture or of modifying in any manner the rights of
the holders of the Securities; PROVIDED; that no such supplemental indenture
shall (a) extend the final maturity of any Security, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, or impair or affect the right of any Securityholder to institute suit
for the payment thereof without the consent of the holder of each Security so
affected, or (b) reduce the aforesaid percentage of Securities, the consent of
the Holders of which is required for any such supplemental indenture, without
the consent of the Holders of all Securities then outstanding.
Upon the request of the Issuer, accompanied by a copy of a Board
Resolution authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of Securityholders
and other documents, if any, required by Section 6.1 the Trustee shall join
with the Issuer in the execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the Security- holders
under this Section to approve the particular form of any
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proposed supplemental indenture, but it shall be sufficient if such consent
shall approve the substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Issuer
shall mail a notice thereof by first-class mail to the Holders of Securities at
their addresses as they shall appear on the registry books of the Issuer,
setting forth in general terms the substance of such supplemental indenture.
Any failure of the Issuer to mail such notice, or any defect therein, shall
not, however, in any way impair or affect the validity of any such supplemental
indenture.
SECTION 7.3 EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith and
the respective rights, limitations of rights, obligations, duties and
immunities under this Indenture of the Trustee, the Issuer and the Holders of
Securities shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments, and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
SECTION 7.4 DOCUMENTS TO BE GIVEN TO TRUSTEE. The Trustee, subject to
the provisions of Sections 5.1 and 5.2, may receive an Officers' Certificate
and an Opinion of Counsel as conclusive evidence that any such supplemental
indenture complies with the applicable provisions of this Indenture.
SECTION 7.5 NOTATION ON SECURITIES IN RESPECT OF SUPPLEMENTAL
INDENTURES. Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article may bear a
notation in form approved by the Trustee as to any matter provided for by such
supplemental indenture or as to any action taken at any such meeting. If the
Issuer or the Trustee shall so determine, new Securities so modified as to
conform, in the opinion of the Trustee and the Board of Directors, to any
modification of this Indenture contained in any such supplemental indenture may
be prepared by the Issuer, authenticated by the Trustee and delivered in
exchange for the Securities then outstanding.
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ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
-----------------------------------------
SECTION 8.1 COVENANT NOT TO MERGE, CONSOLIDATE, SELL OR CONVEY
PROPERTY EXCEPT UNDER CERTAIN CONDITIONS. The Issuer shall not consolidate
with or merge into any other corporation or corporations (whether or not
affiliated with the Issuer or convey, transfer or lease its properties and
assets substantially as an entirety to any other corporation or corporations
(whether or not affiliated with the Issuer), and the Issuer shall not permit
any other corporation or corporations (whether or not affiliated with the
Issuer) to consolidate with or merge into the Issuer or convey, transfer or
lease its properties and assets substantially as an entirety to the Issuer,
unless:
(a) In case the Issuer shall consolidate with or merge into
another corporation or corporations or convey, transfer or lease its properties
and assets substantially as an entirety to any other corporation or
corporations, the corporation or corporations (if other than the Issuer) formed
by such consolidation or into which the Issuer is merged or the other
corporation or corporations which acquire by conveyance or transfer, or which
lease, the properties and assets of the Issuer substantially as an entirety
shall be organized and validly existing under the laws of any state of the
United States and shall, except where such assumption is deemed to have
occurred by the operation of law, expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the due and punctual payment of the principal
of and any premium and interest on, all the Securities and the performance or
observance of every covenant of this Indenture on the part of the Issuer to
be performed or observed; and
(b) Immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Issuer or any
Subsidiary as a result of such transaction as having been incurred by the
Issuer or such Subsidiary at the time of such transaction, no Event of Default,
and no event which, after notice or lapse of time or both, would become an
Event of Default, shall have happened and be continuing.
SECTION 8.2 SUCCESSOR CORPORATION SUBSTITUTED. In case of any such
consolidation, merger, sale or conveyance, and following such an assumption by
the successor corporation, such successor corporation shall succeed to and be
substituted for the Issuer, with the same effect as if it has been named
herein.
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Such successor corporation may cause to be signed, and may issue either
in its own name or in the name of the Issuer prior to such succession any or
all of the Securities issuable hereunder which theretofore shall not have been
signed by the Issuer and delivered to the Trustee; and, upon the order of such
successor corporation, instead of the Issuer, and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Securities which previously shall have been
signed and delivered by the officers of the Issuer to the Trustee for
authentication, and any Securities which such successor corporation thereafter
shall cause to be signed and delivered to the Trustee for that purpose. All of
the Securities so issued shall in all respects have the same legal rank and
benefit under this Indenture as the Securities theretofore or thereafter issued
in accordance with the terms of this Indenture as though all of such Securities
had been issued at the date of the execution hereof.
In the case of any such consolidation, merger, sale, lease or
conveyance such changes in phraseology and form (but not in substance) may be
made in the Securities thereafter to be issued as may be appropriate.
In the event of any such sale or conveyance (other than a conveyance by
way of lease) the Issuer or any such successor corporation which shall
theretofore have become such in the manner described in this Article shall be
discharged from all obligations and covenants under this Indenture and the
Securities and may be liquidated and dissolved.
SECTION 8.3 OPINION OF COUNSEL TO TRUSTEE. The Trustee, subject to
the provisions of Section 5.1 and 5.2, may receive an Opinion of Counsel as
conclusive evidence that any such consolidation, merger, sale, lease or
conveyance, and any such assumption, and any such liquidation or dissolution,
complies with the applicable provisions of this Indenture.
ARTICLE NINE
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
----------------
SECTION 9.1 SATISFACTION AND DISCHARGE OF INDENTURE. If at any time
(a) the Issuer shall have paid or caused to be paid the principal of and
interest on all the Securities outstanding hereunder, as and when the same
shall have become due and payable, or (b) the Issuer shall have delivered to
the Trustee for cancellation all Securities theretofore authenticated (other
than any Securities which shall have been destroyed, lost or stolen and
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which shall have been replaced or paid as provided in Section 2.6) or (c) (i)
all such Securities not theretofore delivered to the Trustee for cancellation
shall have become due and payable, or are by their terms to become due and
payable within one year, and (ii) the Issuer shall have irrevocably deposited
or caused to be deposited with the Trustee as trust funds the entire amount in
cash (other than moneys repaid by the Trustee or any paying agent to the Issuer
in accordance with Section 9.4) sufficient to pay at maturity all such
Securities not theretofore delivered to the Trustee for cancellation, including
principal and interest due or to become due to such date of maturity as the
case may be, and if, in any such case, the Issuer shall also pay or cause to be
paid all other sums payable hereunder by the Issuer, then this Indenture shall
cease to be of further effect (except as to (i) rights of registration of
transfer and exchange, (ii) substitution of apparently mutilated, defaced,
destroyed, lost or stolen Securities, (iii) rights of holders to receive
payments of principal thereof and interest thereon, (iv) the rights,
obligations and immunities of the Trustee hereunder and (v) the rights of the
Securityholders as beneficiaries hereof with respect to the property so
deposited with the Trustee payable to all or any of them), and the Trustee, on
demand of the Issuer accompanied by an Officers' Certificate and an Opinion of
Counsel and at the cost and expense of the Issuer, shall execute proper
instruments acknowledging such satisfaction of and discharging this Indenture.
The Issuer agrees to reimburse the Trustee for any costs or expenses thereafter
reasonably and properly incurred and to compensate the Trustee for any services
thereafter reasonably and properly rendered by the Trustee in connection with
this Indenture or the Securities.
SECTION 9.2 APPLICATION BY TRUSTEE OF FUNDS DEPOSITED FOR PAYMENT OF
SECURITIES. Subject to Section 9.4, all moneys deposited with the Trustee
pursuant to Section 9.1 shall be held in trust and applied by it to the
payment, either directly or through any paying agent (including the Issuer
acting as its own paying agent), to the holders of the particular Securities
for the payment or redemption of which such moneys have been deposited with the
Trustee, of all sums due and to become due thereon for principal and interest;
but such money need not be segregated from other funds except to the extent
required by law.
SECTION 9.3 REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection
with the satisfaction and discharge of this Indenture all moneys then held by
any paying agent under the provisions of this Indenture shall, upon demand of
the Issuer be repaid to it or paid to the Trustee and thereupon such paying
agent shall be released from all further liability with respect to such moneys.
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SECTION 9.4 RETURN OF MONEYS HELD BY TRUSTEE AND PAYING AGENT UNCLAIMED
FOR THREE YEARS. Any moneys deposited with or paid to the Trustee or any
paying agent for the payment of the principal of or interest on any Security
and not applied but remaining unclaimed for three years after the date upon
which such principal or interest shall have become due and payable, shall,
upon the written request of the Issuer and unless otherwise required by
mandatory provisions of applicable escheat or abandoned or unclaimed property
law, be repaid to the Issuer by the Trustee or such paying agent, and the
holder of such Security shall, unless otherwise required by mandatory
provisions of applicable escheat or abandoned or unclaimed property laws,
thereafter look only to the Issuer for any payment which such holder may be
entitled to collect, and all liability of the Trustee or any paying agent with
respect to such moneys shall thereupon cease.
ARTICLE TEN
MISCELLANEOUS PROVISIONS
SECTION 10.1 INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS OF
ISSUER EXEMPT FROM INDIVIDUAL LIABILITY. No recourse under or upon any
obligation, covenant or agreement contained in this Indenture, or in any
Security, or because of any indebtedness evidenced thereby, shall be had
against any incorporator, as such or against any past, present or future
stockholder, officer or director, as such, of the Issuer or of any successor,
either directly or through the Issuer or any successor, under any rule of law,
statute or constitutional provision or by the enforcement of any assessment or
by any legal or equitable proceeding or otherwise, all such liability being
expressly waived and released by the acceptance of the Securities by the
holders thereof and as part of the consideration for the issue of the
Securities.
SECTION 10.2 PROVISIONS OF INDENTURE FOR THE SOLE BENEFIT OF PARTIES
AND SECURITYHOLDERS. Nothing in this Indenture or in the Securities, expressed
or implied, shall give or be construed to give to any person, firm or
corporation, other than the parties hereto and their successors and the holders
of the Securities, any legal or equitable right, remedy or claim under this
Indenture or under any covenant or provision herein contained, all such
covenants and provisions being for the sole benefit of the parties hereto and
their successors and of the holders of the Securities.
SECTION 10.3 SUCCESSORS AND ASSIGNS OF ISSUER BOUND BY INDENTURE. All
the covenants, stipulations, promises and agreements in this Indenture
contained by or in behalf of the
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Issuer shall bind its successors and assigns, whether so expressed or
not.
SECTION 10.4 NOTICES AND DEMANDS ON ISSUER, TRUSTEE AND
SECURITYHOLDERS. Any notice or demand which by any provision of this Indenture
is required or permitted to be given or served by the Trustee or by the holders
of Securities to or on the Issuer may be given or served by being deposited
postage prepaid, first- class mail (except as otherwise specifically providing
herein) addressed (until another address of the Issuer is filed by the Issuer
with the Trustee) to
Analog Devices, Inc.
One Technology Way
Norwood, Massachusetts 02062
Attention: Chairman
Any notice, direction, request or demand by the Issuer or any Securityholder
to or upon the Trustee shall be deemed to have been sufficiently given or
made, for all purposes, if given or made at the Corporate Trust Office.
Where this Indenture provides for notice to holders, such notice shall
be sufficiently given (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to each holder entitled
thereto, at his last address as it appears in the Security register. In any
case where notice to holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular holder shall
affect the sufficiency of such notice with respect to other holders. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case, by reason of the suspension of or irregularities in regular
mail service, it shall be impracticable to mail notice to the Issuer and
Securityholders when such notice is required to be given pursuant to any
provisions of this Indenture, then any manner of giving such notice as shall be
satisfactory to the Trustee shall be deemed to be a sufficient giving of such
notice.
SECTION 10.5 OFFICERS' CERTIFICATES AND OPINIONS OF COUNSEL;
STATEMENTS TO BE CONTAINED THEREIN. Upon any application or demand by the
Issuer to the Trustee to take any action under any of the provisions of this
Indenture, the Issuer shall, upon the
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Trustee's request, furnish to the Trustee an Officers' Certificate
stating that all conditions precedent provided for in this Indenture relating
to the proposed action have been complied with and an Opinion of Counsel
stating that in the opinion of such counsel all such conditions precedent have
been complied with, except that in the case of any such application or demand
as to which the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular application or demand,
no additional certificate or opinion need be furnished.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or
covenant provided for in this Indenture shall include (a) a statement that the
person making such certificate or opinion has read such covenant or condition,
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based, (c) a statement that, in the opinion of such
person, he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant or
condition has been complied with and (d) a statement as to whether or not, in
the opinion of such person, such condition or covenant has been complied with.
Any certificate, statement or opinion of an officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of or representations by counsel, unless such officer knows that the
certificate or opinion or representations with respect to the matters upon
which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same are
erroneous. Any certificate, statement or opinion of counsel may be based,
insofar as it relates to factual matters or information with respect to which
is in the possession of the Issuer, upon the certificate, statement or opinion
of or representations by an officer or officers of the Issuer, unless such
counsel knows that the certificate, statement or opinion or representations
with respect to the matters upon which his certificate, statement or opinion
may be based as aforesaid are erroneous, or in the exercise of reasonable care
should know that the same are erroneous.
Any certificate, statement or opinion of an officer of the Issuer or of
counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Issuer, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations
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<PAGE> 59
with respect to the accounting matters upon which his certificate, statement
or opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
Any certificate or opinion of any independent firm of public accountants
filed with the Trustee shall contain a statement that such firm is independent.
SECTION 10.6 PAYMENTS DUE ON SATURDAYS, SUNDAYS AND HOLIDAYS.
If the date of maturity of interest on or principal of the Securities or the
date fixed for redemption of any Security shall not be a Business Day, then
payment of interest or principal need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if made
on the date of maturity or the date fixed for redemption, and no interest shall
accrue for the period after such date.
SECTION 10.7 CONFLICT OF ANY PROVISION OF INDENTURE WITH TRUST
INDENTURE ACT OF 1939. If and to the extent that any provision of this
Indenture limits, qualifies or conflicts with another provision included in
this Indenture by operation of Sections 310 to 317, inclusive, of the Trust
Indenture Act of 1939 (an "incorporated provision"), such incorporated
provision shall control.
SECTION 10.8 MASSACHUSETTS LAW TO GOVERN. This Indenture and each
Security shall be deemed to be a contract under the laws of The Commonwealth of
Massachusetts, and for all purposes shall be construed in accordance with the
laws of said Commonwealth, except as may otherwise be required by mandatory
provisions of law.
SECTION 10.9 COUNTERPARTS. This Indenture may be executed in any
number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
SECTION 10.10 EFFECT OF HEADINGS. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
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<PAGE> 60
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and, in the case of the Trustee, its corporate seal to be
hereunto affixed and attested, all as of March 1, 1993.
ANALOG DEVICES, INC.
By____________________________
Attest:
By____________________________
THE FIRST NATIONAL BANK OF BOSTON,
Trustee
By____________________________
[CORPORATE SEAL]
Attest:
By____________________________
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<PAGE> 61
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF SUFFOLK, SS
On this day of March, 1993, before me personally came
_____________________, to me personally known, who, being by me duly sworn, did
depose and say that he resides at ___________________________________________;
that he is the ___________________ of Analog Devices, Inc., the corporation
described in and which executed the above instrument; and that he signed his
name thereto by authority of the Board of Directors of said corporation.
[NOTARIAL SEAL]
______________________________
Notary Public
COUNTY OF SUFFOLK, SS
On this day of March, 1993, before me personally came
______________________, to me personally known, who, being by me duly sworn,
did depose and say that he resides at ______________________________________;
that he is a ______________________ of The First National Bank of Boston, a
national banking association described in and which executed the above
instrument; that he knows the corporate seal of said association; that the
seal affixed to said instrument is such corporate seal; that it was so
affixed by authority of the Board of Directors of said association, and that
he signed his name thereto by like authority.
[NOTARIAL SEAL]
______________________________
Notary Public
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<PAGE> 1
Exhibit 10-1
ANALOG DEVICES, INC.
BONUS PLAN
1. Purpose
-------
The purpose of the Bonus Plan ("Plan") of Analog Devices, Inc. and its
subsidiaries (the "Company") is to encourage employees to work together toward
the Company-wide goal of improved financial performance and to reward employees
if the Company achieves its targeted improvement in Company performance.
2. Participants
------------
Employees eligible to participate in the Plan are officers and
full-time U.S. employees of the Company, except for the following who are
excluded as participants: employees already covered under Company field sales,
field applications engineering or other incentive programs; individuals who
terminate their employment prior to the end of the bonus period; employees who
receive a "needs improvement" performance rating during the bonus period;
employees who receive a written warning during the bonus period; co-op students
and interns; and temporary employees.
3. Administration
--------------
(a) The Plan shall be administered by the Compensation Committee of
the Board of Directors, subject however to the approval by the Board of
Directors of the applicable goals and
<PAGE> 2
performance objectives, payment factors and other matters referred to in
Section 4.
(b) The Compensation Committee may establish such rules and
regulations, not inconsistent with the provisions of the Plan, as it deems
necessary for the proper administration of the Plan, and may amend or revoke
any rule or regulation so established. The Committee may make such
determinations and interpretations under or in connection with the Plan as it
deems necessary or advisable. All such rules, regulations, determinations and
interpretations shall be binding and conclusive upon the Company, its
subsidiaries, and all employees, and upon their respective legal
representatives, beneficiaries, successors and assigns and upon all other
persons claiming under or through any of them.
4. Determination of Bonus Award
----------------------------
(a) Participants in the Plan will be entitled to bonus payments based
on the Company's attainment of a targeted Operating Profit Before Taxes
("OPBT") for the applicable year, or other performance measures determined by
the Board of Directors after consultation with the Compensation Committee.
(b) For purposes of the Plan, OPBT for any fiscal year shall mean the
amount reported as operating profit before taxes in the Company's financial
statements as adjusted for any one-time nonrecurring charges such as
restructuring expenses.
-2-
<PAGE> 3
(c) Each employee of the Company shall be assigned a Bonus Target
which shall, in the case of all employees, except corporate officers, be based
on the employee's job grade which is in effect at the end of the bonus period.
The Bonus Target is expressed as a percentage of the employee's regular
earnings paid during the applicable fiscal year. Bonus Targets for corporate
officers shall be fixed by the Compensation Committee, subject to approval by
the Board of Directors. For purposes of the Plan, regular earnings include the
following pay categories: base pay, shift differential, sick pay, vacation
pay, holiday pay, bereavement pay, jury duty pay and alternative work schedule;
and exclude overtime pay, bonus payments received from a previous period, and
other payments which are taxable but not considered regular earnings.
(d) Within the first 90 days of each fiscal year, the Compensation
Committee, subject to the approval of the Board of Directors, shall designate
the OPBT target (hereinafter "OPBT Target") for such year (generally based on
the Company's Benchmark Plan for the year) and the manner in which the Bonus
Factor shall be applied to attainment of the OPBT Target. The Bonus Factor is
expressed as a multiple (e.g., 1.2x) of the Bonus Target. If the OPBT Target
is attained, each participant will be paid a bonus equal to the amount derived
by multiplying the participant's regular earnings for the bonus period by the
participant's Bonus Target, and then multiplying the product by his/her Bonus
Factor.
-3-
<PAGE> 4
If the Company's OPBT for a particular year either exceeds or is less than the
OPBT Target for such year, the Bonus Factor will be increased or decreased, as
the case may be, based on a formula determined by the Compensation Committee.
The Compensation Committee will establish for each fiscal year a maximum Bonus
Factor, provided that in no event may the Bonus Factor exceed 2.0x.
(e) Bonus awards may be calculated and paid quarterly, semi-annually
or annually, as determined by the Compensation Committee.
5. General
-------
(a) No participant shall be entitled to a bonus award for any
particular bonus period if he/she is not employed by the Company at the end of
such bonus period, provided, however, that this provision may be waived by the
Company.
(b) No employee nor his or her spouse or other designee shall have any
right to commute, sell, assign, pledge, transfer or otherwise convey any
interest he/she may have under the Plan.
(c) Benefits payable under the Plan shall be independent and separate
of and in addition to any employment agreement that may exist from time to time
between a participant and the Company. The Plan shall not be deemed to
constitute a contract of employment between a participant and the Company, nor
shall any provision hereof restrict the right of the Company to discharge
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<PAGE> 5
any participant or restrict the right of any participant to terminate
his/her employment.
(d) The Company may make such provisions as it may deem appropriate
for the withholding of any taxes which the Company determines it is required to
withhold in connection with any bonus payment.
(e) The rights of any participant under the Plan shall be solely those
of an unsecured creditor of the Company.
(f) The invalidity or illegality of any provision of the Plan shall
not impair or affect the validity or enforceability of any other provision of
the Plan, and such other provisions shall remain in full force and effect in
accordance with their terms.
6. Amendment and Termination
-------------------------
There is no obligation on the part of the Company to continue the Plan
after the end of a particular bonus period, as determined by the Compensation
Committee. However, the Company may continue the Plan for any subsequent
fiscal or bonus periods by appropriate action of the Board of Directors. The
Board of Directors of the Company may amend the Plan, provided, however, that
no such amendment may reduce any amounts which have theretofore been earned and
credited to a participant under the Plan, without such participant's consent.
-5-
<PAGE> 6
7. Effective Date
--------------
The effective date of the Plan is December 8, 1993, the date the Plan
was adopted by the Board of Directors of Analog Devices, Inc.
-6-
<PAGE> 1
Exhibit 10-8
ANALOG DEVICES, INC.
1994 DIRECTOR OPTION PLAN
1. PURPOSE
The purpose of this 1994 Director Option Plan (the "Plan") of Analog
Devices, Inc. (the "Company") is to encourage ownership in the Company by
outside directors of the Company whose continued services are considered
essential to the Company's future progress and to provide them with a further
incentive to remain as directors of the Company.
2. ADMINISTRATION
The Board of Directors shall supervise and administer the Plan. Grants
of stock options under the Plan and the amount and nature of the awards to be
granted shall be automatic and non- discretionary in accordance with Section 5.
However, all questions of interpretation of the Plan or of any options issued
under it shall be determined by the Board of Directors and such determination
shall be final and binding upon all persons having an interest in the Plan.
3. PARTICIPATION IN THE PLAN
Directors of the Company who are not employees of the Company or any
subsidiary of the Company shall be eligible to participate in the Plan.
4. STOCK SUBJECT TO THE PLAN
(a) The maximum number of shares which may be issued under the Plan
shall be two hundred thousand (200,000) shares of the Company's Common Stock,
par value $.16-2/3 per share ("Common Stock"), subject to adjustment as
provided in Section 9 of the Plan.1
(b) If any outstanding option under the Plan for any reason expires or
is terminated without having been exercised in full, the shares allocable to
the unexercised portion of such option shall again become available for grant
pursuant to the Plan.
- -------------------------
1 The maximum number of shares issuable under the Plan and the references to
the number of shares purchasable upon exercise of options (as set forth
in Section 5) have been adjusted to reflect the 3-for-2 stock split, to be
effected in the form of a 50% stock dividend, approved by the Board of
Directors of the Company on November 29, 1994 and to be distributed on January
4, 1995 to stockholders of record December 12, 1994.
<PAGE> 2
(c) All options granted under the Plan shall be non-statutory options
not entitled to special tax treatment under Section 422 of the Internal Revenue
Code of 1986, as amended to date and as may be amended from time to time (the
"Code").
5. TERMS, CONDITIONS AND FORM OF OPTIONS
Each option granted under the Plan shall be evidenced by a written
agreement in such form as the Board of Directors shall from time to time
approve, which agreements shall comply with and be subject to the following
terms and conditions:
(a) Automatic Option Grants.
------------------------
(i) An option for the purchase of 5,250 shares of Common Stock
shall be granted automatically to each eligible director at the close of
business on the date the Plan is approved by the Board of Directors of the
Company (December 7, 1994), subject to shareholder approval of the Plan at the
1995 Annual Meeting of Stockholders.
(ii) Each eligible director who is first elected or appointed
to serve on the Board after December 7, 1994 shall be granted an option to
purchase 5,250 shares of Common Stock upon such election or appointment.
(iii) Each such eligible director shall be granted an
additional option to purchase 5,250 shares of Common Stock upon each of the
first, second and third "Anniversary Dates" (as defined below) of the initial
option grant to such eligible director; provided that such person is an
eligible director on the applicable Anniversary Date.
(iv) The Anniversary Dates of an eligible director who was a
member of the Board of Directors on December 7, 1994 shall be December 7, 1995
and successive anniversaries thereof. The Anniversary Dates of an eligible
director who is first elected or appointed to the Board of Directors after
December 7, 1994 shall be the date which is twelve (12) months after such
election or appointment and the successive anniversaries thereof.
(b) OPTION EXERCISE PRICE. The option exercise price per share for
each option granted under the Plan shall equal (i) the last reported sales
price per share of the Company's Common Stock, as listed on a nationally
recognized securities exchange, on the date of grant (or, if no such price is
reported on such date, such price as reported on the nearest preceding day); or
(ii) the fair market value of the stock on the date of grant, as determined by
the Board of Directors, if the Common Stock is not publicly traded.
- 2 -
<PAGE> 3
(c) OPTIONS NON-TRANSFERABLE. Each option granted under the Plan by
its terms shall not be transferable by the optionee other- wise than by will,
or by the laws of descent and distribution, or pursuant to a qualified domestic
relations order (as defined in Section 414(p) of the Code), and shall be
exercised during the lifetime of the optionee only by him. No option or
interest therein may be transferred, assigned, pledged or hypothecated by the
optionee during his lifetime, whether by operation of law or otherwise, or be
made subject to execution, attachment or similar process.
(d) EXERCISE PERIOD. Each option shall vest and be exercisable on a
cumulative basis as to one-third of the shares subject to such option on each
of the first, second and third Anniversary Dates of the grant of such option,
PROVIDED that, subject to the provisions of Sections 5(e) and 5(f), no option
may be exercised more than 90 days after the optionee ceases to serve as a
director of the Company and such option may then only be exercised for the
purchase of such number of shares as were vested and exercisable at the time of
such termination. No option shall be exercisable after the expiration of ten
(10) years from the date of grant or prior to approval of the Plan by the
stockholders of the Company.
(e) EXERCISE PERIOD UPON RETIREMENT. Notwithstanding the provisions
of Section 5(d), in the event an optionee ceases to be a director by reason of
retirement of the optionee as a director at the retirement age determined by
the Company or by reason of the Company's failure to nominate the optionee for
reelection as a director (other than for such director's refusal to serve as a
director), each option then held by such director shall, at the time he or she
ceases to be a director, be exercisable for that number of shares of Common
Stock which equals the sum of (i) the shares which are then vested and
exercisable and (ii) the shares which would otherwise become vested and
exercisable at the next succeeding Anniversary Date.
(f) EXERCISE PERIOD UPON DEATH OR DISABILITY. Notwithstanding the
provisions of Section 5(d), any option granted under the Plan:
(i) may be exercised in full by an optionee who becomes
disabled (within the meaning of Section 22(e)(3) of the Code
or any successor provision thereto) while serving as a
director of the Company; or
(ii) may be exercised
(x) in full upon the death of an
optionee while serving as a director of the
Company, or
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<PAGE> 4
(y) to the extent then exercisable
upon the death of an optionee within 90 days
of ceasing to serve as a director of the
Company,
by the person to whom it is transferred by will, by the laws of descent
and distribution, or by written notice filed pursuant to Section 5(i);
in each such case within the period of one year after the date the optionee
ceases to be such a director by reason of such death or disability; provided,
that no option shall be exercisable after the expiration of ten (10) years from
the date of grant or prior to the approval of the Plan by the stockholders of
the Company.
(g) EXERCISE PROCEDURE. Options may be exercised only by written
notice to the Company at its principal office accompanied by payment of the
full consideration for the shares as to which they are exercised.
(h) PAYMENT OF PURCHASE PRICE. Options granted under the Plan may
provide for the payment of the exercise price (i) by delivery of cash or a
check to the order of the Company in an amount equal to the exercise price of
such options or, (ii) to the extent provided in the applicable option
agreement, by delivery to the Company of shares of Common Stock of the Company
already owned by the optionee having a fair market value equal in amount to the
exercise price of the options being exercised, or (iii) by any combination of
such methods of payment. The fair market value of any shares of the Company's
Common Stock which may be delivered upon exercise of an option shall be
determined by the Board of Directors.
(i) EXERCISE BY REPRESENTATIVE FOLLOWING DEATH OF DIRECTOR. A
director, by written notice to the Company, may designate one or more persons
(and from time to time change such designation) including his legal
representative, who, by reason of his death, shall acquire the right to
exercise all or a portion of the op- tion. If the person or persons so
designated wish to exercise any portion of the option, they must do so within
the term of the option as provided herein. Any exercise by a representative
shall be subject to the provisions of the Plan.
6. ASSIGNMENTS
The rights and benefits under the Plan may not be assigned except for
the designation of a beneficiary as provided in Section 5.
- 4 -
<PAGE> 5
7. TIME FOR GRANTING OPTIONS
All options for shares subject to the Plan shall be granted, if at all,
not later than ten (10) years after the approval of the Plan by the Company's
stockholders.
8. LIMITATION OF RIGHTS
(a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the
granting of an option nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or
implied, that the Company will retain a director for any period of time.
(b) NO STOCKHOLDERS' RIGHTS FOR OPTIONS. An optionee shall have no
rights as a stockholder with respect to the shares covered by his options until
the date of the issuance to him of a stock certificate therefor, and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such certificate is issued.
9. CHANGES IN COMMON STOCK
(a) If (x) the outstanding shares of Common Stock are exchanged for a
different number or kind of shares or other securities of the Company, or (y)
the outstanding shares of Common Stock are increased or decreased as a result
of any recapitalization, reclassification, stock dividend or stock split
(except for the 3-for-2 stock split approved by the Board of Directors on
November 29, 1994, which has been reflected in the Plan as adopted by the Board
of Directors on December 7, 1994), reverse stock split or other similar
transaction, an appropriate and proportionate adjustment shall be made in (i)
the maximum number and kind of shares reserved for issuance under the Plan, and
(ii) the number and kind of shares or other securities subject to then
outstanding options under the Plan and (iii) the price for each share subject
to any then outstanding options under the Plan, without changing the aggregate
purchase price as to which such options remain exercisable. No fractional
shares will be issued under the Plan on account of any such adjustments.
Notwithstanding the foregoing, no adjustment shall be made pursuant to this
Section 9 if such adjustment would cause the Plan to fail to comply with Rule
16b-3 or any successor rule promulgated pursuant to Section 16 of the
Securities Exchange Act of 1934.
(b) If any event occurs that would constitute a "Change of Control"
within the meaning of clause (iii) or (iv) of Section 10 below, the Board of
Directors of the Company, or the board of directors of any corporation assuming
the obligations of the Company, shall, subject to the provisions of Section 10,
as to outstanding options, take one or more of the following actions: (i)
provide that such options shall be assumed, or equivalent
- 5 -
<PAGE> 6
options shall be substituted, by the acquiring or succeeding corporation (or an
affiliate thereof), (ii) upon written notice to the optionees, provide that all
unexercised options will terminate immediately prior to the consummation
of such transaction unless exercised by the optionee within a specified period
following the date of such notice, or (iii) if, under the terms of a merger
transaction, holders of the Common Stock of the Company will receive upon
consummation thereof a cash payment for each share surrendered in the merger
(the "Merger Price"), make or provide for a cash payment to the optionees equal
to the difference between (A) the Merger Price times the number of shares of
Common Stock subject to such outstanding options (to the extent then
exercisable at prices not in excess of the Merger Price) and (B) the aggregate
exercise price of all such outstanding options in exchange for the termination
of such options.
10. CHANGE IN CONTROL
Notwithstanding any other provision to the contrary in this Plan, in
the event of a Change of Control (as defined below), all options outstanding as
of the date such Change in Control occurs shall become exercisable in full,
whether or not exercisable in accordance with their terms. A "Change in
Control" shall occur or be deemed to have occurred only if any of the following
events occur: (i) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended, (other than the
Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, or any corporation owned directly or indirectly by
the stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding securities; (ii)
individuals who, as of July 1, 1992, constitute the Board of Directors of the
Company (as of the date thereof, the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person becoming
a director subsequent to the date thereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A under the Securities Exchange Act of 1934) shall be, for
purposes of this Agreement, considered as though such person were a member of
the Incumbent Board; (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding
- 6 -
<PAGE> 7
or by being converted into voting securities of the surviving entity) more than
50% of the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no "person"
(as hereinabove defined) acquires more than 30% of the combined voting power of
the Company's then outstanding securities; or (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially all of the
Company's assets."
11. AMENDMENT OF THE PLAN
The Board of Directors may suspend or discontinue the Plan or review or
amend it in any respect whatsoever; provided, however, that without approval of
the stockholders of the Company no revision or amendment shall change the
number of shares subject to the Plan (except as provided in Section 9), change
the designation of the class of directors eligible to receive options, or
materially increase the benefits accruing to participants under the Plan. The
Plan may not be amended more than once in any six- month period.
12. WITHHOLDING
The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan.
13. EFFECTIVE DATE AND DURATION OF THE PLAN
(a) EFFECTIVE DATE. The Plan shall become effective when adopted by
the Board of Directors, but no option granted under the Plan shall become
exercisable unless and until the Plan shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained within twelve
months after the date of the Board's adoption of the Plan, all options granted
under the Plan shall terminate and no further options shall be granted under
the Plan. Amendments to the Plan not requiring shareholder approval shall
become effective when adopted by the Board of Directors; amendments requiring
shareholder approval (as provided in Section 11) shall become effective when
adopted by the Board of Directors, but no option granted after the date of such
amendment shall become exercisable (to the extent that such amendment to the
Plan was required to enable the Company to grant such option to a particular
optionee) unless and until such amendment shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any options granted on
or after the date of such amendment shall terminate to the extent that such
amendment to the Plan was required to enable the Company to grant
- 7 -
<PAGE> 8
such option to a particular optionee. Subject to this limitation, options may
be granted under the Plan at any time after the effective date and before the
date fixed for termination of the Plan.
(b) TERMINATION. Unless sooner terminated in accordance with Section
9, the Plan shall terminate upon the earlier of (i) the close of business on
the day next preceding the fifth anniversary of the date of its approval by the
Company's stockholders, or (ii) the date on which all shares available for
issuance under the Plan shall have been issued pursuant to the exercise or
cancellation of options granted under the Plan. If the date of termination is
determined under (i) above, then options outstanding on such date shall
continue to have force and effect in accordance with the provisions of the
instruments evidencing such options.
14. NOTICE
Any written notice to the Company required by any of the provisions of
the Plan shall be addressed to the Treasurer of the Company and shall become
effective when it is received.
15. COMPLIANCE WITH RULE 16B-3
Transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successor promulgated pursuant to Section 16 of
the Securities Exchange Act of 1934. To the extent any provision of the Plan
or action by the Board of Directors in administering the Plan fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Board of Directors.
16. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the Commonwealth of Massachusetts.
Approved by the Board of Directors
on December 7, 1994
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<PAGE> 1
Exhibit 10-9
LEASE
PARTIES
- -------
THIS INDENTURE OF LEASE made on the 13th day of February,
1970 Campanelli and Alfred Campanelli, Trustees of Campanelli
Investment Properties under Declaration of Trust dated July 6,
1962, and recorded with Middlesex South District Registry of Deeds,
Book 10095, Page 307, as amended in Book 10495, Page 12, (hereinafter
referred to as Landlord), and Analog Devices, Inc., a Massachusetts
corporation having its principal place of business in Cambridge,
Middlesex County, Massachusetts, (hereinafter referred to as Tenant).
W I T N E S S E T H:
- - - - - - - - - --
PREMISES
- --------
1. In consideration of the covenants and agreements
hereinafter mentioned and to be performed on the part of Tenant
and payment the rental hereinafter designated to be paid, and for
other good and valuable consideration, Landlord has leased,
rented, let and demised, and by these presents does lease, rent,
let and demise unto Tenant, and Tenant does hereby lease from
Landlord a certain parcel of land containing 10.71 acres situated
off Route 1, Boston/Providence Pike, in the town of Westwood,
Norfolk County, Commonwealth of Massachusetts, shown as Lot 1A on
plan entitled "Plan of Land, Westwood, Massachusetts, owned by
Glacier Sand & Stone Co., Inc." dated February 3, 1970, Bradford
<PAGE> 2
Saivetz & Associates, Inc., Consulting Civil Engineers, being marked
"Exhibit A-1" attached hereto and made a part hereof, which plan is to be
recorded with Norfolk Deeds, together with the building to be erected thereon,
said building to contain 97,200 square feet, including 31,700 square feet of
office space, 9100 square feet for laboratory and 56,400 square feet of
manufacturing space. Said premises are hereinafter referred to as the
"premises" or the "demised premises". Said premises are leased subject to the
items set forth in Schedule "A" hereto. The building or buildings in the
demised premises are hereinafter sometimes referred to as the "demised
building" or the "demised buildings".
TERM
2. The term of this lease shall be a period commencing upon the day
hereinafter provided for the commencement thereof and ending twenty-five (25)
years from the date rent commences to accrue hereunder unless sooner terminated
as hereinafter provided.
3. Tenant covenants and agrees to pay Landlord during the term of
this lease, except as in this lease otherwise provided, the annual net rent of
ONE HUNDRED EIGHTY-SIX THOUSAND FOUR HUNDRED SIXTY-NINE DOLLARS ($186,469)
payable in equal monthly installments of FIFTEEN THOUSAND FIVE HUNDRED
THIRTY-NINE AND 08/100 DOLLARS ($15,539.08) in advance on the first day of each
calendar month included within the term of this lease.
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<PAGE> 3
All rent and other payments to be made by Tenant to Landlord
shall be made payable to Landlord and sent to Landlord at the
place to which notices to Landlord shall be required to be sent
unless Landlord shall direct otherwise by notice to Tenant.
Said annual net rent is sometimes hereinafter referred to as
"minimum rent".
CONSTRUCTION
- ------------
4A. The Landlord agrees to commence the construction program
of the building by April 1, 1970 and to prosecute to completion
with due diligence the work called for in the plans and
specifications attached hereto and marked Exhibits "A", "B", "C"
and Addendum No. 1 to Exhibit C all at its own cost and expense
within twelve months from the date of this lease subject to
extension for delays as set forth in Section 23 hereof, provided
that Tenant may terminate this lease within 30 days after eighteen
months from the date of this lease by written notice to Landlord
if the buildings are not substantially completed, notwithstanding
any such excusable delays, whereupon this lease shall terminate
and all obligations of the parties hereto shall cease. Tenant
shall have the right to make changes in the plans and
specifications, except that any increase in cost to the Landlord
caused by such changes made by Tenant shall be borne by Tenant and
shall be paid to Landlord upon substantial completion of the
building. The cost to Tenant for such changes shall be as set
forth in Exhibit "C" hereof. Any such changes shall not be of
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<PAGE> 4
such nature as to cause the Landlord any delay in completing the
construction of the building. Tenant shall have the right to approve all
working drawings and changes in the plans and specifications which approval
shall not be unreasonably withheld or delayed and shall be in conformity with
the exhibits to this lease. Tenant shall present to Landlord its floor plan
within four weeks from the date of this lease so that Landlord may develop
working drawings.
B. Tenant shall have the right, without charge, after the execution
of this lease and prior to the delivery to it of possession of the demised
premises, whenever Tenant shall deem it appropriate to enter the demised
premises and make such improvements thereto as it shall have the right to make
and install therein fixtures, supplies, merchandise and other property. Tenant
agrees that any such entry and the making of any such improvements and any such
installation shall be done without materially interfering with the Landlord's
construction of the demised premises.
Prior to such entry, Tenant shall evidence to Landlord comprehensive
public liability insuring the Landlord, tenant, and all persons claiming under
them, and Workmen's Compensation insurance policies covering Tenant's
activities. If it can be so obtained, Landlord will obtain an endorsement to
its builder's risk policy insuring Tenant against loss for work performed by
Tenant and Tenant shall pay any additional cost for such
-4-
<PAGE> 5
endorsement. If it cannot be so obtained, Tenant shall evidence to
Landlord fire insurance as required under Article 5A of this lease.
DELIVERY OF PREMISES
- --------------------
C. Upon substantial completion of Landlord's construction work, but
not prior thereto, notwithstanding any entry into the demised premises by
Tenant prior thereto pursuant to the provisions of this section, Landlord shall
deliver possession of the demised premises to Tenant and rent pursuant to
Article 2 hereof shall commence on the date of such delivery of the demised
premises to the Tenant.
COMMENCEMENT OF RENT
- --------------------
The rent for the calendar month during which rent shall begin to accrue
and for the last calendar month of the term of this lease shall be apportioned.
ACCEPTANCE OF THE PREMISES
- --------------------------
Tenant or its representatives may enter upon the Premises during the
progress of the work to inspect the progress thereof and to determine if the
work is being performed in accordance with the requirements of this lease.
Tenant shall promptly give to Landlord notices of any alleged failure by
Landlord to comply with those requirements. Landlord's Work shall be deemed
approved by Tenant upon substantial completion as defined below except for
items of Landlord's Work which are uncompleted or do not conform to the
requirements of this lease and as to which Tenant shall in
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<PAGE> 6
either case, have given written notice to Landlord prior to such
opening.
CONSTRUCTION REPRESENTATIVES
- ----------------------------
Each party authorizes the other to rely in connection with
plans and construction upon approval and other actions on the
party's behalf by any Construction Representative of the Landlord
or Tenant designated by written notice to the party relying.
DEFINITION OF SUBSTANTIAL COMPLETION
- ------------------------------------
Landlord's construction shall be deemed substantially
completed when the same shall be fully completed except only for
"touch-ups" and "adjustments". Landlord agrees that when
possession of the demised premises shall be delivered to Tenant,
the same will be free and clear of all tenancies, occupancies,
restrictions, violations, liens and encumbrances except as
specified herein and in Exhibit "D" attached to this lease, which
would affect Tenant's use of the demised premises. Nothing herein
contained shall relieve Landlord from the obligation to complete
Landlord's construction without unreasonable delay,
notwithstanding the fact that the term of this lease shall have
commence pursuant to the provisions of this paragraph.
GUARANTIES
- ----------
Landlord agrees to deliver or assign to Tenant all guaranties
and warranties which the Landlord receives on any equipment and
materials installed in the premises by the Landlord, or by any
contractor or supplier. Landlord agrees to cure any defects,
-6-
<PAGE> 7
including labor charges at no expense to Tenant due to faulty
design, workmanship or materials in the improvements constructed
or to be constructed on the Premises by Landlord provided Tenant
shall have given written notice of such defects to Landlord prior
to the first anniversary of the Commencement Date.
COMMENCEMENT DATE
- -----------------
d. The term of the lease shall be deemed to commence upon
delivery to Tenant of possession as above provided. During the
period of time between the delivery by Landlord to Tenant of
possession of the demised premises and the time hereinbefore
provided for the commencement of rent accrual, all the provisions
of this lease except the provisions relating to the payment of
rent and real estate taxes and assessments shall apply to the
extent that said provisions may be made applicable to said period.
Until such time as Landlord shall deliver possession of the
demised premises to Tenant, Landlord shall pay the cost of water,
electricity, heat, air-conditioning, and other utilities used upon
the demised premises; and until such time Tenant shall have the
right to use, to the extent that the same are available, water,
electricity, heat, air-conditioning and other utilities available
upon the demised premises without charge. Prior to the delivery
to Tenant of possession of the demised premises and while Tenant
may be making improvements to the demised premises or installing
in the demised premises fixtures, supplies, merchandise, and other
property, as hereinabove provided, Tenant and its installations
-7-
<PAGE> 8
shall be in the demised premises at its own risk, subject to the
insurance provisions set forth in Article 4.B. hereof.
FIRE INSURANCE
- --------------
5A. Tenant agrees that it will at its expense maintain throughout the
term of this lease with respect to the demised premises insurance against loss
or damage by (1) fire and the so-called extended coverage causalties in an
amount not less than eighty per cent (80%) of the full insurable value of the
demised buildings or up to the full insurable value of the buildings or
buildings if required by the holder of a first mortgage in accordance with
general practice of holders of first mortgages in the Boston area in case of
similar loans and only if such holder would suffer a loss arising out of the
carrying of 80% of the full insurance value coverage and (2) sprinkler leakage
in an amount not less than ten per cent (10%) of the full insurable value of
the demised buildings. The policies of such insurance may contain a
co-insurance clause, in which event the amount of the insurance shall be
sufficient so that the insured will not be a co-insurer. Landlord and Tenant
shall be named as insureds, the insurance should be payable in case of loss to
the holders of any mortgages upon the demised premises as their interest may
appear, and the policies shall provide that the loss, if any, shall be adjusted
with Tenant. Said insurance shall be written by responsible insurance
companies authorized to do business in the Commonwealth of Massachusetts and in
amounts with each company satisfactory to
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<PAGE> 9
the holder of a first mortgage upon the demised premises. If at
any time Landlord shall question the insurance value of the
demised premises and request an appraisal, Tenant will have an
appraisal made by a mutually satisfactory appraiser, the expense
of the appraisal to be borne equally between Landlord and Tenant,
provided that Landlord may not question the insurable value of the
demised premises for a period of three (3) years after any such
appraisal establishing the same. Tenant agrees that it will
deliver to Landlord the policies and certificates of such
insurance upon acceptance or possession of the demised premises by
Tenant and that it will deliver to Landlord at least thirty (30)
days prior to the expiration of any policy, a renewal policy and a
certificate thereof. If the terms of any such policies shall
expire subsequent to the termination of the term of this lease, a
proper apportionment of the premiums for such policies shall be
made. Upon the termination of the term of this lease, Tenant
shall release its interest in such policies.
LIABILITY INSURANCE
- -------------------
B. Tenant will maintain with respect to the demised
premises throughout the term of this lease, a policy or policies
or comprehensive general public liability insurance, indemnifying
the Landlord and Tenant, in amounts of not less than Three Hundred
Thousand Dollars ($300,000) with respect to injuries to any one
person and not less than Five Hundred Thousand Dollars ($500,000)
with respect to injuries suffered in any one accident, and against
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<PAGE> 10
all claims for damages to or loss of property occurring upon the
demised premises in the amount of at least Twenty-five Thousand
Dollars ($25,000), such policies of insurance to be issued by
insurance companies authorized to do business in the Commonwealth
of Massachusetts. Tenant shall deliver such policies to Landlord
at least fifteen (15) days prior to the commencement of the term
of this lease, and each renewal policy at least fifteen (15) days
prior to the expiration of the policy it renews. Tenant agrees
that such insurance will contain an endorsement that the same will
not be cancelled without ten (10) days' notice to Landlord, to the
extent that such endorsement is obtainable. Tenant may maintain
such insurance under a blanket policy affecting the demised
premises and other premises of Tenant or any business organization
affiliated with Tenant. In lieu of delivering any policy of
insurance to Landlord, Tenant may deliver to Landlord a
certificate of the company issuing such policy certifying such
independent insurance or certifying the existence of a blanket
policy showing the coverage.
FIRE OR OTHER CASUALTY
- ----------------------
6A. In the event that during the term hereof the demised
building shall be partially damaged or totally destroyed by fire,
other casualty, the elements, or any other cause whatsoever, this
lease shall not cease or determine, nor shall the rent herein
provided for to be paid be diminished or abated or cease, but such
rent herein provided for shall be paid by Tenant. The building or
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<PAGE> 11
buildings so damaged or destroyed by fire, other casualty, the elements
or otherwise shall be repaired, re-erected or replaced by Tenant with all
reasonable diligence at the expense of Tenant to the condition existing prior
to such damage or destruction. Notwithstanding anything to the contrary in this
Article 6A, Tenant shall be obligated to repair, re-erect or replace the
building if such damage or destruction is caused by war, riot, revolution or
other civil disorder, or nuclear explosion only to the extent of the net
proceeds of insurance, if any, recovered arising out of such casualty and in
the event such net proceeds of insurance recovered are not sufficient to repair
re-erect or replace the buildings to the condition existing prior to such
damage or destruction, Tenant shall use such net proceeds to repair, re-erect
or replace the buildings to the extent of such proceeds and a just proportion
of the rent shall be abated based on the diminished value of the buildings
existing after such repair, re-erection or replacement, or in the event the
buildings are not so repaired, re-erected or replaced the rent shall be
suspended and this lease shall terminate. All insurance proceeds recovered
with respect to Tenants leasehold improvement, including, without limitation,
structural improvements, and Tenant's personal property shall be paid to
Tenant. If any insurance proceeds recovered on account of damage to the
buildings shall be less than Ten Thousand Dollars ($10,000), the same shall be
paid over to the Tenant. If any insurance proceeds payable on
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<PAGE> 12
account of such damage to the buildings are more than Ten Thousand
Dollars ($10,000) such insurance proceeds shall be disbursed by the mortgagee
to the Tenant as the work of repair or restoration progresses upon certificates
of the architect or engineer supervising the repair or restoration that the
disbursements then requested plus all previous disbursements made from said
insurance proceeds do not exceed the cost of the repair or restoration already
completed, and that after the disbursement then requested shall be made, the
balance of said insurance proceeds shall be sufficient to pay the remaining
cost of complete repair or restoration. The term "mortgagee" in the preceding
sentence shall mean any bank, insurance company, pension fund, or similar
institutional lender holding a first mortgage on the premises. In the event
such holder is not a bank, insurance company, pension fund or similar
institutional lender, Tenant shall select a bank or trust company having its
principal place of business in Massachusetts to hold such proceeds, subject to
Landlord's approval, which approval shall not be unreasonably withheld or
delayed. If the insurance proceeds shall exceed the cost of complete repair
and restoration, any excess shall be paid to the Tenant upon the Landlord's
being furnished with a certificate reasonably satisfactory to it that at a time
not less than forty-three (43) days subsequent to completion of the repair or
restoration, the demised premises are free from liens on account of such repair
and construction, and that all bills for labor and
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materials in connection therewith have been paid. The Tenant
agrees to proceed promptly with such work of restoration and
repair and to prosecute such work with due diligence.
DAMAGE BY FIRE AND OTHER CASUALTY
- ---------------------------------
B. It is agreed and understood that (1) if during the
fourth semi-annual period preceding the expiration of the term of
this lease, the demised buildings shall be so damaged or destroyed
to the extent of twenty-five per cent (25%) or more of their
insurable value, or (2) if during the third semi-annual period
preceding the expiration of the term of this lease, the demised
buildings shall be so damaged or destroyed to the extent of twenty
per cent (20%) or more of their insurable value, or (3) if during
the second semi-annual period preceding the expiration of the term
of this lease, the demised buildings shall be so damaged or
destroyed to the extent of fifteen per cent (15%) or more of their
insurable value, or (4) if during the semi-annual period
immediately preceding the expiration of the term of this lease,
the demised buildings shall be so damaged or destroyed to the
extent of ten per cent (10%) or more of their insurable value,
either Landlord or Tenant may, if either shall so elect, terminate
the term of this lease by notice to the other within thirty (30)
days after such damage or destruction. In the event of any
termination of the term of this lease pursuant to the provisions
of this article, the termination shall become effective on the
thirtieth day after the giving of the notice of termination, and a
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<PAGE> 14
just proportion of the minimum rent according to the nature and
extent of the injury to the demised premises, shall be suspended
or abated until the time of termination, rent shall be apportioned
as of the time of termination and proper adjustments shall be
made, and neither Landlord nor Tenant shall be obligated to repair
or restore any damage or destruction caused by the fire or other
casualty. The Landlord in case of such termination shall be
entitled to all the avails of any policy or policies insuring the
hazard causing such damage or destruction. If the Tenant, within
thirty (30) days after the receipt of notice from Landlord as
hereinbefore provided, shall give notice to the Landlord of
Tenant's intention to extend the term of this lease or to purchase
the premises in accordance with any option or right so to do which
it may have, (even though the time for the exercise of any option
to extend the lease may not have arrived) then this lease and the
options to extend and to purchase shall not terminate and end
although notice of termination may previously have been given by
Landlord to Tenant. In case neither party shall serve such notice
of termination, or if Landlord's notice is nullified as above
provided, this lease shall not terminate and all of the provisions
of the preceding paragraph shall apply to and be binding upon the
parties hereto.
TENANT'S REPAIRS
- ----------------
7A. Tenant agrees that it will make all repairs and
alterations to the demised premises and buildings which Tenant is
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<PAGE> 15
required to maintain, as hereinafter set forth, which may be necessary
to maintain the same in as good repair and condition as the same are in at the
commencement of the term of this lease or may be put in thereafter, or which
may be required by any laws, ordinances or regulations of any public
authorities having jurisdiction, reasonable wear and tear, and damage by fire
or other casualty, act of God, the elements, the act of any public authority or
taking by right of eminent domain excepted, subject to the Tenant's obligation
to restore or repair as hereinbefore provided in Article 6A hereof. Tenant
shall take all reasonable steps (including removal of snow and ice) to prevent
the liveload on the roof of the building from exceeding its design capacity of
a live load of forty (40) pounds per square foot.
Tenant agrees not to make structural alterations or improvements,
including new buildings, to or upon the demised premises without on each
occasion obtaining the prior written consent of the Landlord, which consent
Landlord agrees not unreasonably to delay or withhold.
Landlord agrees that Tenant may at any time and from time to time make
nonstructural alterations, and improvements to or upon the demised premises
without prior notice to or approval by Landlord.
REPAIRS AND ALTERATIONS
- -----------------------
Tenant agrees that any repairs, alterations, other improvements or
installations made by it, structural or
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<PAGE> 16
nonstructural shall be done in a good and workmanlike manner and
in conformity with all laws, ordinances and regulations of all
public authorities having jurisdiction, that materials of good
quality shall be employed therein, that the demised premises shall
not be decreased in value thereby and that the building on the
demised premises will not be endangered or impaired thereby. All
salvage in connection therewith may be disposed of by Tenant.
REMOVAL OF GOODS AT TIME OF TERMINATION
- ---------------------------------------
Upon the expiration or other termination of the terms of this
lease, Tenant will remove its goods and effects and nonstructural
alterations, additions and improvements made by Tenant or paid for
by Tenant in any way other than as rent including, if tenant
elects to so remove, lighting fixtures, carpeting and any
specialized equipment and installations and those of all persons
claiming under it and will yield up peaceably to Landlord the
demised premises and all structural alterations or additions made
to or upon the same in as good repair and condition as the same
were at the commencement of the term of this lease or may have
been put in thereafter, reasonable wear and tear, damage by fire
or other casualty, act of God, the elements, the act of any public
authority, or taking by right of eminent domain excepted. It is
agreed and understood that Landlord will accept the demised
premises as altered pursuant to the provisions hereof without any
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<PAGE> 17
obligation upon Tenant to restore the same to their former
condition.
LANDLORD'S REPAIRS
- ------------------
B. It is further expressly agreed and understood that
Landlord shall not be obligated during the term of this lease to
make any repairs, alterations, or changes, structural or
otherwise, of any kind whatsoever, to the said demised premises
(land and demised building), except for such repairs as may be
necessitated by defects in design, workmanship or material as set
forth in Article 4C hereof. Notwithstanding the provisions of the
preceding sentence, Landlord shall maintain the drainage ditch
serving the premises and all roads within the subdivision of which
the premises are a part and all utilities to the lot line of the
premises until such roads and such drainage ditch is permanently
accepted by the appropriate governmental authorities and until the
maintenance of such utilities is the responsibility of the utility
furnishing such service under a recorded easement requiring such
utility to permanently maintain such service.
PERMITS
- -------
C. Tenant agrees that it will procure all necessary
permits, before making any such repairs, alterations, other
improvements or installations. Landlord agrees it will cooperate
with Tenant in obtaining such permits.
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<PAGE> 18
MECHANICS LIENS
- ---------------
D. Tenant agrees to pay promptly when due the entire cost
of any work done by Tenant upon the demised premises so that the
demised premises shall at all times be free of liens for labor or
materials.
INDEMNITY
- ---------
E. Tenant agrees to save and indemnify Landlord from any
and all injury, loss, claims or damage to any person or property
occasioned by or arising out of the doing of such work.
EMINENT DOMAIN
- --------------
8A. If after the execution of this lease and prior to the
expiration of the term of this lease the whole of the demised
premises shall be taken by eminent domain, then the term of this
lease shall cease as of the time when Landlord shall be divested
of its interest in the demised premises, and minimum rent shall be
apportioned and adjusted as of the time of termination.
B. If by eminent domain
(1) part of the demised buildings shall be taken and if
as a result thereof the floor area within the demised buildings
shall be reduced by more than fifteen per cent (15%), or
(2) a part of the demised land shall be taken and if as
a result thereof Tenant shall no longer have free and
uninterrupted access for passage by foot and by vehicle from a
public street to each door and loading platform originally
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<PAGE> 19
installed by Landlord in the demised buildings situated as
advantageously as at the beginning of this lease, or
(3) a part of the demised land shall be taken and if as a result
thereof the remaining land is not sufficient in area to provide as reasonable
parking facilities as immediately prior to such taking by employees and
business invitees of the demised buildings shall be taken, or
(4) if any part of the drainage easement servicing the premises shall
be taken so that the drainage from the premises is no longer adequate to serve
the premises, or
(5) any part of the demised buildings or demised premises shall be
taken during the last year of the term of this lease, then Tenant may, if it
shall so elect, terminate the term of this lease by giving notice of the
exercise of such election to Landlord within twenty (20) days after the receipt
from Landlord of notice of such taking. If Tenant shall give notice of
termination pursuant to the provisions of subdivision (1) immediately above and
if within fifteen (15) days after the giving of such notice by Tenant, Landlord
shall give Tenant notice that (a) Landlord will add to what shall remain of the
demised buildings additional premises adjacent thereto so that what shall
remain plus said addition shall have a floor area not less than eighty-five per
cent (85%) of the demised buildings at the commencement of the term, and (b)
that Landlord will reconstruct the demised buildings so that the detailed
layout of the demised
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<PAGE> 20
buildings as reconstructed will be reasonably satisfactory to Tenant with
respect to functional efficiency for both warehouse and office purposes based
upon the standard of functional efficiency immediately prior to the taking;
then such notice of termination by Tenant shall become void and of no force and
effect. If Tenant shall give notice of termination pursuant to the provisions
of subdivision (2) immediately above and if within fifteen (15) days after the
giving of such notice by Tenant, Landlord shall give Tenant notice that
Landlord will restore free and uninterrupted access for passage by foot and by
vehicle from a public street to each door and loading platform originally
installed by Landlord in the demised buildings situated as advantageously as at
the beginning of this lease, then such notice of termination by Tenant shall
become void and of no force or effect. If Tenant shall give such notice of
termination pursuant to the provisions of subdivision (3) immediately above,
and if within fifteen (15) days after the giving of such notice by Tenant,
Landlord shall give Tenant notice that Landlord will substitute for the taken
ground area used for parking (immediately prior to such taking) by employees
and business invitees of the demised building other ground area contiguous
to the remaining land included within the demised premises so that what shall
remain of said ground area used for parking plus such other ground area shall
be reasonably sufficient to furnish parking facilities for at least 400 cars,
subject to an appropriate abatement of rent for the loss of such spaces from
the original 494 spaces provided,
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<PAGE> 21
then such notice of termination by Tenant shall become void and of
no force or effect. If Tenant shall give such notice of
termination pursuant to the provisions of subdivision (4)
immediately above, and if within fifteen days after the giving of
such notice by Tenant, Landlord shall give Tenant notice that
Landlord will substitute for the taken drainage easement, another
drainage easement substantially similar to the easement taken,
then such notice of termination by Tenant shall become void and of
no force and effect. Landlord shall provide any such
substitutions promptly and in no event later than six months from
the date of any such taking. Until such substitution is provided,
an appropriate amount of the rent shall be abated depending on the
nature and duration of the loss of use of the premises suffered by
Tenant.
In the event of a termination under the provisions of this
article, the termination shall be effective as of the time that
Tenant is deprived of possession of the premises so taken, and
minimum rent shall be apportioned and adjusted as of the time of
termination. The amount charged by the taking authority or its
assigns for rent or use and occupation between the time of the
taking and the time of termination shall be deductible from rent
paid or payable hereunder. If there shall be a taking by eminent
domain and if the term of this lease shall not be terminated as
aforesaid, then the term of this lease shall continue in full
force and effect, and Landlord shall, within a reasonable time
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<PAGE> 22
after possession is required for public use, restore what may
remain of the demised premises and construct such additions as
Landlord may have agreed to add, by notice as aforesaid, to
condition suitable for use, according to the standards of the
original construction set forth in Exhibit "A" and "C", and
including the restoration of facilities and services existing
prior to such taking. A just proportion of the minimum rent
according to the nature and extent of the injury to the demised
premises shall be suspended or abated until what may remain of the
demised premises shall be so restored and such additions shall be
so constructed as aforesaid. Thereafter a just proportion of the
minimum rent according to the nature and extent of the part so
taken shall be abated for the balance of the term of this lease,
and for the purpose hereof minimum rent shall be deemed allocable
one hundred per cent (100%) to the demised buildings, except,
however, if any of the ground area within the demised premises
used for parking shall be taken, then to the extent that the same
has not been replaced by Landlord by substituted ground area,
Tenant shall be allowed a reasonable abatement of minimum rent and
upon failure of the Landlord and Tenant to agree upon such
abatement, the same shall be determined by arbitration as
hereinafter provided.
Landlord reserves and excepts all rights to damages to the
demised premises and the leasehold hereby created, then or
thereafter accruing, by reason of any taking by eminent domain or
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<PAGE> 23
by reason of anything lawfully done or required by any public
authority, and Tenant grants to Landlord all Tenant's rights, if
any, to such damages and shall execute and deliver to Landlord
such further instruments of assignment thereof as Landlord may
from time to time request. Notwithstanding the foregoing, the
Landlord does not reserve or except and Tenant does not grant to
Landlord any rights of Tenant to any damages that may be payable
for trade fixtures, equipment, signs or similar property or
leasehold improvements installed by and belonging to Tenant or any
other damages, to the extent that any such damages are of a nature
such as the Tenant would be entitled to recover damages on its own
account if the lease were terminated by reason of the taking and
such lease contained no expressed provisions as to the rights of
the Landlord and Tenant.
FINANCING
- ---------
9. In the event the Landlord should desire to obtain a loan
on this lease from a savings bank in accordance with Section 38,
Paragraph 6, Chapter 168 of the General Laws, Tenant agrees that
it will execute an agreement in writing between the bank and the
Tenant which shall provide that, upon the written request by the
bank, the Tenant will make all payments of rent and other sums due
thereafter under the lease directly to such bank.
WAIVER OF SUBROGATION
- ---------------------
10A. Each of the Landlord and Tenant hereby releases the
other to the extent of its insurance coverage from any and all
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<PAGE> 24
liability for any loss or damage caused by fire or any of the extended
coverage casualties, even if such fire or other casualty shall be brought about
by the fault or negligence of the other party, or any persons claiming under
it; provided, however, this release shall be in force and effect only with
respect to loss or damage occurring during such time as releasor's policies of
fire and extended coverage insurance shall contain a clause to the effect that
this release shall not affect said policies or the right of the release to
recover thereunder. Each of the Landlord and Tenant agrees that its fire and
extended coverage insurance policies will include such a clause so long as the
same is obtainable and in includable without extra cost, or if such extra cost
is chargeable therefor, so long as the other party pays such extra cost. If
extra cost is chargeable therefor, each party will advise the other thereof and
of the amount thereof, and the other party, at its election, may pay the same
but shall not be obligated to do so.
INDEMNIFICATION
- ---------------
11. Tenant agrees to save Landlord harmless from and indemnify
Landlord against any and all injury, loss or damage or claims for injury, loss
or damage of whatever nature, to any person or property caused by or resulting
from any act, omission or negligence of Tenant or any subtenant or
concessionaire of Tenant or any employee or agent of Tenant or any subtenant or
concessionaire of Tenant. If Tenant or anyone claiming under
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<PAGE> 25
Tenant or the whole or any part of the property of Tenant or anyone
claiming under Tenant shall be injured, lost or damaged by theft, fire, water
or steam or in any other way or manner, whether similar or dissimilar to the
foregoing, no part of said injury, loss or damage is to be borne by Landlord
unless the same shall be caused by or result from the negligent act or omission
of Landlord or its employees or agents.
SELF-HELP
- ---------
TENANT'S DEFAULT
- ----------------
12A. If Tenant shall default in the performance or observance of any
agreement or condition in this lease contained on its part to be performed or
observed, and shall not cure such default within thirty (30) days after notice
from Landlord specifying the default (or shall not within said period commence
to cure such default and thereafter prosecute the curing of such default to
completion with due diligence), Landlord may, at its option, without waiving
any claim for breach of agreement, at any time thereafter cure such default for
the account of Tenant and any reasonable amount paid by Landlord in so doing
shall be deemed paid for the account of Tenant and Tenant agrees to reimburse
Landlord therefor; provided that Landlord may cure any such default as
aforesaid prior to the expiration of said waiting period but after notice to
Tenant, if the curing of such default prior to the expiration of said waiting
period is reasonably necessary to protect the real estate or Landlord's
interest
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<PAGE> 26
therein, or to prevent injury or damage to persons or property. If
Tenant shall fail to reimburse Landlord upon demand for any amount paid for the
account of Tenant hereunder, said amount shall be added to and become due as a
part of the next payment of rent due hereunder.
LANDLORD'S DEFAULT
- ------------------
B. If Landlord shall default in the performance or observance of any
agreement or condition in this lease contained on its part to be performed or
observed, or shall default in the payment of any tax or other governmental
charge which shall be a lien upon the demised premises or in the payment of any
installment of principal or interest upon any mortgage which shall be prior in
lien to the lien of this lease, and if Landlord shall not cure such default
within thirty (30) days after notice from Tenant specifying the default or
within such time as may be specified in any such mortgage, (or shall not within
said period commence to cure such default and thereafter prosecute the curing
of such default to completion with due diligence), Tenant may, at its option,
without waiving any claim for breach of agreement, at any time thereafter cure
such default for the account of Landlord, and any reasonable amount paid by
Tenant in so doing shall be deemed paid for the account of Landlord and
Landlord agrees to reimburse Tenant therefor, provided that Tenant may cure any
such default as aforesaid prior to the expiration of said waiting period, but
after said notice to Landlord, if the curing of such
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<PAGE> 27
default prior to the expiration of said waiting period is
reasonably necessary to protect the real estate or Tenant's
interest therein or to prevent injury or damage to persons or
property. Further, Landlord agrees that if Tenant shall give
Landlord written notice of any violation of any rights of Tenant
under this lease, Landlord will use diligence to stop said
violation. If Landlord shall fail to reimburse Tenant upon demand
for any amount paid for the account of Landlord hereunder, said
amount may be deducted by Tenant from the next or any succeeding
payments of rent due hereunder.
MORTGAGE SUBORDINATION AND ATTORNMENT AGREEMENT
- -----------------------------------------------
13. Tenant agrees that upon the request of Landlord in
writing it will subordinate this lease and the lien hereof from
time to time to the lien of any present or future first mortgage
to a bank, insurance company, pension trust or similar
institutional lender, irrespective of the time of execution or
time of recording of any such mortgage or mortgages, provided that
the holder of any such mortgage shall enter into an agreement with
Tenant, in recordable form, that in the event of foreclosure or
other right asserted under the mortgage by the holder or any
assignee thereof, this lease and the rights of Tenant, its
successors and assigns, hereunder shall continue in full force and
effect and shall not be terminated or disturbed except in
accordance with the provisions of this lease. Tenant agrees that
if requested by the holder of any such mortgage it will be a party
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<PAGE> 28
to said agreement and will agree in substance that if the
mortgagee or any person claiming under the mortgagee (including a
purchaser at foreclosure sale, its successors and assigns) shall
succeed to the interest of Landlord in this lease, it will
recognize said mortgagee or person as its landlord under the terms
of this lease. Tenant agrees that it will upon the request of
Landlord execute, acknowledge and deliver any and all instruments
necessary or desirable to give effect to or notice of such
subordination. The word "mortgage" as used herein includes
mortgages, deeds of trust, or other similar instruments and
modifications, consolidations, extensions, renewals, replacements
and substitutes thereof.
TAXES
- -----
14. As additional and further rent, Tenant agrees to pay and
discharge, before penalties accrue, all and every tax and taxes
(whether special or general, ordinary or extraordinary), water
rates, sewer rates and assessments imposed or assessed upon or
against the said premises and the buildings or improvements
thereof by any lawfully constituted governmental or public
authority for any period during the term hereof. Nothing herein
contained shall be construed to require Tenant to pay any
franchise, estate, inheritance, succession, capital levy or
transfer tax of Landlord, growing out of or connected with this
lease or Landlord's right in said premises, or any income, excess
profits or revenue tax, or any other tax, assessment, charge or
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<PAGE> 29
levy upon the rentals payable by Tenant under this lease unless
and only to the extent that the same is imposed in lieu of the
present real estate tax which is assessed on the demised premises.
Notwithstanding anything to the contrary in this lease or in this
Article 14, Landlord shall pay for all assessments that have been
or may be assessed for the roads, water and sewer lines, drainage
and utilities that have been or will be installed by Landlord in
connection with the development of the subdivision of which the
premises are a part.
In the event that the demised premises or any part thereof
shall hereafter be affected by an assessment or assessments for
local improvements, which may be paid in installments, Tenant
shall have the right to pay said assessments over the longest
period of time permitted by law and Tenant shall pay only such
installments as may be due and payable for any period during the
term of this lease.
Upon the commencement of the term of this lease, Tenant shall
be liable only for such proportion of such taxes and charges which
shall be levied, assessed or become liens upon said premises or any
part thereof for the tax year in which this lease commences as the
part of such tax year during which this lease is in effect shall bear
to the whole of said tax year.
Upon the termination of this lease, either by expiration of its term
or under any other provisions of this lease, other than the default by
Tenant, Tenant shall be liable only for such proportion of such taxes
and charges which shall be levied, assessed or become liens upon said
premises or any part thereof for the tax year in which this lease is
terminated as the part of such tax year during which this lease is
in effect shall bear to the whole of said tax year.
Tenant agrees, upon request of Landlord, to exhibit to Landlord,
as Landlord may from time to time require, the official receipts
evidencing the payment or payments described in this Article 14.
It is understood and agreed that Tenant may pay under protest
and/or contest, review or appeal from all such taxes, assessments
and other charges levied or placed upon the demised premises, provided
that Tenant shall notify Landlord in writing of such action and shall
by legal proceedings or otherwise, prevent the divesting of Landlord's
title in said premises; and further provided that all such proceedings
shall be at Tenant's sole cost and expense and shall promptly be
commenced and diligently prosecuted to a speedy and final conclusion;
provided also that Tenant shall indemnify and save harmless Landlord
from any and all judgments, decrees, costs, expenses and charges in
connection therewith. All refunds and abatements shall belong to
Tenant. Tenant may bring such proceedings as it deems necessary
in its own name or in the name of the Landlord. Landlord agrees that
it will, if requested by Tenant, at the cost and expense of Tenant,
execute or have executed any documents that might be necessary to
bring any such action or proceedings or defend any action or
proceedings which Tenant deems should be defended.
Landlord shall have the right to pay any such taxes or other
changes aforesaid if Landlord is about to be divested of interest
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<PAGE> 30
upon written notice to Tenant, and Landlord may add the amount so
paid to the installment of annual net rent next coming due or to
any subsequent installment of said rent, and the same shall be
collectible as additional rent in the same manner and with the
same remedies as if it had been originally reserved as rent.
PAYMENT OF TAXES TO MORTGAGEE
- -----------------------------
If the terms of any first mortgage to a bank, insurance
company, pension trust or similar institutional lender, provide
for the payment to or deposit with the mortgagee of monthly
payment on account of real estate taxes, the Tenant agrees that it
will make such payments as may be required by the terms of such
mortgage, provided that such mortgagee pays interest on such
deposits if a statute is enacted requiring such payment of
interest.
UTILITIES
- ---------
15. Tenant shall pay all charges for light, power, gas,
telephone, water and fuel consumed on the demised premises and
sewerage use charges, if any, applicable to the demised premises
and shall provide such heat and air-conditioning, if any, as it
shall deem desirable, and Tenant shall pay for all snow removal
and all maintenance of parking lot. Landlord shall not be liable
for any interruption of gas, water, heat, air-conditioning,
electricity other utilities in the demised premises, except,
however, if any such interruption shall be due to the failure of
any utilities, conduits or equipment which it shall be the
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<PAGE> 31
obligation of Landlord to maintain pursuant to other provisions of
this lease, Landlord shall, upon notice of such failure, use due
diligence to repair the same.
ASSIGNMENT
- ----------
16. Tenant shall have the right to assign this lease or to
sublease the demised premises or any part thereof with the written
consent of the Landlord, which consent shall not be unreasonably
withheld or delayed; provided, however, that Tenant may assign
this lease or sublet any portion or all of the premises without
Landlord's consent to any corporation, partnership, trust,
association or other business organization directly or indirectly
controlling or controlled by Tenant or to any successor by merger,
consolidation or acquisition of all or substantially all of the
assets of Tenant. Notwithstanding any such assignment or
subletting, Tenant shall continue liable during the entire term of
this lease, or any extension or renewal or exercise of the option
to purchase pursuant to the options granted herein for payment of
the annual net rent and additional rent and for the performance of
the terms, provisions and covenants in this lease contained and on
the part of Tenant to be kept and performed. In the event of any
assignment of this lease, Tenant agrees that its continuing
liability hereunder shall in no way be affected or impaired by any
extension of time or other indulgence granted to any assignee or
by waiver by the Landlord of any default of any of the terms and
provisions of the lease, whether or not prior notice thereof has
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<PAGE> 32
been given to the Tenant, the Tenant hereby waiving all suretyship
defenses.
LANDLORD'S LIABILITY
- --------------------
17. It is expressly agreed and understood that if Landlord
herein named conveys its interest in the said demised premises
during the term hereof, it shall not thereafter be liable for the
covenants and agreements to be observed and performed by Landlord
hereunder, but the grantee of the Landlord's interest shall
thereupon assume and become liable for the observance of said
covenants and agreements. Nothing herein, however, shall relieve
Landlord named herein of any liability which may have incurred or
which may have accrued prior to such conveyance.
DEFAULT
- -------
18.A. (1) If the Tenant shall be in default in payment of
any rent, or (2) if the Tenant shall be in default in the
performance or observance of any other agreement on its part to be
performed or observed, or (3) if any person shall take this
leasehold interest or any part thereof upon execution, or (4) if
Tenant shall make an assignment of its property for the benefit of
creditors, or (5) if Tenant shall be declared bankrupt or
insolvent according to law or (6) if any bankruptcy or insolvency
proceedings shall be commenced by or against Tenant and shall not
be dismissed within one hundred twenty (120) days thereafter, or
(7) if a receiver, trustee or assignee shall be appointed in any
bankruptcy or insolvency proceedings for the property of Tenant
-32-
<PAGE> 33
and shall not be discharged within one hundred twenty (120) days
thereafter, then, in any of said cases, on the thirtieth day next
following the giving of notice designating such default or breach
hereof, provided Tenant has not cured such default within such
thirty (30) day period or if the default is of such a nature that
it cannot reasonably be cured within such thirty (30) day period,
provided that Tenant has not commenced diligently to correct the
default and has not thereafter diligently pursued such correction
to completion, then, without waiving any claim for breach of
agreement, Landlord may send written notice to Tenant of the
termination of the term of this lease and on the fifth day next
following the date of the sending of the notice, the term of this
lease shall terminate, Tenant hereby waiving all rights of
redemption.
DEFAULT
- -------
B. In case of any such termination, Tenant will indemnify
Landlord against all loss of rent and other payments provided
herein to be paid by Tenant to Landlord between the time of
termination and the expiration of the term of this lease; or at
the election of Landlord, exercised at the time of the termination
or at any time thereafter, Tenant will indemnify Landlord each
month until the exercise of the election against all loss of rent
provided herein to be paid by Tenant to Landlord which Landlord
may incur by reason of such termination during the period between
the time of the termination and the exercise of the election, and
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<PAGE> 34
upon the exercise of the election, Tenant will pay to Landlord as
damages such amount as at the time of the exercise of the election
represents the amount by which the fair rental value of the
demised premises for the period from the exercise of the election
until the expiration of the term shall be less than the amount of
rent and other payments provided herein to be paid by Tenant to
Landlord during said period. It is understood and agreed that at
the time of the termination or any time thereafter Landlord in the
exercise of reasonable business judgment will seek to relet the
premises may rent the demised premises for a term which may expire
after the expiration of the term of this lease, without releasing
Tenant from any liability whatsoever, that Tenant shall be liable
for any expenses incurred by Landlord in connection with obtaining
possession of the demised premises, in connection with putting the
demised premises into good condition for reletting, and in
connection with any reletting, including, but without limitation,
reasonable attorneys' fees and brokers' fees, and that any monies
collected from any reletting shall be applied first to the
foregoing expenses and then to payment of rent and all other
payments due from Tenant to Landlord.
RIGHTS CUMULATIVE
- -----------------
19. It is mutually covenanted and agreed that the various
rights, powers, options, elections, appointments and remedies of
Landlord contained in this lease shall be construed as cumulative
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<PAGE> 35
and no one of them is exclusive of the other or exclusive of any
rights or priorities allowed by law.
RIGHT OF ENTRY
- --------------
20. Landlord shall have the right at any time during the
term hereof to enter in or upon said demised premises during
reasonable business hours for the purpose of examining and
inspecting the same and during the last six (6) month period prior
to the expiration of the term hereof, Tenant will permit Landlord
to enter in and upon said premises during reasonable business
hours for the purpose of showing the same to prospective tenants.
Landlord shall obtain any security clearances necessary if Tenant
is performing classified work at any time on the premises.
INTERPRETATION
- --------------
21. It is agreed that if any provision of this lease or the
application of any provision to any person or any circumstance
shall be determined to be invalid or unenforceable, then such
determination shall not affect any other provisions of this lease
or the application of said provision to any other person or
circumstance all of which other provisions shall remain in full
force and effect; and it is the intention of the parties hereto
that if any provision of this lease is capable of two
constructions, one of which would render the provision void and
the other of which would render the provision valid, then the
provision shall have the meaning which renders it valid.
-35-
<PAGE> 36
SUCCESSORS AND ASSIGNS
- ----------------------
22. The words "Landlord" and "Tenant" and the pronouns
referring thereto as used in this lease shall mean, where the
context requires or admits, the persons named herein as Landlord
and as Tenant respectively, and their respective heirs, legal
representatives, successors and assigns, irrespective of whether
singular or plural, masculine, feminine or neuter. The agreements
and conditions of this lease contained on the part of the Landlord
to be performed and observed shall be binding upon Landlord and
its heirs, legal representatives, successors and assigns, and shall
enure to the benefit of Tenant and its heirs, legal
representatives, successors and assigns, and the agreements and
conditions on the part of Tenant to be performed and observed
shall be binding upon Tenant and its heirs, legal representatives,
successors and assigns, shall enure to the benefit of Landlord and
its heirs, legal representatives, successors and assigns. If
Landlord shall be more than one person, the obligations of Landlord
shall be joint and several.
DELAYS
- ------
23. In any case where either party hereto is required to act
(other than make a payment of money) delays caused by or
resulting from an act of God, war, civil commotion, fire or
casualty, labor difficulties, general shortages of labor, materials,
or equipment, government regulations or other causes beyond such
reasonable control shall not be counted in determining the time when
-36-
<PAGE> 37
the performance of such act must be completed, such time be
designated by a fixed time, a fixed period of time or "a reasonable
time". In any case where work is to be paid for out of insurance
proceeds or condemnation awards, due allowance shall be made, both
to the party required to perform such and to the party required to
make such payment for delays in the collection of such proceeds
and awards.
HOLDING OVER
- ------------
24. If Tenant or anyone claiming under Tenant shall remain
in possession of the demised premises or any part thereof after the
expiration of the term of this lease without any agreement in
writing between Landlord and Tenant with respect thereto prior to
acceptance of rent by Landlord, the person remaining in possession
shall be deemed a tenant at sufferance and after acceptance of
rent by Landlord, the person remaining in possession shall be
deemed a tenant from month to month, subject to the provisions of
this lease insofar as the same may be made applicable to a tenancy
from month to month.
WAIVERS
- -------
25. Failure to either party to complain of any act or
omission on the part of the other party, no matter how long the
same may continue, shall not be deemed to be a wavier by said
party of any of its rights hereunder. No waiver by either party
at any time, express or implied, of any breach of any provision of
this lease shall be deemed a waiver of a breach of any other
-37-
<PAGE> 38
provision of this lease or a consent to any subsequent breach of the
same or any other provision. If any action by either party shall require the
consent or approval of the other party, the other party's consent to or
approval of such action on any one occasion shall not be deemed a consent to or
approval of said action on any subsequent occasion or a consent to or approval
of any other action on the same or any subsequent occasion. Any and all rights
and remedies which either party may have under this lease or by operation of
law, either at law or in equity, upon any breach, shall be distinct, separate
and cumulative and shall not be deemed inconsistent with each other; and no one
of them, whether exercised by said party or not shall be deemed to be in
exclusion of any other; and any two or more or all of such rights and remedies
may be exercised at the same time.
OPTIONS
- -------
26. The Tenant, provided it is then not in default of its obligations
under this lease, shall have the privilege of extending or renewing this lease
for a further term of ten (10) years by giving notice to the Landlord in
writing on or before twelve (12) months prior to the expiration of the term
hereof.
The Tenant, provided it is then not in default of its obligations under
this lease shall have the further privilege of extending or renewing this lease
for another term of ten (10) years by giving notice to the Landlord in writing
on or before
-38-
<PAGE> 39
twelve (12) months prior to the expiration of the first ten (10) year
renewal option.
QUIET ENJOYMENT
- ---------------
27. Landlord agrees that upon Tenant's paying the rent and performing
and observing the agreements and conditions on its part to be performed and
observed, Tenant shall and may peaceably and quietly have, hold and enjoy the
demised premises and all rights of Tenant hereunder during the term of this
lease without any manner of hindrance or molestation.
NOTICES
- -------
28. Any notice and other communication given pursuant to the
provisions of this lease shall be in writing and shall be given by mailing the
same by certified mail or registered mail, return receipt requested, postage
prepaid, and, except as may be expressly otherwise provided in this lease, any
such notice or other communication shall be deemed given when mailed as in this
article provided. If sent to Landlord, the same shall be mailed to Landlord at
One Campanelli Drive, South Braintree, Massachusetts 02185, or at such other
address or addresses as Landlord may hereafter designate by notice to Tenant;
and if sent to Tenant, the same shall be mailed to Tenant at the demised
premises or at such other address or addresses as Tenant may hereafter
designate by notice to Landlord.
-39-
<PAGE> 40
NOTICE OF LEASE
- ---------------
29. In accordance with the provisions of General Laws, Chapter 183,
Section 4, a notice of this lease is being delivered by the parties and being
recorded. Upon request of either party, the Landlord and Tenant shall execute
and deliver an instrument in form for recording setting forth the commencement
date, and if this lease is terminated before the term expires or if the options
to extend are not exercised, they shall execute and deliver an instrument in
such form acknowledging such fact and the date of termination of this lease.
Both parties agree that this lease shall not be recorded.
SIGNS
- -----
30. Tenant shall have the right to place any signs on the premises
relating to Tenant's business provided Tenant complies with all applicable
governmental statutes, by-laws and regulations. Tenant shall also have the
right to place a sign naming Tenant and its operations at the entrance of the
subdivision of which the premises are a part of a size no smaller than any sign
of any other tenant or occupant in the subdivision, subject to such reasonable
rules and regulations as Landlord may impose concerning the location, size and
character of such sign.
ARBITRATION
- -----------
31. In the event of a dispute between Landlord and Tenant with respect
to the existence of a default hereunder, such dispute shall be arbitrated by
three arbitrators appointed as follows:
-40-
<PAGE> 41
Landlord and Tenant shall each appoint a fit and impartial person
as arbiter who shall have at least ten years' experience in the
City of Boston in a calling connected with the subject matter of
the dispute. Written notice of such appointment shall be given by
each party to the other within 15 days of the date upon which
written notice is given by one party to the other demanding
arbitration and the arbiters so appointed shall appoint a third
arbiter who shall likewise have had ten years' experience in the
City of Boston in a calling connected with the subject matter of
the dispute, and if the arbiters fail to agree upon a third
arbiter within 15 days of the date upon which the later of such
written notices of appointment of the first two arbiters is given,
such third arbiter shall be appointed by a Justice of the Superior
Court of the Commonwealth of Massachusetts in Suffolk County upon
ten days' notice of the institution of proceedings for such Court
appointment, or by any other Court sitting in Suffolk County
succeeding to the jurisdiction and functions exercised by the
Superior Court of the Commonwealth of Massachusetts. Any award
that shall be made in such arbitration by the arbiters or a
majority of them shall be binding and shall have the same force
and effect as a judgment made in a court of competent jurisdiction
and both Landlord and Tenant shall have the right to apply to the
Superior Court of the Commonwealth of Massachusetts in Suffolk
County, or to any other court sitting in Suffolk County succeeding
to the jurisdiction and functions exercised by the Superior Court
-41-
<PAGE> 42
of the Commonwealth of Massachusetts, for a decree, judgment or
order upon said arbitration or award upon ten days notice to the
other party. The fees, costs and expenses of arbitration, other
than fees of attorneys for the parties, expert witnesses and other
witness' fees, shall be borne equally between the parties unless
the arbiters determine that some other division shall under the
circumstances be more equitable.
PURCHASE OPTIONS
- ----------------
32. The Lessee shall have the right to purchase Lessor's
leasehold in the demised premises at the end of ten (10) years of
the term hereof or at the end of twenty-five (25) years of the
term hereof. Such option is to be exercised by written notice to
the Lessor delivered twelve (12) months before the expiration of
the tenth year of the term hereof or twelve (12) months before the
expiration of the twenty-fifth year of the term hereof. The
purchase price to be paid in case of the exercise of the ten-year
option shall be $1,200,000 and in the case of the twenty-five year
option the purchase price shall be $850,000. Said purchase prices
shall be adjusted by the amount of any outstanding mortgage or
mortgages on the premises. At the time of conveyance, Lessor
shall deliver to Lessee, an assignment of the ground lease from
Glacier Sand & Stone Co., Inc. duly assented to by the Ground
Lessor, free from all encumbrances except those mentioned in
Schedule "A".
-42-
<PAGE> 43
If Lessee exercises either of the options to purchase the
leasehold set forth in the preceding paragraph, Lessee may also
exercise the option to purchase the fee in accordance with the
provisions of Article 32 and 33 of the Ground Lease set forth in
full as follows:
ARTICLE 32 AND 33 OF GROUND LEASE
---------------------------------
APPRAISALS
- ----------
"32. In any case where an appraisal is required under this
lease and the parties hereto do not agree as to the appraisal
amount within a period of twenty (20) days, then in such event the
Lessor and Lessee shall on or before ten (10) days after the
expiration of said twenty (20) days each appoint an appraiser in
writing and the two appraisers so appointed shall appoint a third
appraiser. The majority of the three so appointed shall determine
the appraisal amount. If either party shall fail to appoint an
appraiser price to said time or if the appraisers shall fail to
select a third appraiser prior to said time, the chief justice of
the Probate Court of Norfolk County for the time being upon
application of either party shall appoint such number of
appraisers so that the total number of them shall be three and a
majority of them shall determine said amount. In any event the
decision of the majority of the appraisers shall be made in
writing within thirty (30) days after appointment of the last
appraiser to be appointed, which decision shall be final. The
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<PAGE> 44
expense of the appraisal shall be borne equally between Lessor and
Lessee.
PURCHASE OPTIONS
- ----------------
33. The Lessee shall have the right to purchase the demised premises
at the end of ten (10) years of the term hereof or at the end of twenty-five
(25) years of the term hereof. Such option is to be exercised by written
notice to the Lessor delivered six (6) months before the expiration of the
tenth year of the term hereof or six (6) months before the expiration of the
twenty-fifth year of the term hereof. The purchase price to be paid in case of
the exercise of either of the above options shall be by agreement between the
parties.
In the event the parties do not agree, then the purchase price for the
options shall be determined by appraisal in accordance with paragraph numbered
32 of this lease.
In any event, however, the price to be paid at the time of the tenth
year option shall not be less than Eight Hundred Ten Thousand Dollars
($810,000) and shall not be more than Nine Hundred Thousand Dollars ($900,000),
and the price to be paid at the time of the twenty-fifth year option shall not
be less than Five Hundred Fifty Thousand Dollars ($550,000) and shall not be
more than Seven Hundred Seventy Thousand Dollars ($770,000).
No adjustments shall be made with respect to any outstanding mortgage
or mortgages on the premises.
-44-
<PAGE> 45
The deed to be delivered by the Lessor shall convey a title
free from all encumbrances except those mentioned in Exhibit "D"
or those imposed with the consent of the Lessee during the term
hereof." (End of Article 32 and 33 of Ground Lease)
Notice of the exercise of such options to purchase the fee
shall be given simultaneously with the notice to purchase the fee.
The amount of any mortgages on the fee shall be deducted from the
purchase price to be paid by Lessee. If Lessee requests it or if
the Ground Lessor requires it, Lessor will purchase the fee in
accordance with the option and will thereupon immediately convey
the fee to Lessee.
EXECUTED AND SEALED on the day and year first above
mentioned.
___________________________________
/s/ Michael Campanelli
-----------------------------------
Trustees as aforesaid for self and
co-trustees
LANDLORD
ANALOG DEVICES, INC.
By:/s/ Emil B. Rechsteiner
--------------------------------
Emil Rechsteiner, President
-45-
<PAGE> 46
EXHIBIT "D"
1. Subject to the drainage easement 20 feet wide and the drainage easement 30
feet wide shown on Exhibit "A";
2. Subject to the agreement with the Department of Natural Resources recorded
with Norfolk Registry of Deeds, Book 4488, Page 656;
3. Subject to restrictions set forth in deed from Lessor to Paul J. McMackin
and Hugh J. McMackin dated May 16, 1969, recorded with Norfolk Registry of
Deeds, Book 4595, Page 277; and
4. Subject to the zoning of the town of Westwood, which provides for a buffer
zone which is part of the demised premises as defined in the zoning laws
of the town of Westwood.
<PAGE> 47
SCHEDULE "A"
1. Subject to the drainage easement 20 feet wide and the drainage easement 30
feet wide shown on Exhibit "A";
2. Subject to the agreement with the Department of Natural Resources recorded
with Norfolk Registry of Deeds, Book 4488, Page 656;
3. Subject to restrictions set forth in deed from Lessor to Paul J. McMackin
and Hugh J. McMackin dated May 16, 1969, recorded with Norfolk Registry of
Deeds, Book 4595, Page 277; and
4. Subject to the zoning of the town of Westwood, which provides for the
buffer zone which is part of the demised premises as defined in the zoning
laws of the town of Westwood.
5. Subject to the restrictions denying access to Downey Street in Westwood
imposed by the deed from Glacier Sand & Stone Co. Inc. to The Town of
Westwood by deed dated March 7, 1968 recorded with said Deeds at Book 4517,
Page 27.
6. Lease from Glacier Sand & Stone Co., Inc. to the Trustees of Campanelli
Investment Properties dated February 13, 1970, notice of which lease
is to be recorded with the notice of this lease.
<PAGE> 1
EXHIBIT 10.18
AMENDMENT NO. 2 TO CREDIT AGREEMENT
AMENDMENT dated as of September 8, 1994 among ANALOG DEVICES, INC.
and the undersigned BANKS.
W I T N E S S E T H:
WHEREAS, Analog Devices, Inc., the Banks listed therein and Morgan
Guaranty Trust Company of New York, as Agent, are parties to a Credit
Agreement dated as of March 12, 1993 (as amended by Amendment No. 1 thereto
dated as of May 18, 1993, the "Agreement"); and
WHEREAS, the parties hereto desire to extend the facility provided
for in the Agreement, and change the pricing applicable thereto, as more fully
set forth below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically
defined herein, each term used herein which is defined in the Agreement has
the meaning assigned to such term in the Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" or to the Agreement and each other
similar reference contained in the Agreement or in any Exhibit thereto shall
from and after the date hereof refer to the Agreement as amended hereby.
SECTION 2. AMENDMENT OF SECTION 1.01. Section 1.01 of the
Agreement is amended (a) by replacing the date "March 15, 1996" in the
definition of "Termination Date" with the date "September 8, 1998";
(b) by replacing the definition of "Commitment Fee Rate" with
the following:
"Commitment Fee Rate" means (i) .01 of 1% per annum for any
date on which Level I Status exists, (ii) .05 of 1% per annum for any date on
which Level II Status exists and (iii) .0625 of 1% per annum for any date on
which Level III Status, Level IV Status or Level V Status exists.
<PAGE> 2
(c) by replacing the definition of "Facility Fee Rate" with the
following:
"Facility Fee Rate" means (i) .125 of 1% per annum for any date
on which Level I Status exists, (ii) .15 of 1% per annum for any date on which
Level II Status exists, (iii) .1875 of 1% per annum for any date on which
Level III Status exists, (iv) .25 of 1% per annum for any date on which Level
IV Status exists and (v) .375 of 1% per annum for any date on which Level V
Status exists.
(d) by deleting the definition of Usage Fee Rate.
SECTION 3. AMENDMENT OF SECTION 2.07. Section 2.07 of the
Agreement is amended
(a) by replacing the definition of "CD Margin" in subsection
(b) with the following:
"CD Margin" means (i) .375 of 1% per annum for any date on
which Level I Status exists, (ii) .45 of 1% per annum for any date on which
Level II Status exists, (iii) .5375 of 1% per annum for any date on which
Level III Status exists, (iv) .75 of 1% per annum for any date on which Level
IV Status exists and (v) 1% per annum for any date on which Level V Status
exists.
(b) by replacing the definition of "Euro-Dollar Margin" in
subsection (c) with the following:
"Euro-Dollar Margin" means (i) .25 of 1% per annum for any date
on which Level I Status exists, (ii) .325 of 1% per annum for any date on
which Level II Status exists, (iii).4125 of 1% per annum for any date on which
Level III Status exists, (iv) .625 of 1% per annum for any date on which Level
IV Status exists, and (v) .875 of 1% per annum for any date on which Level V
Status exists.
SECTION 4. AMENDMENT OF SECTION 2.08. Section 2.08 of the
Agreement is amended by deleting subsection (e) thereof.
SECTION 5. CHANGES IN COMMITMENTS. The Commitments of the
Banks are changed as set forth on the signature pages hereof.
SECTION 6. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
2
<PAGE> 3
SECTION 7. COUNTERPARTS; EFFECTIVENESS. This Amendment may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Amendment shall become effective as of the date hereof when
the Agent shall receive
(a) duly executed counterparts hereof signed by the Borrower
and the Banks (or, in the case of any party as to which an executed
counterpart shall not have been received, the Agent shall receive
telex, telecopy or other written confirmation from such party of
execution of a counterpart hereof by such party);
(b) an opinion of William A. Wise, Jr., Assistant General
Counsel of the Company, substantially in the form of Exhibit A hereto
and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(c) an opinion of Davis Polk & Wardwell, special counsel for
the Agent, substantially in the form of Exhibit B hereto and covering
such additional matters relating to the transactions contemplated
hereby as the Required Banks may reasonably request; and
(d) all documents it may reasonably request relating to the
existence of the Company, the corporate authority for and the
validity of this Amendment, the Agreement so amended hereby and the
Notes, and any other matters relevant hereto, all in form and
substance satisfactory to the Agent;
PROVIDED that this Amendment shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied not later
than September 30, 1994.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective authorized officers as of the day and
year first above written.
ANALOG DEVICES, INC.
By /s/ William A. Martin
-----------------------------
Title: Treasurer
3
<PAGE> 4
COMMITMENTS
$20,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Adam J. Silver
---------------------------
Title: Associate
$20,000,000 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ Kevin McMahon
---------------------------
Title: Vice President
$20,000,000 THE FIRST NATIONAL BANK OF
BOSTON
By /s/ George Hibbard
---------------------------
Title: Vice President
- -----------------
Total Commitments
$60,000,000
Consented to by: CONTINENTAL BANK N.A.
By /s/ Barry A. Peterson
---------------------------
Title: Vice President
4
<PAGE> 1
December 15, 1994
Mr. Jerald G. Fishman
President and Chief Operating Officer
Analog Devices, Inc.
Three Technology Way
Norwood, Massachusetts 02062-9106
Reference: Non-Qualified Stock Option Agreements between Analog
Devices, Inc. and Jerald G. Fishman
dated: (1) December 11, 1991
(2) October 7, 1992
(3) December 14, 1993
Restricted Stock Award Agreements between Analog
Devices, Inc. and Jerald G. Fishman
dated: (1) October 25, 1990
(2) December 18, 1990
(jointly and severally the "Agreements")
Dear Jerry:
I am pleased to inform you that on September 14, 1994, the
Board of Directors (the "Board") of Analog Devices, Inc. (the
"Company"), at a meeting duly called at which a quorum was present
and voting throughout, voted to authorize amendments to your
outstanding Non-Qualified Stock Options and Restricted Stock
Awards, granted to you pursuant to each of the Agreements
referenced above.
This letter is intended to provide an amendment to each of
the above referenced Agreements. The following, upon your
acceptance as provided below shall be incorporated in each
referenced Agreement as if fully stated therein and shall prevail
over any conflicting provision thereof so long as the period of
time set forth therein has not expired. The capitalized terms in
the amendment shall have the same meaning as set forth in the
Agreements.
(1) The parties hereby agree that in the event the Company
terminates your employment for any reason other than termination
for cause prior to September 15, 1999, (i) the options for the
purchase of shares of Common Stock of the
<PAGE> 2
Mr. Jerald G. Fishman
Page -2-
December 15, 1994
Company which are not then exercisable (in the case of the Non-Qualified Stock
Option Agreements) shall be and become immediately exercisable upon such
termination, and (ii) the shares of Common Stock of the Company which
are not then vested (because the Restricted Period set forth in the Restricted
Stock Award Agreements has not then expired) shall be and become immediately
fully vested upon such termination date, and the applicable terms set in the
Agreements relating to exercisable options and vested shares shall govern.
(2) The above provisions relating to acceleration of Options and
vesting of Restricted Stock shall not apply to (a) any voluntary termination by
you of your employment, (b) any termination for cause prior to September 15,
1999 or (c) any Options or Restricted Stock Awards granted to you by the
Company after September 14, 1994.
(3) "Cause" for the purposes hereof means (a) your willful and
continued failure to substantially perform your duties as directed by the Board
(other than any such failure resulting from your incapacity due to physical or
mental disability), provided that a written demand for substantial performance
has been delivered to you by the Board specifically identifying the manner in
which the Board believes that you have not substantially performed your duties
and you have not cured such failure within 30 days after such demand, (b) your
willful engaging in conduct which is demonstrably and materially injurious to
the Company, or (c) your willful violation of any material provision of any
confidentiality, nondisclosure, assignment of invention, noncompetition or
similar agreement entered into by you in connection with your employment by the
Company. For purposes of this paragraph, no act or failure to act on your part
shall be deemed "willful" unless done or omitted to be done by you not in good
faith and without reasonable belief that your action or omission was in the
best interest of the Company.
(4) On and after September 15, 1999, the terms of each of the
Agreements then in effect will determine your rights with respect to the Common
Stock of the Company subject to the Agreements.
<PAGE> 3
Mr. Jerald G. Fishman
Page -3-
December 15, 1994
If the foregoing is acceptable to you, please sign below where indicated
and return an original of this letter to me for our Company records.
Very truly yours, AGREED AND ACCEPTED:
ANALOG DEVICES, INC. /s/ Jerald G. Fishman
---------------------
/s/ Ray Stata
- -------------
Ray Stata Jerald G. Fishman
Chairman of the Board 169 Hickory Road
and Chief Executive Officer Weston, MA 02193
<PAGE> 1
<TABLE>
Exhibit 21
SUBSIDIARIES
The following is a list of the Company's subsidiaries:
<CAPTION>
PERCENTAGE OF VOTING
SECURITIES OWNED BY
ORGANIZED REGISTRANT AS OF
UNDER LAW OF OCTOBER 29, 1994
------------ ----------------
<S> <C> <C>
Analog Devices Limited United Kingdom 100%
Analog Devices, GmbH Germany 100%
Analog Devices, S.A. France 100%
Analog Devices, K.K. Japan 100%
Analog Devices APS Denmark 100%
Analog Devices, A.G. Switzerland 100%
Analog Devices Nederland, B.V. The Netherlands 100%
Analog Devices International, Inc. Massachusetts 100%
Analog Devices Israel, Ltd. Israel 100%
Analog Devices A.B. Sweden 100%
Analog Devices SRL Italy 100%
Analog Devices, HDLSGESMBH M.B.H. Austria 100%
Analog Devices Korea, Ltd. Korea 100%
Analog Devices, B.V. The Netherlands 100%
Analog Devices Finance N.V. Netherlands Antilles 100%
Analog Devices Finance Bermuda, Ltd. Bermuda 100%
Analog Devices Holdings, B.V. The Netherlands 100%
Analog Devices Research & Development Ltd. Ireland 100%
Analog Devices (Philippines), Inc. The Philippines 100%
Analog Devices Foreign Sales
Corporation, B.V. The Netherlands 100%
Analog Devices Foundry Services, Inc. Delaware 100%
Analog Devices Asian Sales, Inc. Delaware 100%
Analog Devices Taiwan, Ltd. Taiwan 100%
Analog Devices Ireland, Ltd. Ireland 100%
Analog Devices Hong Kong, Ltd. Hong Kong 100%
Analyzed Investments, Ltd. Ireland 54%
Analog/NCT Supply Ltd. Delaware 50%
Analog Supplies Company Japan 15%
</TABLE>
The financial statements of all wholly owned subsidiaries are included
in the Consolidated Financial Statements listed in the Index to Consolidated
Financial Statements appearing elsewhere herein.
49
<PAGE> 1
Exhibit 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 2-63561, 2-69122, 2-77321, 2-90023, 2-95495, 33-2502,
33-4067, 33-22604, 33-22605, 33-29484, 33-39851, 33-39852, 33-43128, 33-46520,
33-46521, 33-60696 and 33-60642) of Analog Devices, Inc. of our report dated
November 29, 1994, with respect to the consolidated financial statements of
Analog Devices, Inc. included in this Annual Report (Form 10-K) for the year
ended October 29, 1994.
ERNST & YOUNG LLP
Boston, Massachusetts
January 20, 1995
50
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF ANALOG DEVICES FOR THE YEAR
ENDED OCTOBER 29, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-29-1994
<PERIOD-START> OCT-31-1993
<PERIOD-END> OCT-29-1994
<EXCHANGE-RATE> 1
<CASH> 109,113
<SECURITIES> 72,652
<RECEIVABLES> 168,740
<ALLOWANCES> 6,403
<INVENTORY> 130,726
<CURRENT-ASSETS> 505,457
<PP&E> 658,879
<DEPRECIATION> 377,064
<TOTAL-ASSETS> 815,871
<CURRENT-LIABILITIES> 206,186
<BONDS> 80,061
<COMMON> 12,542
0
0
<OTHER-SE> 509,373
<TOTAL-LIABILITY-AND-EQUITY> 815,871
<SALES> 773,474
<TOTAL-REVENUES> 773,474
<CGS> 394,448
<TOTAL-COSTS> 394,448
<OTHER-EXPENSES> 277,210
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,149
<INCOME-PRETAX> 96,911
<INCOME-TAX> 22,415
<INCOME-CONTINUING> 74,496
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74,496
<EPS-PRIMARY> .96
<EPS-DILUTED> .96
</TABLE>
